KUALA LUMPUR (Feb 27): FGV Holdings Bhd expects to resolve the issue of labour shortage at its oil palm plantations by the third quarter of this year, and hopes this will help to boost production and expedite its replanting programme.

Its chief executive officer Datuk Nazrul Mansor said the group is recruiting another 5,000 foreign workers this year. Last year, it brought in 10,000 workers which helped to bring down the labour shortage to 13% from 32% in 2021.

“We are optimistic to resolve any labour shortage issues in 2023 between the second and third quarter.

“The reason we are being careful is that we want to make sure all foreign workers that come in do not pay recruitment fees. We are taking a bit more time to ensure proper due diligence, interviews and declarations have been done before they come in,” he said at a media briefing on FGV’s financial performance for the year ended Dec 31, 2022 (FY2022).

Nazrul said FGV could see its fresh fruit bunches (FFB) production rise by between 10% and 15% in FY2023 as it resolved the worker shortages at its estates.

In FY2022, FGV saw its FFB production improve 9% to 14.27 million tonnes, driven by third party production and higher FFB output in the fourth quarter.

FGV and other plantation companies have been facing labour shortages since the Covid-19 outbreak in early 2020 which led to border closures.

Following the improvement in its labour situation, Nazrul said FGV will be boosting its replanting programme to 21,000 hectares this year, compared with its previous target of 16,000 hectares a year.

“We are aiming to raise a rated sukuk in the coming months of RM1.5 billion mainly for our replanting programme,” he added.

At the moment, only 34% of FGV's oil palm trees are at the prime age of between nine and 20 years old, while 24% are considered young at four to eight years old, and 27% are classified as old and very old at 21 years.

For the fourth quarter of FY2022, FGV reported a 27.4% decline in net profit to RM337.71 million or 9.26 sen per share from RM465.09 million or 12.75 sen per share in the same quarter a year earlier.

The group attributed the drop in its profitability to the plantation and logistics sector, and higher losses recorded by its sugar business. The average crude palm oil (CPO) price for FY2022 was RM4,832 per tonne. Quarterly revenue fell slightly to RM6.1 billion from RM6.17 billion, according to FGV's filing with Bursa Malaysia.

For the full year, the group’s net profit rose 12.82% to RM1.32 billion from RM1.17 billion in FY2021, while revenue grew 30.61% to RM25.56 billion from RM19.57 billion.

The group announced a dividend of 11 sen per share, totalling RM401.3 million, raising the total dividend payout for FY2022 to 15 sen per share.

For this year, Nazrul expects CPO prices to remain elevated albeit slightly lower at RM4,000 per tonne, driven by policy changes in Indonesia including higher biodiesel mandate and tighter export policy.

When asked on the US import ban on its products, Nazrul said the group is optimistic that the ban would be lifted by the end of this year.

He said FGV’s independent assessor has completed its site assessments and the group will put their recommendations into action and will submit the final report to the US Customs and Border Protection (CBP) by the end of the first quarter.

Presently, the group is in the process of remediating gaps identified by the audit firm that include upgrading housing facilities, compensate foreign workers who paid recruitment fees to secure jobs, ensure workers have access to passports and adhere to laws on working hours.

"Aligned with FGV's no recruitment fee policy, we will reimburse our current and former foreign workers who were employed after June 27, 2019 and had to pay recruitment fees to agents or other third parties in countries of origin. The payment to our current 23,333 foreign workers amounting to RM81.64 million will be made in three tranches between March and September 2023.

“Additionally, FGV has created a sinking fund amounting to RM30 million to reimburse former workers who paid recruitment fees during their employment with FGV but are no longer employed by the company,” he said in a statement.

FGV to issue preference share, address public spread issue

In a separate filing, FGV said it is looking at issuing Islamic preference shares as part of its plan to address its public spread requirement.

As of Feb 13, FGV’s public shareholding spread stood at 13.09%, which is below the 25% requirement imposed by Bursa Malaysia.

“On Feb 23, the board had agreed to evaluate and explore a corporate exercise entailing the issuance of new Islamic preference shares in FGV as part of the rectification plan for FGV to comply with the public spread requirement.

“Advisors have been appointed and feasibility of the corporate proposal is subject to further evaluation by the management and the board of FGV,” the group said.

It plans to seek further extension of time for FGV to comply with public spread requirements from Bursa Malaysia.