FGV sees creation of sustainable revenue stream from integrated farming business
28 May 2020
FGV Holdings Bhd, which has embarked on a transformation programme, hopes to see its newly-ventured integrated farming business generate an earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of 15% by 2023.
Its group chief executive officer (CEO) Datuk Haris Fadzilah Hassan said this will be driven by the segment’s four core components including dairy.
The remaining three components are fresh produce, animal feed and grains.
“This (the segment) will become another revenue stream that is stable and sustainable for FGV, supplementing the group’s core revenue,” Haris Fadzillah said in a media briefing today.
According to him, the group’s new dairy business has picked up speed, registering consolidated revenues of some RM610,000 in the first two months since the acquisition of fresh milk producer RedAgri Farm Sdn Bhd.
On Feb 16, FGV announced its subscription to new shares amounting to a 60% stake in the enlarged share capital of RedAgri Farm for RM10 million, marking its entry into the dairy farming business and fresh milk processing.
The acquisition, Haris Fadzillah said, has enabled FGV to create more value from its existing resources and to tap into synergies within the palm-based circular economy.
RedAgri owns the Bright Cow brand of dairy products that include fresh milk, yoghurt, cheese and kefir. The company is set to introduce new fresh milk-based products in September.
“Our processing plant in Negeri Sembilan is being upgraded, which will expand its capacity to produce about 10 million litres of fresh milk products annually. FGV aims to produce approximately 400,000 litres of fresh milk in this year alone,” the CEO said.
Last year, FGV introduced an integrated farming blueprint as part of its strategy to make productive use of marginal lands. The plan was to enable inter-cropping on its oil palm land during the replanting process. This will also be achieved by involving smallholders in the supply chain through contract farming.
The group has identified 212.71ha for the planting of a variety of premium fresh fruits and vegetables this year, with 10ha already planted as the MD2 Pineapple Seeds Garden in Johor.
On the grains side, Haris Fadzillah said FGV has identified some 10,000ha for large scale mechanised paddy farming by 2025, with an optimum production capacity of 120,000 tonnes.
“The whole idea is that we want to be involved in end products that are rice-based, such as flour and noodles, which complement our current capability in food. We also plan to launch our Beras Saji by the third quarter of this year.
“For animal feed, we’ve seen an increase in sales by 244% in the first quarter of this year. As at April 30, we have sold 13,534 tonnes of animal feed in the local market, generating RM6.98 million in revenue,” he added.
FGV is also eyeing the regional markets for its animal feed products.
The group expects to launch five new products this year and is in talks with “large” customers for animal feed.
Source: The Edge Markets