FGV baulks as Felda mulls taking back land

 

FGV Holdings Bhd issued a pointed statement today in reaction to the revelation of the Federal Land Development Agency's (Felda) plans regarding the company.

While the IPO in 2012 was often blamed for Felda's financial problems in recent years, the company said the "real issue" was how the money raised was utilised.

"Felda earned RM5.7 billion from this IPO while FGV earned RM4.5 billion. FGV cannot comment on how Felda uses the proceeds from the IPO.

"Unfortunately for FGV, part of the proceeds was not well invested. Up until the end of 2018, FGV has made substantial impairments amounting to RM780 million for those new investments," said the company.

This remark was made as part of the company's reaction to Felda chairperson Idris Jusoh's interview with Bernama recently.

Among others, Idris said Felda's earnings "obviously declined" because the returns from FGV's investments did not commensurate with "what was expected of them".

Idris added that to help Felda return to profitability, the agency wants to take back 350,000ha of land loaned to FGV under a land lease agreement (LLA).

"When the LLA was entered into, there were conditions stating that Felda can take back the land at any time by giving them (FGV) 18 months' land acquisition notice.

"We want to take back the land to re-empower Felda. The income derived from profits from Felda plantations before the listing exceeded RM1 billion, making a billion is no big deal... it can be made, however, the income dwindled since 2012 following FGV's listing," he said, adding that the proposal was being considered by the federal government.

Idris Jusoh

On the proposed termination of the LLA, FGV said this was allowed under the terms of the agreement but they have yet to receive any official word from Felda to "negotiate matters".

However, FGV said that Felda will have to buy up the company's mills on the land at market value on a "willing buyer, willing seller" basis.

Felda will also have to seek the approval of other shareholders through an extraordinary general meeting (EGM), said the company.

According to FGV's 2019 annual report, Felda and its companies had at least a 38.9 percent stake. Finance Ministry-controlled Urusharta Jamaah Sdn Bhd and Retirement Fund Inc (Kwap) held 14.4 percent.

FGV added that it had made good its RM248 million per annum payment to Felda, but not the 15 percent cut of the operating profit from LLA land.

The company explained that it had to undertake an extensive replanting and fertilisation programme, costing RM300 million per annum, because 50 percent of the trees inherited were considered old (21 years or more), thus cutting its profitability.

Moreover, crude palm oil prices have declined since the IPO in 2012, said the company.

FGV also stated that the LLA land was currently "much improved" compared to its original condition in 2012.

After posting a massive RM5.8 billion windfall in 2012, Felda lost RM4.9 billion in 2017 while its debt exceeded its net asset values that year.

The Pakatan Harapan government tabled a White Paper on Felda in 2019 and initiated a RM6.3 billion rescue plan.

Now, the plan is at the hands of Idris, who is also the Besut MP.

Idris said Felda plans to issue sukuk bonds with the federal government as the guarantor. The amount to be issued has not been specified.

FGV's IPO was executed during former premier Najib Abdul Razak's administration and was touted as the second-largest IPO in the world that year, raising RM10.5 billion.

Its IPO price was RM4. At the time of writing, FGV's share was last traded at RM1.08.  - Mkini