Weak CPO price drives some plantation counters into the red

The lacklustre CPO prices from the lower demand for palm products and lower FFB production means plantation companies made lower profit or a loss


THE plantation sector’s financial performance for the third quarter (3Q) ended Sept 30, 2018, was dragged by the depressed prices for crude palm oil (CPO) and palm products.

CPO prices ranged between RM2,100 and RM2,300 per tonne in July, August and September — an average of RM300 lower than in the first half of the year.

The lacklustre CPO prices from the lower demand for palm products and lower fresh fruit bunch (FFB) production meant plantation companies made lower profit or a loss, while others failed to recover from their previous losses.

In July, the benchmark palm oil futures contract plummeted to the lowest in nearly three years, tracking the weaker prices of other edible oils and a weaker ringgit against the greenback.

Some companies such as TH Plantations Bhd, IJM Plantations Bhd, Boustead Plantations Bhd and FGV Holdings Bhd slipped into the red in the recent 3Q as the commodity’s selling price was below their cost of production.

TH Plantations
TH Plantations recorded a net loss of RM19.8 million in its 3Q against a net profit of RM15 million a year ago, the first loss in 2½ years.

TH Plantations said the heavy decline in financial performance was due to lower CPO and palm kernel (PK) prices.

“The average realised CPO price recorded for the quarter was RM2,095 per metric tonne, an 18% decrease against the price recorded in the same period last year.

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

It added that lower FFB production, which was down by 4%, and the 5% decline of CPO production along with weaker sales had contributed to depressed revenue. Its quarterly revenue fell 25.57% to RM140.91 million from RM189.31 million in 3Q17.

IJM Plantations
IJM Plantations was also in the red with a net loss of RM28.3 million for its 2Q compared to a net profit of RM7.44 million in the corresponding period a year ago.

This was IJM Plantations’ second consecutive quarter of losses.

The group’s performance was heavily weighed down by the weaker Indonesia rupiah against the US dollar that resulted in unrealised foreign-exchange losses amounting to RM11.83 million.

Lower sales due to palm oil delivery constraints in Indonesia added to the adverse market supply and demand conditions.

Group quarterly revenue shrunk by 29% to RM140.09 million from RM196.44 million due to lower sales volume and commodity prices.

Boustead Plantations
Boustead Plantations recorded a net loss of RM21.9 million in the 3Q compared to a net profit of RM557.7 million a year ago.

The group was another planter affected by the decline in palm product prices and lower crop production, in addition to increased expenditure due to its larger harvested area.

Boustead Plantations recorded a lower quarterly revenue, a decline of 28.5% to RM131.1 million from RM183.4 million recorded a year ago.

FGV Holdings
The Federal Land Development Authority-controlled FGV Holdings reported a net loss of RM849.26 million in the quarter against a net profit of RM41.53 million a year ago in its 3Q, due to asset impairment amounting to RM788 million.

FGV Holdings’ revenue fell to RM3.19 billion in the 3Q from RM4.14 billion a year ago due to lower average CPO price realised, its impairments of intangible assets and the higher share of losses from joint-venture companies.

“The average CPO price realised was RM2,224 per metric tonne for the period under review, 16.5% lower than RM2,665 per metric tonne in the previous corresponding quarter.

“FFB production was 12.2% lower at 1.08 million metric tonnes, compared to 1.23 million metric tonnes in the previous corresponding quarter,” FGV Holdings said.