PRG Holdings Berhad Annual Report 2020

18 PRG HOLDINGS BERHAD Management Discussion and Analysis cont’d Agriculture The Group ventured into agriculture through the acquisition of two parcels of agricultural land planted with teak trees in Gua Musang Kelantan in November 2019. This division started to generate revenues in FY2020. The agriculture segment recorded revenue of approximately RM0.9 million from the sales of harvested teak logs and loss before tax of RM2.3 million for FY2020. The loss before tax is mainly due to the professional fees and expenses incurred for securing the financing facility and slower harvesting and selling of teak logs activities during current financial year. Harvesting activities were at standstill most part of the year due to the implementation of MCO. The difficulty to access to site for inspection of teak wood by potential buyers during Conditional Movement Control Order (“CMCO”) also affected the sales generation during current financial year. We are confident this newly ventured business can contribute positive income and steady cash flows to our Group. We managed to obtain the export licence of raw logs during the year, allowing us to have exposure to overseas markets which has higher margins. Furthermore, we are also exploring different opportunities with local sawmills to develop various value-added teak wood products. As part of our Group’s sustainability business strategies, we will be re-planting with multi-crops after harvesting of the teak logs. Others The others segment recorded profit before tax of RM7.1 million for FY2020, which was RM17.4 million higher than the loss before tax of RM10.3 million recorded in the preceding year. This is mainly due to the realisation of previously unrealised interest income of RM12.4 million on intercompany advances upon disposal of PDMSB to third party and current year interest income on advances of RM2.1 million. The higher profit before tax also due to lower finance costs on borrowings incurred in current financial year. RISK MANAGEMENT & APPROACHES The Group remains resilient against the upcoming risks and challenges. The Group constantly reassesses its risk exposure and seeks to optimise the balance between opportunities and risks both in operations and strategic direction. All of our operating assets are situated in Malaysia, Vietnam, Singapore, Hong Kong and the PRC. As such, our business, financial conditions and results of operations whether presently or in the future, depend to a certain extent on the economic, political and regulatory developments of local governments and authorities. Such developments and future uncertainties include, but not limited to, changes in political leadership, risks of war, expropriation and changes in laws and regulations. In particular, any unfavourable changes in government policies on import and export duties and tariffs, foreign exchange controls, restrictions on production, price controls, taxation, environmental protection, employment and health and safety, could materially and adversely impact our business operations, financial conditions and international competitiveness.