KUALA LUMPUR, Aug 28 (Reuters) - Malaysian palm oil producer FGV Holdings said on Tuesday it was investigating several of its business practices following “adverse findings” from an earlier probe into its investments.
The internal investigations are examining open credit lines, poor purchasing trading practices and palm oil sales, direct awards of procurement contracts that breach best practices, and the shortage of workers from mid-2016 to mid-2018 that resulted in financial losses over the period, FGV said in a statement.
The company’s investigation into its investments was started in January and focused on an acquisition of a palm plantation company and a condominium property, as well as an investment in a graphene production company, among others.
FGV said the investigation had revealed “adverse findings”, without explaining what they were, and that it had sought legal advice on possible recourse.
“FGV needs to refocus on its core competencies and to ensure that we restore the integrity of our operations ... While the board resolves the issues surrounding past investments and transactions that have depleted FGV’s cash resources, it will simultaneously strive to ensure that this critical turnaround plan is implemented,” FGV said in its statement.
Shares of FGV, the world’s largest producer of crude palm oil, have fallen in recent years amid allegations by analysts and investors of graft and poor company management.
A new government elected into power this year has pledged to clean up the governance and operations of state-linked entities including state plantation agency Federal Land Development Authority (Felda), FGV’s largest shareholder.
FGV reported a second quarter net loss of 23.2 million ringgit on Tuesday, versus a net profit of 37.3 million ringgit in the same quarter last year. Revenue slid to 3.44 billion ringgit from 4.21 billion ringgit last year.
The net loss was attributed to lower productivity, weaker average crude palm oil prices, higher production costs and higher losses from joint ventures and associate companies.
“Further steps need to be taken by the management to enhance operational effectiveness and efficiencies, in order to produce sustained results under changing market conditions,” said FGV.
“Furthermore, the company’s performance falls short of market expectations and the targets that were internally set by management.”
FGV added it was forecasting its full-year oil palm fresh fruit bunch yields at 17 tonnes per hectare, below its initial target of 17.5 tonnes and the national industry average. It expects yields to rise above 20 tonnes next year on improvements in agricultural practices and aggressive replanting. (Reporting by Emily Chow; Editing by Mark Potter)