by SHAHEERA AZNAM SHAH/ pic by BERNAMA
Sime Darby Plantation Bhd posted a net profit of RM27 million for its second quarter ended June 30, 2019 (2Q19).
This is largely contributed by the registered losses in the upstream segment due to the weak crude palm oil (CPO) prices.
In a statement, the planter said its revenue for the quarter stood at RM2.8 billion.
The largest plantation firm by landholding said that its quarterly performance continues to be impacted by the weak CPO and palm kernel (PK) prices but partially cushioned by its lower cultivation costs.
“For the second quarter of the financial year ending Dec 31, 2019, the group reported net earnings of RM27 million against net earnings of RM30 million in the corresponding quarter of the previous year.
“The current quarter continued to be adversely affected by weak CPO and PK prices, but partially cushioned by lower finance costs with the capitalisation of higher borrowing costs and lower net tax resulting from the recognition of deferred tax assets on losses suffered by some subsidiary companies,” it said in a statement.
For the first half of 2019 (1H19), the planters said its net profit stood at RM101 million with a revenue of RM5.88 billion.
The planter’s upstream operations posted a loss before interest and tax (LBIT) of RM64 million against before interest and tax (PBIT) of RM403 million last year driven by the depressed CPO and PK prices.
“The weaker performance was driven by the 15% and 39% year-on-year (YoY) decline in average CPO and PK prices realised respectively, as well as lower sales volume which was in line with the 4% YoY decline in CPO and PK production,” the group said.
Its downstream segment posted a PBIT of RM51 million in the quarter under review as compared to RM85 million a year ago, attributable to lower sales volumes and margins for CPO and PK due to higher feedstock costs and lower selling prices.
For the Apr-June period, the planter’s fresh fruit bunches (FFB) stood at 2.43 million tonne in 2Q19.
GMD Mohamad Helmy Othman Basha. said low commodity prices continue to impact the industry as well as the group’s earnings.
“We have aggressively put in place measures that would help us navigate through the current market conditions, including strategies to balance the profit contribution from both upstream and downstream segments as a mid-to-long-term solution,” he added.
Moving forward, the planter expects the business sentiment in the palm oil industry to be challenging for the remaining of 2019 amid flat projection of CPO.
“Barring any extreme weather abnormalities, the group expects FFB production to continue improving for the remainder of the financial year ending Dec 31, 2019.
“CPO prices are expected to remain relatively flat, mainly attributed to an expected rise in production levels due to seasonal factors, offset by higher demand in anticipation of higher biodiesel mandates in Malaysia and Indonesia,” the group said.
It added that external factors such as the movement of crude oil prices, currency valuation, and global trade tensions would likely influence the CPO and other palm products prices.