23/05/2011 (The Star) - BY 2015, Felda Global Group, the commercial entity of Federal Land Development Authority (Felda) is envisaged to emerge as a dynamic agri-business and multinational organisation with strong upstream and downstream activities, a well-recognised brand, diversified activities and a leadership especially in agri-based new technologies.

Under its current five-year transformation programme, Felda Global Group (comprising Felda Global Ventures Holdings Sdn Bhd (FGV) and Felda Holdings Bhd) has been tasked to undertake the strategic mission while at the same time ensuring steady growth of sustainable businesses to support Felda, its ultimate shareholder.

Running a unique company like Felda Global Group so far has been interesting, an eye-opener as well as challenging, says group president and chief executive officer Datuk Sabri Ahmad to StarBizWeek recently.

“The five-year key performance indices (KPIs) I set when I took up appointment as group president in July last year will be the immediate yardstick to measure whether Felda Global's transformation programme is going to be successful.”

The target is to double Felda Global's pre-tax profit in the next five years, adds Sabri. In 2009, FGV and Felda Holdings posted pre-tax profits of RM203mil and RM804mil respectively.

Furthermore, a bigger portion (about 30%) of Felda Global's revenue should come from added value products such as margarine, oleo chemical derivatives and specialty fats rather than from the upstream plantation division where the current heavy dependence is on.

“Our growth strategies include to fully unlock the values in agri-businesses which are related to palm oil and rubber via expansion particularly in Asean through new investments, joint ventures and M&As,” explains Sabri.

In addition, the group will be looking at exploring niche businesses like micronutrients as well as renewable energy projects using palm biomass waste as the new “green technology” income-generating operations for Felda Global.

Should the Group be able to expedite all the tasks, Sabri says that “We will be well on our way to becoming a successful, globally integrated and diversified agri-business MNC by 2015.”

In terms of size, Felda Global currently oversees and supports the largest oil palm operations in the world, exceeding 850,000ha.

“No other company in Malaysia or in the world, does that. When I was at Golden Hope Plantations Bhd, our landbank was only about 200,000 ha. The biggest company before the 2007 GLC-plantation companies merger (Golden Hope, Sime Darby Bhd and Kumpulan Guthrie Bhd) did not even top 300,000ha,” says Sabri who joined Felda Global Group in July last year.

Furthermore, Felda Global is involved in the whole value chain of the industry upstream, midstream and downstream from producing seedlings to refining and logistics right down to marketing and distributing packed products and cooking oils.

Sabri adds, “Felda has many strengths. This is particularly in the upstream operations where we have world-class R&D facilities from the iconic Tun Abdul Razak Agricultural Research Centre in Tekam, Pahang to our biotechnology centre in Nilai, Negri Sembilan. Downstream, our bulk storage facilities are also the largest and most advanced in Malaysia while our cooking oil, Saji, is a market leader.”

However, Sabri says the real challenge in running Felda Global is that, it is a commercial entity with profit-oriented target but the business objectives were founded on a social mission by virtue of Felda whose charter is to serve the settler community.

Felda services its overheads and implements various programmes from internally generated funds. “Therefore, there exists, for Felda Global Group, the added dimension of having to ensure a strong and sustainable business to support this.”

“This also means that Felda Global Group has many stakeholders in its business and it is always a challenge for us to balance the interests of all of them,” explains Sabri.

Having said that, the ultimate litmus test, however, will be the reception from all Felda Global's stakeholders.

He points out that Felda Global's business activities already impact more than one million people across many geographies.

The proceeds are channelled to various social and developmental programmes initiated by Felda. At the same time, Koperasi Permodalan Felda (KPF a co-operative whose membership comprises Felda settlers, staff and their respective families) has a majority stake in FGV's 49% subsidiary, Felda Holdings.

Therefore, Sabri says Felda Global's commercial success will have spill-over effects to the settler community. “The first generation will enjoy higher income through their investments in KPF and the second generation will benefit from Felda's skill development programmes as well as enjoy better career opportunities within the growth areas.”

“Should all our stakeholders respond positively to the transformation, we would deem ourselves to have achieved our objectives,” adds Sabri.

He says Felda Global Group returns over RM1bil, the direct profit from its management of Felda's land, to Felda annually

“FGV was only launched in mid-2009, but if you were to look at Felda Holdings (the predecessor of the commercial entity of the Felda Group), we have reported billion-ringgit returns since the nineties,” says Sabri.

“In the last few years, the pre-tax profit stood at around RM800mil annually,” he says.

There are many aspects of its plantation operations which are unique to Felda Global Group, adds Sabri.

“To begin with, we only own some 11,000ha under our R&D subsidiary where we conduct our field trials. Our mills receive fruits from oil palm plantations owned by Felda and estates owned by settlers, altogether totalling some 850,000ha.”

“We manage Felda's land on their behalf but we have no control over the management of the settler estates.

Therefore, it is also a very big challenge for Felda Global Group to increase the oil extraction rate at our palm oil mills as this is a function of good estate management,” explains Sabri.

In addition, the plantations and estates were developed from land given by state governments to Felda for land development and settlements.

“These are not necessarily prime land for agriculture and neither are they always in the best locations. This is unlike the scenario at most other commercial plantation companies as they acquire their landbank through a careful selection process taking into account soil suitability, topography, land status and rainfall patterns to ensure that the planting can yield the best returns from their investment in the land,” adds Sabri.

Felda currently has a skewed age profile where a large percentage of its palm trees are between 19 and 25 years old.

“A considerable number are above 25 years old. This is much lower in most other plantation companies. “Therefore, we are pursuing an aggressive replanting programme, at a rate of 4% to 6% every year to ensure that FFB production remains at desired levels,” says Sabri.

Under Felda Global's five year transformation programme, the idea is to undertake about 30,000ha of replanting annually with a capex of about RM450mil.

At the same time, Felda Global would like to see better productivity as much as 23% average OER at its 71 mills and FFB yield of 25 tonnes per ha at Felda estates.

According to Sabri, Felda Global Group is a truly sustainable plantation operator who practises the three sustainability principles People (for its 112,635 settlers), Profits (for Felda's financial well being) and Planet (adopting green practices in its day-to-day operations).