FGV’s Q3 loss may be partly due to fraud at overseas operations

KUALA LUMPUR, 29 Ogos -- Presiden dan Ketua Pegawai Eksekutif Kumpulan Felda Global Ventures Holdings Berhad (FGV), Datuk Zakaria Arshad ketika taklimat media mengenai Laporan Suku Kedua Felda Global Ventures Holdings Berhad (FGV) 2016 hari ini. Keuntungan sebelum cukai FGV susut kepada RM107.73 juta pada suku kedua yang berakhir pada 30 Jun, 2016 berbanding RM190.27 juta yang dicatatkan pada tempoh yang sama tahun lepas. --fotoBERNAMA (2016) HAK CIPTA TERPELIHARA

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) said possible fraudulent acts may be partly to blame for the group’s after-tax loss of RM40.07mil in the third quarter ended Sept 30 compared with a profit of RM20.19mil a year earlier.

“The performance of the group for the quarter was dragged down by the significant losses suffered by one of the jointly controlled entity (sic) due to stock losses discovered in this quarter. On the backdrop of this, the group expects the performance of the group to be challenging for the current financial year with another quarter to close the year,” the oil palm plantation giant said in its quarterly financial report to Bursa Malaysia.

While it did not mention any possibility of fraud in the filing, FGV said in a statement issued to the press that an “unusual” stock loss amounting to about RM57mil was incurred by a subsidiary of a jointly controlled entity in Turkey of which it did not have management control.

“We had started reviewing and communicating with management of the said subsidiary that suffered the stocks losses in the third quarter. Subsequent to this, potential fraudulent acts were uncovered in the said subsidiary and these acts are currently a subject of forensic audit,” FGV group president and chief executive officer Datuk Zakaria Arshad was quoted as saying in the statement.

“In line with my call for greater transparency and good governance, we will continue our ‘clean-up’ efforts and provide for potential impairments if any going forward.”

FGV did not name the jointly controlled entity or the business segment where the stock losses occurred. (Read StarBiz on Wednesday to learn which subsidiary is possibly involved.) 

In the statement, FGV compared the loss for the quarter under review to the profit in the preceding quarter (Q2), noting that one contributing factor was the higher fair value charge on land lease agreement (LLA) of RM105mil compared with RM12mil in Q2. However, if we are to compare year-on-year, the fair value charge was actually slightly higher in Q3 2015 at RM107.91mil.

In its quarterly financial report, FGV noted various factors, such as the slower global growth and the strengthening of the US dollar, that would put the group under tough operating conditions.

Based on these, it said, the board expected the group to record a loss for the full financial year.

Zakaria said FGV's strategic focus next year would be to consolidate its assets to drive operational excellence in its core business to leverage economies of scale in production and deliver sustainable returns to its stakeholders.

"Nevertheless, I believe there are still tough decisions to be made before the end of this year, as we begin the first phase of our new strategic plan," he said.

FGV shares have lost 14% in value in the last one week. The counter closed at RM1.69 on Tuesday, down 20 sen from a day earlier, with 50.275 million shares changing hands.

The latest revelation adds to concerns on the business operations of Federal Land Development Authority (Felda), which is FGV’s substantial shareholder with an effective 33.7% equity interest. A day earlier Felda had been taken to task by the 2015 Auditor General Report (Series 2), reportedly for the loss of millions of ringgit due to poor planning and execution of projects.

* See also FGV Q3 net loss widens to RM94.86mil