KUALA LUMPUR: FGV Holdings Bhd has subscribed to new shares amounting to a 60 per cent stake in the enlarged share capital of RedAgri Farm Sdn Bhd for RM10 million.
FGV said the acquisition marked its entry into the dairy farming business and fresh milk processing, the first step towards becoming an integrated agrifood company.
The acquisition of RedAgri, which owns the Bright Cow brand of dairy products, enables FGV to create more value from its existing resources and to tap into synergies within the palm-based circular economy.
FGV group chief executive officer Datuk Haris Fadzilah Hassan said dairy farming is one of the identified pillars of the group’s integrated farming business.
“The other key components are animal nutrition, paddy and rice, and cash crops, which includes MD2 Pineapples and Cavendish Bananas.
“FGV had announced in 2019 that it would enter the palm-based circular economy to tap into lucrative synergies presented by the group’s extensive palm oil operations,” he said in a statement on Friday.
FGV said RedAgri currently process 4,000 litres of fresh milk a day, which will be increased to 20,000 litres a day by 2022.
Most of that increased production capacity is already committed to industrial and commercial customers.
With the support of contract farmers, FGV would be able to increase production to meet more local demand, FGV said.
Malaysia imports about RM3.9 billion worth of dairy products a year, as local production amounts for only 67.1 million litres annually, or 61 per cent of current domestic demand.
The remaining 40.0 million litres is imported.
Haris Fadzilah said FGV’s success has always run parallel with the nation’s efforts to achieve greater social equity.
“Already, our smallholders produce two-thirds of the crops we process. Enabling them to grow with us and to enjoy the same successes in synergistic and adjacent businesses will help us to ensure that this important stakeholder is able to continue partnering FGV in the years ahead,” he said.
Meanwhile, FGV said it had rammed up production of its palm-based animal feed operations, with 2019 sales showing a marked 113 per cent increase to 21,600 tonnes, against sales of 10,200 tonnes the previous year.
It said January 2020 sales had come in at 369 per cent higher than January 2019, with a total of 3,600 tonne of feed sold in the domestic market.
“Once capacities are rammed up to 150,000 tonne per annum, in the next five-year, we are looking at additional revenues of about RM120 million from this business,” Haris Fadzilah said.
Currently, 60 to 70 per cent of the cost of livestock rearing in Malaysia is from feed, most of which is imported.