This article first appeared in The Edge Malaysia Weekly on May 31, 2021 - June 6, 2021

Almost all major plantation companies have been raking in the profits from the record high crude palm oil (CPO) prices. However, FGV Holdings Bhd recorded a loss in the latest quarter.

Its revenue and operating profit increased on the back of higher CPO prices. However, its result was dragged down by an adjustment to the fair value change of its land lease agreement (LLA) that is tied to its ultimate shareholder, Felda Holdings Bhd.

The LLA adjustment of RM143.8 million in the latest quarter saw FGV record a loss of RM13.8 million. The company however, stated in the notes accompanying the results that the performance was a huge improvement compared to the loss of RM173.9 million in the same period last year.

But a peek into the accounts suggests that the losses are more than just the adjustment to the LLA agreement.

The plantation division, which is the mainstay of the plantation company, is still bleeding despite CPO prices at record high levels in the first quarter.

FGV stated that the plantation sector registered a lower loss of RM50.8 million in the first quarter of this year compared to a loss of RM142.3 million in the same period last year. The lower loss was mitigated by the higher average selling price of CPO at RM3,172 per tonne compared to RM2,669 per tonne last year.

If FGV is still unprofitable when CPO prices are more than RM3,000 per tonne, what is its break-even cost of production?

The three-month CPO price is now hovering at more than RM4,000, which gives a good margin to other plantation companies. Even medium-size plantation companies that command a smaller share of the market are raking in the profits.

Under such an environment, why can’t a plantation giant such as FGV register decent numbers?

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