Felda Global Ventures Sdn Bhd's (FGV) current business model, which is heavily dependent on crude palm oil (CPO) prices is not sustainable, its president and chief executive, Datuk Sabri Ahmad said.
"Relying heavily on one segment, exposes the company to violent fluctuations in commodity prices," he said, although, the current CPO price of above RM3,000 per tonne is giving good returns to plantation companies.
Hence, he added, FGV’s business model must change to steadily increase profit and not be overly exposed to fluctuating commodity prices.
"One way this can be done, is by expanding the downstream activities," he told Bernama.
Sabri, who has had extensive experience in the industry, notably as a previous chairman of the Malaysian Palm Oil Board said better premium margins are usually in the end consumer products.
"For that, we need a partner, to readily bring in the technology and strong marketing network," he said, adding, that is the very reason FGV is seeking a global partner who can fill the missing link.
FGV holds a 49 per cent stake in Felda Holdings, while Koperasi Permodalan Felda (KPF) has the remaining 51 per cent.
Three foreign banks, Morgan Stanley, JP Morgan and Deutsche Bank together with two local banks Maybank and CIMB, have been appointed to undertake the listing exercise.
He said the global partner is expected to come up with a number of capabilities such as a good global marketing network and enhanced technology.
Talk is rife that global trading giants such as Archer Daniels Midlands Co. (ADM) and Bunge Ltd (BG) are among those parties. Sources say FGV has screened a number of potential partners and has six to choose from.
However, Sabri was tight-lipped over this, noting that the board would make the final decision after due diligence.
The sources also said FGV is expected to pick the potential global partner by mid-February, in time to be listed on Bursa Malaysia before the middle of the year, with April being the earliest date.
Sabri reiterated that FGV never had any intention to be secretive about the listing but was merely being careful so as to not give out too much information which can disrupt the process.
"We need to follow the Securities Commission’s rules and regulations," he said, adding, FGV was putting out as much information as possible as long as it was line with the commission's procedures.
He said from the start of the listing plan, FGV was determined to constructively engage with all parties.
"We will continue to provide the settlers and other stakeholders with the necessary information. The ultimate goal of the listing is to benefit the settlers and KPF," he added.
FGV owns about 80 active companies undertaking diverse activities such as multi-crop plantations, oils & fats, oleochemicals, logistics and services. It has operations in the United States, Canada, China, Australia and the Middle East.
FGV’s independent director, Datuk Mohd Rafik Shah Mohamad believes that the listing and tie-up with a global partner, would help the company adapt to global operating standards.
"A listed company also comes under public scrutiny, which is good for FGV, as it will be pushed to perform better than at present. It will also enhance the company's corporate governance,," he said.
Providing a glimpse into future plans, Sabri, who has served as the chief executive officer of Golden Hope Plantation Bhd (GHPB), believes FGV has a lot of potential, especially the very concept that the company was built on and prospered.
"We can create nucleus estates, whereby the land is owned by settlers but FGV goes and manages them, buys the crops and processes it, similar to what is being done in Malaysia.
"We can also promote the concept to other developing countries," he said, adding, there are plans to promote it within Asean as well as the African region.
Sabri believes that such a concept will work well in Africa and help with poverty alleviation, similar to what has taken place in Malaysia with the Felda settlements.
"This plan will also be worked out with the global strategic partner," he said. -- BERNAMA
