IJM Plantations expects lower crop and CPO production in FY21

The insufficient labour supply situation in the country will further dragged down the crop production too, Tek says


OVERALL crop production and crude palm oil (CPO) production may be lower for IJM Plantations Bhd for its financial year ending March 31, 2021 (FY21), compared to FY20, which will also be a common trend in the palm oil industry over the same period.

The group’s CEO and MD Joseph Tek said crop production is expected to decline for the group’s FY21 due to lagged effects of last year’s dry weather that took place between August and November 2019 in many oil palm cultivation areas in Malaysia and Indonesia, along with cut-down of fertiliser inputs among many growers.

Dropping or fractured fronds may also recur in older trees in Sabah that were subjected to prolonged dryness.

“IJM Plantations, having both upstream operations in Malaysia and Indonesia, is of the view that its overall crop production and CPO production this financial year may end up lower in comparison to the last financial year.

“The crop production will be further dragged down by insufficient labour supply situation especially in Malaysia — which will impede crop harvesting critical in the coming peak production season this year,” he said in IJM Plantations’ 35th AGM yesterday.

Meanwhile, CPO production from mills will also be lower set against lower oil extraction due to poor bunch formation following lower pollination efficiency relating to the weather. He cited reports from the Malaysian Palm Oil Board that crop production in Malaysia for the first seven months in 2020 is trailing behind 2019 by 671,619 metric tonnes (MT) or 5.8%.

The probability of La Nina in September to November this year was raised to 60% from an earlier 30% and 40%, which will also hamper crop production, said Tek.

“Ultimately, Malaysia’s CPO output may not likely cross 20 million tonnes while Indonesian’s CPO production in 2020 has been forecasted by many analysts to be lower by one to two million tonnes from last year’s 44 million tonnes,” he added.

The group, however, believes global demand for palm oil is poised to recover due to the easing of Covid-19 lockdowns worldwide along with the return of major consumers to the market such as China and India that will boost their purchases.

Tek said the push to use more palm oil in biofuels mainly by Indonesia would bode well in lowering the stocks and increasing the price although it will be correlated to petroleum crude oil prices.

“Stronger crude oil makes palm oil a more attractive option as biodiesel feedstock. Indonesia recently announced that it may further increase palm oil export levies to support its ambitious biodiesel programme as the price of crude oil is expected to remain weak,” he said.

The group recorded a net loss of RM63.42 million in FY20 due to total net foreign-exchange (forex) losses amounted to RM87.11 million.

As for its latest quarterly performance for the first quarter of FY21, IJM Plantations posted a net profit of RM82.12 million on the back of forex gains of RM91.74 million.

Its fresh fruit bunch production increased by 19% to 275,135MT with 23% and 15% crop production hikes in its Malaysian and Indonesian operations respectively against last year’s corresponding quarter.