SD Plantation’s net profit down 83%


Sime Darby Plantation Bhd (SD Plantation) recorded a net profit of RM244 million for the six-month financial period which ended on Dec 31, 2018, down 83% from the RM1.45 billion recorded in the corresponding period a year ago.

Earnings at the world’s biggest oil palm planter by land holdings were dented by lower average crude palm oil (CPO) and palm kernel (PK) realised prices, and the absence of a one-off gain amounting to RM749 profit from a land sale last year.

But higher fresh fruit bunches (FFB) production, improved oil extraction rate (OER) and lower costs helped to cushion the planters from a more dismal result due to the CPO and PK low prices.

For the quarter ended Dec 31, 2018, net profit declined by 70% to RM129 million due to lower profits from the upstream segment.

“This financial period continued to present a challenging environment for the group’s operations. Despite an overall increase in our FFB production and OER, the palm oil industry continued to weather prevailing low CPO and PK prices arising from the pressures on the US-China trade war, as well as relentless negative sentiment on palm oil from Europe,” executive deputy chairman and MD Tan Sri Mohd Bakke Salleh (picture) said in Kuala Lumpur yesterday.

Mohd Bakke said the company has projected the CPO price to firm up from April to August at between RM2,250 and RM2,450 per tonne, fuelled by the higher demand from China and India, and consistent with the higher volume of other edible oils such as soyoil.

But he warned that CPO prices will likely trade below RM2,200 per tonne in March.

CFO Renaka Ramachandran said the lower average CPO and PK prices erased about RM1 billion from SD Plantation’s pretax profit for the sixmonth period.

SD Plantation’s net gearing stood at 43% as at Dec 31, 2018, as borrowings increased by RM808 million compared to June 30, 2018, partly attributable to new loan drawdowns for the acquisition of Markham Farming Co Ltd of RM245 million in Papua New Guinea.

Mohd Bakke said the company aims to reduce its gearing to 38% in the near term, adding that a ratio below 50% is considered satisfactory.

He said the planter is also expected to dispose of nonperforming plantation assets mainly in Selangor, Negri Sembilan and Johor. Meanwhile, Mohd Bakke said the group is reviewing its operations in Liberia on the back of a challenging profitability outlook.

He said a decision on its operation in Liberia will be made in three months, including the option to exit the country.

“We had a number of meetings with Liberian government leaders, including the president, to share our challenges to operate business there,” Mohd Bakke said.

The planter has 607,146ha of oil palm planted areas — about 314,000ha in Malaysia, Indonesia (203,000 ha), Papua New Guinea and the Solomon Islands (101,000 ha) and Liberia (10,000 ha).

SD Plantation also announced a final single-tier dividend of 1.7 sen for every share for the financial period which ended on Dec 31, 2018, at a payout of 51% (based on recurring profit after tax and minority interest), payable on May 21, 2019.