Sime Darby to review India exports strategy

Raised import duties on vegetable oils have caused profits to drop, forcing the firm to re-evaluate products


Sime Darby Plantation Bhd will review its palm oil and derivative product exports to India, after its earnings were impacted due to the raised import duties on vegetable oils.

The world’s biggest palm oil importer increased its import tariffs on major vegetable oils, which include crude palm oil (CPO) from 15% to 30%, and refined palm oil of edible grade from 25% to 40% last August.

The change, although beneficial to India’s local refiners, has raised some concerns among exporters from Malaysia and Indonesia.

The move caused profits to drop to a certain extent, forcing Sime Darby Plantation to re-evaluate which products — between CPO and refined products — would bring the most revenue.

“Due to higher tariffs, India’s levy has hit our profits.

We need to re-examine what’s best to sell, either CPO or refined products,” Sime Darby Plantation CEO Datuk Franki Anthony Dass (picture) said on the sidelines of the group’s AGM and EGM in Kuala Lumpur yesterday.

According to Dass, the company has been exporting almost a million tonnes of palm oil products to India and the volume has been increasing year-on-year.

Bloomberg reported yesterday that demand of India’s vegetable oils remains strong even after the duties were raised. Some 70% of India’s total vegetable oi ls are imported.

Dass added that the cost of sales of CPO including the levy is about RM1,500 per tonne.

Commenting on the European Union’s (EU) resolution to curb palm oil imports, Dass said the EU should treat the product equally as to other vegetable oils.

“It is not fair to associate palm oil alone to unsustainable industry practices. They should apply it to all vegetable oils as well,” he said.

Dass said the company is eyeing new export markets such as the US, which has big potentials, on top of its traditional markets like India, China, Europe and countries in Greater Mekong area.

Dass forecast palm oil prices will sustain in the range of RM2,600 to RM2,700 a tonne until early next year.

One analyst told The Malaysian Reserve the downward trend in CPO price would not have a significant influence on investors in the incoming listing of Sime Darby Plantation on the Main Market.

“The CPO price weakness is mainly due to the strengthening of the ringgit. As for the falling CPO price, it would not affect the investors’ sentiment towards Sime Darby Plantation’s shares because they normally would look at it as a long-term investment,” the analyst said.