KUALA LUMPUR, May 29 (Reuters) - Malaysia’s FGV Holdings Berhad, the world’s largest crude palm oil producer, said on Wednesday it is exploring ways to reduce its dependency on palm oil after slipping to a small first-quarter loss amid flat prices.
FGV Holdings said it expected crude palm oil (CPO) prices to continue to come under pressure this year from high inventory levels and ample supplies of competing oilseeds like soybean and sunflower.
However, it said Malaysia’s palm oil export tax exemption and a higher biodiesel mandate would help drive demand and reduce stockpiles.
“FGV is also exploring strategic initiatives to reduce the dependence on palm oil and the impact of CPO prices,” chief executive officer Haris Fadzilah Hassan said in a press statement after the result, without elaborating.
The company’s plantation business made up 76 percent of total revenues in 2018, but it also has operations in logistics and sugar. The plantations arm includes a small amount of revenue from rubber.
FGV reported a first quarter loss of 3.4 million ringgit ($0.8 million), down from a 1.3 million ringgit profit a year ago, while revenue dipped to 3.28 billion ringgit from 3.6 billion ringgit due to lower crude palm oil prices.
The group said its downstream business performed better during the quarter, aided by the implementation of an increased biodiesel mandate in Malaysia.
“We are strategically reviewing our downstream businesses and believe that they will continue to grow and contribute positively to FGV’s performance,” Haris said.
Malaysia, the world’s second largest palm oil producer after Indonesia, raised the minimum bio-content that local producers must put in biodiesel to be used in transport to 10% from 7% in February. A 7% blend for the industrial sector will be implemented from July.
Higher blending mandates reduce stockpiles of palm oil, which is used as a feedstock to make biodiesel.
Malaysia has also deferred crude palm oil export duties until the end of the year in a bid to improve demand and lower stockpiles, which last year rose to the highest levels in nearly two decades. MYPOMS-TPO
$1 = 4.1940 ringgit Reporting by Emily Chow; editing by Richard Pullin
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