KUALA LUMPUR: At his first press conference as the chairman of the Federal Land Development Authority (Felda), Tan Sri Megat Zaharuddin Megat Mohd Nor said the plantation group would first need to improve its cash flow and pare down some of its borrowings.

The former chairman of the largest banking group in Malaysia, Malayan Banking Bhd (Maybank), described Felda’s current cash flow as “almost empty”.

“One thing to tackle is Felda’s cash flow. We could not pay what we should have to the settlers,” said Megat Zaharuddin to reporters at a press conference yesterday.

He pointed out that restructuring some of its RM8bil borrowings and selling its properties in London, Kuching and Kota Kinabalu would improve its short-term cash flow.

Additionally, he said the weak crude palm oil (CPO) price contributed to the cash-flow issue.

Overall, Megat Zaharuddin is targeting to turn around Felda in two years, which he reckoned to be a tough task.

“I’ve been in many turnaround situations before, big and small. This is big. The turnaround of Felda will need a minimum of two years,” he said.

For this year, he is targeting to reduce Felda’s borrowings to RM6.5bil from RM8.05bil as at June 30 by selling its properties.

He said the assets include hotels, apartments and student hostels, which carry an acquisition cost of about RM2.2bil.

“Felda has already started the selling process of its assets since last year, and we hope to at least get all the money back,” Megat Zaharuddin said.

He was appointed to his current post at Felda on July 27, replacing Tan Sri Shahrir Abdul Samad, who tendered his resignation on May 14.

Felda is the country’s most important political cog with as many as 54 parliamentary constituencies dominated by Felda settlers.

Megat Zaharuddin, 70, is seen as an ideal candidate to helm Felda, given his vast knowledge and hands-on experience in the corporate scene.

He built an outstanding career of 31 years with the Royal Dutch Shell Group of Companies, as well as serving as Maybank chairman for eight years from 2009 to 2014.

His previous chairmanships also include Maxis Communications Bhd (2004 to 2007), the Malaysian Rubber Board (2009 to 2010) and Etiqa Insurance & Takaful (2006 to 2009), among others.

To assist in the turnaround, Felda also announced the appointment of Datuk Othman Omar as its director-general, effective Oct 1.

Othman, 58, was the former general manager of Selangor State Development Corp.

He replaces Datuk Abd Ghani Mohd Ali, who has been with the Felda group for 37 years.

Othman headed Singapore-listed property developer Oxley Holdings Ltd’s Malaysian operations from 2014 to 2016.

Megat Zaharuddin said Felda’s board of directors felt that Othman had the skills and ability to lead the group to overcome current challenges.

In recent years, Felda has increasingly been under the spotlight, owing to its involvement in a number of inexplicable deals.

In January this year, it cooperated with an external forensic audit investigation carried out on the suspicious land title transfer of its Jalan Semarak land earmarked for the Kuala Lumpur Vertical City (KLVC) project.

It was reported on Dec 21, 2017 that Felda was at risk of losing its rights to strategic land along Jalan Semarak, estimated to be worth RM270mil, as a result of four allegedly dubious sale and purchase transactions.

Megat Zaharuddin said that Felda was planning to restart discussions with property developer Synergy Promenade Sdn Bhd to reach a win-win outcome on the KLVC development.

“Firstly, I must make it clear that we have the land back,” he said.

“But the case is quite complicated, we are in the midst of gathering the details and we have also spoken to legal experts,” he added.

In August, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali said he would be presenting a White Paper on Felda in the next parliamentary sitting in October, which would lay out Felda’s situation and financial position as well as its strategic rehabilitation plan.

Megat Zaharuddin said Felda would be providing the information and key findings for the White Paper.

“Turning around Felda is our job,” he stressed.

Felda is also the single largest shareholder with a 34% stake in diversified plantation group FGV Holdings Bhd , the world’s largest CPO producer.

Megat Zaharuddin is hoping that FGV can turn around within the next six months to one year.

Annually, he said FGV contributed about RM400mil to Felda from land lease agreements, profits and dividends.

“We believe that the contribution should be higher. But this all depends on FGV’s productivity, as well as the CPO prices and the fresh fruit bunch (FFB) production,” he said.

He said FGV’s FFB production was below the national average and it needed to be addressed.

Additionally, Megat Zaharuddin said Felda also needed to improve its productivity to increase earnings.

“Our FFB productivity at Felda is above the national average of 20 tonnes per hectare per year, but we are not yet best in class,” he said, adding that 24 tonnes per hectare was the target.