TH Plantations in the red on low margins


TH Plantations Bhd slipped into the red during the third quarter ended Sept 30, 2018 (3Q18), the first quarterly loss since the January-March 2016 period, driven by lower prices of crude palm oil (CPO) and volumes.

The subsidiary of Lembaga Tabung Haji posted a net loss of RM19.8 million against a net profit of RM15 million a year ago.

The company said the weaker performance was largely due to the significantly lower CPO and palm kernel (PK) prices.

The average realised CPO price recorded for the quarter was RM2,095 per metric tonne, 18% lower than the price recorded in 3Q17.

The group’s average realised PK price was RM1,724 per metric tonne, a 22% decrease from the same quarter last year.

Additionally, lower fresh fruit bunches production was down by 4% from the corresponding period and CPO production was down by 5%.

The company also recorded weaker sales in the quarter, with CPO sales down by 11%, while PK sales declined by 18%.

Its revenue for the quarter fell by 25.57% year-on-year to RM140.91 million.

TH Plantations CFO Mohamed Azman Shah Ishak said the company unfortunately sees a repeat of the challenging opera-ting conditions that plagued the industry barely two to three years ago.

“Unfavourable market dynamics have pushed prices lower, while the high stockpile has exacerbated the low price environment. On top of these, the industry continues to grapple with labour issues and higher wages, environmental pressure and stiff competition from other vegetable oils.

“TH Plantations, as a pure upstream player, is visibly more affected by the current challenges,” he said in a statement yesterday.

He added that the industry’s commitment to improve the efficiency and sustainability of palm oil will strengthen the industry’s resilience in the longer term. 

The company also noted that improved production and weak exports across the industry have led to a surge in CPO stock levels in the country, which may delay the recovery of palm product prices.

It expected prices to remain rangebound in the near term, causing continued pressure on profit margins for the industry, particularly when stock levels peak in November and December 2018.

However, it added that the market anticipates demand to pick up in 2019, driven by higher exports to China.

TH Plantations’ shares closed at 57 sen yesterday, two sen or 3.39% lower from its previous close, giving it a market capitalisation of RM503.8 million. The share price of the planter was hovering around the highest level of RM2.45 level in 2012, but   has now lost almost a quarter of its value.