FGV’S NEW CAPTAIN CHARTS ITS NEXT COURSE
Palm oil is one of those commodities alm that you just can’t live without, and Malaysia is the world’s second-largest producer of it, behind Indonesia. According to the Malaysian Palm Oil Council (MPOC), Malaysia was responsible for 25.8 percent of global palm oil production and for 34.3 percent of the world’s palm oil exports in 2020.
Cue FGV Holdings Bhd (FGV), the ue entity that is responsible for around 15 percent of the total annual production of crude palm oil (CPO) in Malaysia. The company is one of the largest producers of the precious commodity and has operations in nine countries across Asia, North America and Europe and exports to many more. International Business Review had the pleasure of speaking with its Group Chief Executive Officer (GCEO) Datuk Mohd Nazrul Izam Mansor on how he is leading FGV in creating value for its stakeholders by becoming a sustainable business, and changing the narrative of the palm oil industry.
Appointed on 23 August 2021, Datuk Nazrul Mansor has just crossed his first anniversary as FGV’s GCEO. He acknowledges that there was a time when FGV’s reputation was sullied by certain controversies. However, he highlights that since 2017, his predecessors have put into place measures that have resulted in major housekeeping being carried out in the company. Reforms were implemented and various improvement in governance and operations were put into place. And now he is ready to carry on with that good work.
“We have a solid procurement system that ensures procurements are done in a transparent manner where the company would get the most value of every single cent it spends,” Datuk Nazrul Mansor expresses.
FGV’s efforts in turning a new leaf was duly rewarded in 2019 when it received ISO 37001:2016 certification for its Anti-Bribery Management Systems from SIRIM QAS, the conformity assessment body accredited by the Department of Standards Malaysia and the United Kingdom Accreditation Service.
“Ultimately, our people are key to our efforts, and to ensure that we are all in line with the same goal, we have instilled a set of values in all our staff, from the GCEO to the senior management to the manual labourers, and that is:
Understanding the Importance of Sustainability
Datuk Nazrul Mansor explains that, in order to understand the challenges FGV faces he took a close look at FGV’s business model so he could better understand what lay ahead of him then, before formulating an action plan. Putting the business model of FGV under the microscope, he identified a few that could potentially present an uphill task.
One such challenge was the need to balance out FGV’s commitment as a socially responsible company while maintaining its profitability. As Datuk Nazrul Mansor explains, “We adhere to the United Nations (UN) Sustainable Development Goals (SDGs) wherein we ensure that our workers’ rights and well-being are protected. Not only do we ensure that they receive a decent wage, work appropriate hours, and have adequate time off, we also go above and beyond, such as our workers’ housing which exceeds national and international standards.”
“Not many other plantation companies go as far as we do in looking after the rights of their workers. However, it does add extra costs to our operations which eat into our margins. But we will still do it because it is the right thing to do,” he states firmly. He also acknowledges that FGV has identified room for improvement in its past practices and that the company is proactively working towards addressing them.
The end goal, he says, is to be a respectable and profitable corporate entity, as it would make FGV more attractive to customers, financing institutions and investors. At FGV, it has a mantra that says, “Sustainability first, profit and growth will follow.”
“We are working to weave ESG into our sustainability agenda. This is driven by three pillars, which are Promoting Economic Growth, Respecting Human Rights, and Protecting The Environment. These pillars form the foundation of our sustainability goals and we are dedicated to preserving and conserving the environment for our children and their children,” he explains.
Bringing Value to the Table
As the GCEO of FGV, Datuk Nazrul Mansor ’s priority is to make decisions that would best suit the interest of the company, which also translates into the best interest of its stakeholders.
“In terms of adding value, we need to see things from the market’s perspective, so that we can provide exactly what the market demands, based on the capabilities that we possess. This would ensure that FGV will remain relevant,” he says.
He believes that FGV must enhance its position in the Malaysian food market, not only in essential food items such as cooking oil and sugar, but also building our presence in other value-added consumer food products segments. “We already have one foot in, it’s just a matter of us having to reorganise ourselves and take advantage and capitalise on our position,” he explains.
For instance, he is drawing on his experiences working with homogenous products in FELCRA to set FGV’s cooking oil products apart from the competition. At the same time, the company has developed its own logistics and distribution network thus ensuring that it has better control over its supply chain.
FGV has also explored new business opportunities to diversify its portfolio. For example, the company has ventured into the energy market through green energy generation. And the vast plantation areas under FGV’s management, allows FGV to produce and supply feedstock for biomass and biogas generation plants. For instance, one such plant, the 7.5 MW Sahabat Biomass-EFB Power Plant in FELDA Sahabat in Sabah, provides power to townships in remote areas on top of powering our own operations.
And this is where another of Datuk Nazrul Mansor ’s previous valuable experiences comes into play. His previous role with N.U.R Power Sdn Bhd had already given him exposure to both power generation and distribution where he helped distribute energy to high voltage, high network clients from both the commercial and industrial side. With that experience, Datuk Mohd Nazrul is well equipped to tackle the operations and challenges that comes with FGV’s venture into renewable power generation.
(Quote – “The rise in CPO prices have also increased our profitability. However, being a responsible corporate player, we have worked with the government extensively to ensure that the prices of our products do not burden Malaysian consumers.”
Rolling Out the Machines
Technology is also an important part of Datuk Nazrul Mansor’s plans for FGV. Currently, FGV has only around 72 percent of the workforce it requires to operate its plantations, as it was unable to import foreign workers due to the strict COVID-19 pandemic guidelines imposed in their countries.
Besides its efforts to recruit more workers, Datuk Nazrul Mansor states that another one of FGV’s solution to this issue of labour dependency would be to improve automation via mechanisation. “I’m proud to say that right now, out of the 440,000 hectares of land we currently operate in, about 115,000 hectares have been fully mechanised using the Mechanical Assisted In-Field Collection (MAIC).”
with the government extensively to ensure that the prices of our products do not burden Malaysian consumers.”
MAIC and the Mechanical Assisted Collection & Transport (MACT) are part of the Palm Oil Mill Integrated System (POMIS) that allows FGV to better monitor its plants, factories and refineries. Both of which serve to collect and transport Fresh Fruit Bunches (FFB) from estates to mills. FGV also utilises drones to apply fertilisers, pesticides and help in plantation data collection and monitoring processes.
He elaborates that FGV also has its own major research and development outfit and has developed many systems and applications to make operating plantations more efficient and effective. For example, he reveals that one of the products that is currently in the commercialisation stage is FGV’s Geotagger device.
By using GPS technology, Geotagger helps to improve replanting productivity in achieving optimal replanting stem counts per hectare to maximise future productions. It marks out old palm oil trees before they are chopped down and uprooted. The device is then used to provide accurate lines to plant new palm trees. This innovative invention could help FGV with cost savings of RM2 million and increase revenue by RM6 million for every 15,000 hectares replanting areas per year.
Mitigating the Uncontrollable
Another major stumbling block for the agribusiness industry is the global fertiliser shortage that is caused, for the most part, by the ongoing Russian and Ukraine conflict. Unfortunately, no one can completely insulate themselves from its effects as many of the raw materials for the fertiliser itself originate from these two countries and Belarus. This has resulted in the prices going up by as high as 200 to 300 percent.
However, FGV has taken necessary steps to mitigate its effects. According to Datuk Nazrul Mansor, FGV uses fortified organic fertilisers (FOF) to reduce usage of conventional fertilisers. “FOF is a great initiative and is quick to produce. We take the empty fruit bunches and basically compost it through our composting process.”
The Road Ahead
With FGV in three key segments of the market, namely oils and fats, sugar and food, the overarching vision is to be a sustainable, global food and agribusiness player.
Regarding oils and fats, Datuk Nazrul Mansor points out that he wants FGV to operate directly in target markets, where they would interface with customers directly. However, geopolitical issues and government policies, such as protectionism and tariffs against palm oil products, pose challenges to realising that goal. In turn these would affect FGV’s cost structure, which ultimately affects the final price of its products.
“In order to make our products more competitive, we need the help of the Malaysian government to support our endeavours by making positive policy changes,” he explains.
When it comes to FGV’s sugar business, he notes that there is a retail ceiling price for sugar sold in Malaysia. There are times when external factors such as currency devaluation and high input cost from gas prices would result in production costs going over than the capped pricing. To address this issue, Datuk Nazrul Mansor reiterates that policies that was rightly applied at a certain time can be outdated and need to be revisited and reworked to suit today’s circumstances.
Lastly with its food market, he asserts that it’s a different ball game all together where it is more a branding issue. While it is already familiar to the market, Datuk Nazrul Mansor acknowledges that given FGV’s background in the upstream sectors, it may be more challenging to attract stakeholders to invest in its downstream and consumer products expansion plans.
“We should think in the grander consumer product business. We’re talking three to five years down the line, to make sure our products are accepted by the market,” he reveals when defining his mindset for this venture.
FGV has made big strides in progressing forward but more would be required in the future. With Datuk Nazrul Mansor helming the “hot seat”, one can envision FGV growing even larger than it is today. And in doing so become a progressive company that not only brings value to its stakeholders but also cares for the wellbeing of its workers and the environment.
