RATHER than invest in a troubled plantation company in Indonesia, the land reform authority should have used the money to solve the settlers’ problems at home, said a group of second-generation settlers in Felda.

Jawatankuasa Bertindak Suara Generasi Kedua Felda adviser Zulkefli Nordin said the US$500 million (RM1.95 billion) invested in PT Eagle High Plantations Tbk (EHP) would have been better spent “fixing what was broken” in Felda.

“For instance, the funds could have been used to shore up the Felda Global Ventures Bhd share price that had fallen from RM4.80 to RM1.80 per unit.

“From the beginning, our group of second-generation settlers had been against the acquisition because we knew the company was in trouble,” he said.

A little over a year after the deal is sealed, the International Palm Oil Monitor (Ipom) has revealed that Felda had made an unwise bargain.

Ipom said it had sighted the due diligence report on the EHP takeover prepared by auditor KPMG, which had detailed the plantation company’s corporate improprieties and financial concerns.

Ipom said Felda, through FIC Properties Sdn Bhd, paid about US$500 million for 37% of EHP shares, paying IDR580 (RM0.17) per share, and an extremely high premium of 95% to its closing share price at the point of acquisition.

Ipom said the industry experts had slammed the deal for being overpriced and in consideration of EHP’s sorry state of affairs.

The deal went through, nonetheless. Government funds financed the buy, which many saw as a bailout for EHP owner Peter Sondakh, an Indonesian businessman with strong political ties in Malaysia.

In a response to Ipom yesterday, EHP said its partnership with Felda in Malaysa was a strategic one that had generated higher sales revenue last year.

EHP said its sales increased by 40.2% over the first nine months of 2017, resulting in income operations rising to IDR229.7 billion (RM65.7 million) from IDR4.9 billion.

“There has been significant improvement to our financial position due to recent business decisions. 

“Cash flow improved in 2017 as we refocused on increasing production and yields from existing planted areas with young age profiles, rather than opening new areas with new plantings,” it said.

Zulkefli said Felda made the acquisition while it was having many problems managing its plantations at home.

Felda was having problems with monthly revenue payments, financing the funds that drew money from the income of settlers, and the drop in value of fresh fruit bunches, he said.

“An investment like this will cause Felda to lose money and bring no benefit,” he said.

Zulkefli said Felda often “lacked an official stand” when it came to investments.

“At the start of the transformation era (under Prime Minister Najib Razak’s administration) began, Felda land was leased out.

“Felda bought hotels and got involved in projects outside its core business. They said it was to make Felda more competitive and not solely focused on agriculture and plantation,” he said.

One example was the plantation rehabilitation fund that was known as plantation insurance, he said.

“For decades, settlers paid money for the insurance every month. When their plantations were attacked by bagworms, the insurance suddenly became the plantation rehabilitation fund.

“When the people urged Felda to rehabilitate their plantations immediately, they were told there were no funds. So the rehabilitation had to be postponed.

“It would have been better for Felda to use that US$500 million (paid for EHP) to fix what needed to be fixed,” he said.

Zulkefli said it took Felda two to three years to approve and disburse the funds for farming applications of RM100,000 to RM200,000.

“That’s not even Felda’s money. The money is deducted from the settlers’ income.

“If it is true that all of Felda’s investments are profitable, why can’t it channel the settlers’ funds to be used where they are needed?” – February 23, 2018.