Malaysia plantation company FGV reports net profit, buoyed by palm fruit output

Felda Global Ventures reported a net profit of 38.8 million ringgit (S$12.8 million) for the quarter ended September. PHOTO: REUTERS

KUALA LUMPUR (REUTERS) - Malaysia's Felda Global Ventures (FGV), the world's No 3 palm plantation operator, returned to profitability in the third quarter on increased production and predicted a further rise in output next year.

The company reported a net profit of 38.8 million ringgit (S$12.8 million) for the quarter ended September, compared with a loss of 73.6 million ringgit a year earlier, it said yesterday.

FGV said its quarterly production of palm fresh fruit bunches (FFB) grew 18 per cent year-on-year, with its plantation operations also boosted by robust palm oil prices.

"Based on the significant improvement in our FFB production for October, we expect FGV to perform better at the close of the financial year compared to 2016," chief executive Zakaria Arshad said in a statement.

The profit came even as revenue dipped to 4.15 billion ringgit from 4.19 billion ringgit.

FGV was hit by a management crisis in June when Zakaria was forced to step aside during an investigation, initiated by the firm's chairman at the time, into transactions at a subsidiary.

But the chairman later resigned and Zakaria, who denied any wrongdoing, was reinstated in mid-October following a four-month leave of absence.

FGV is targeting FFB production of 4.3 million tonnes by year end, with 2018 output seen at 4.86 million tonnes, Zakaria told a news conference.

The company does not expect its production to be hurt by the La Nina weather event, which brings rains across Asia.

"We don't expect a serious La Nina. Even if there is, it's not as great an impact as El Nino. (And it is) usually for a short period," said Palaniappan Swaminathan, chief operating officer of plantation sector.

Rains across palm oil plantations could potentially disrupt harvest and reduce production, but boost fruit yields in the longer term.

A likely rise in output among producers could weigh on palm oil prices next year, said Zakaria.

He expects the price of crude palm oil, currently around 2,600 ringgit per tonne, to trade between 2,500 and 2,700 ringgit for the first half of 2018.

Prices will drop next year as "a lot of competition will come from soyoil, and also on recovery of output," Zakaria said.

FGV's shares rose as much as 2.8 per cent following the quarterly results, outperforming the broader market.

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