Felda Still Leads Malaysian Palm Oil, Says Moody's

KUALA LUMPUR, Nov 21 (Bernama) -- Felda Global Ventures Holdings Bhd remains the Malaysian palm oil sector leader while IOI Corporation Bhd exhibits a stronger business profile, owing to its highly efficient upstream operations and integrated business model, Moody's Investors Service says. "We expect Felda will maintain its production leadership position as Sime Darby's - Malaysia's second-largest producer - efforts to increase its crude palm oil (CPO) production through improving harvesting yield and productivity will likely be realised after 12 months," Moody's Vice President and Senior Analyst Jacintha Poh said. Felda's annual CPO production was more than three million tonnes over its last three fiscal years, a lead of more than 500,000 tonnes over Sime Darby Bhd and more than four times the outputs of IOI and Genting Plantations. Moody's conclusions were contained in its just-released report, 'Palm Oil -- Malaysia: Peer Comparison -- Felda Wins in Scale; IOI's Operations Are Efficient, More Integrated'. Sime Darby, Genting Plantations, IOI and Felda together have accounted for around one-third of Malaysia's total CPO productions over the last three years. "According to the comparison, IOI's upstream operations are most efficient with it consistently generating the highest fresh fruit bunch (FFB) yield among all four companies, and in fiscal 2015 it achieved FFB yield of around 24 tonnes, versus Malaysia's industry average of around 18 to 19 tonnes," said Poh. Over the next six to 12 months, Moody's expected all four companies to generate lower FFB yield due to poor weather conditions, but IOI will maintain its lead as 55 per cent of its trees are at their prime age. Moody's said IOI's business model was the most integrated, which supports financial stability. The group generated over 80 per cent of its total revenue from downstream operations, which provided diversification to the single-commodity business model across the agricultural value chain, said the rating firm. "We believe an integrated company is less exposed to CPO price cyclicality and has more stable, albeit much lower profit margins. IOI's leverage ratios exhibit more stability, helped by resilient profit margins," it said. All four companies have been members of the Roundtable on Sustainable Palm Oil (RSPO) since 2004 and while they are committed to the RSPO Principles and Criteria, some of them have been subject to complaints over the years alleging they breached RSPO guidelines. In some cases, the complaints resulted in partial or full suspension of their certification. Over the last three years, with the exception of Sime Darby, the other three companies have had issues with RSPO. Genting Plantations had its membership suspended and reinstated within 2014 while the certification on IOI's entire oil palm production was suspended in April 2016 and subsequently lifted in August 2016. In May 2016, Felda voluntarily withdrew RSPO certification for its upstream operations of 58 mills to address sustainability issues in their supply chains and it targeted to progressively recertify the mills within three years. -- BERNAMA