Genting Plantations to gain on more matured, favourable age profile trees

by SHAHEERA AZNAM SHAHA / pic by TMR FILE

GENTING Plantations Bhd expects its crop output to recover and overall growth in the fresh fruit bunches (FFB) production for the year, despite a lacklustre production in its first quarter ended March 31, 2021 (1Q21).

The planter additional mature areas and favourable age profile trees of its Indonesia operations would support the businesses.

The group said its financial year ending Dec 31, 2021 (FY21) would track the performance of its core plantation segment, depending on the palm products prices movements and its FFB production.

“The impact of the Covid-19 pandemic continues to be felt worldwide with the renewed containment measures from countries facing resurgent infection waves.

“Thus, the group expects palm oil prices to be primarily influenced by the impact of the pandemic on global economic conditions, as well as the demand and supply dynamics of palm oil and other substitute oils and fats,” it said in a bourse filing yesterday.

Genting plantation expects, notwithstanding the lacklustre production in 1Q21, output recovery and overall growth in FFB production, while the replanting activities are likely to moderate production from Malaysian estates.

Its 1Q21 net profit dipped 30.19% year-on-year (YoY) to RM63.73 million compared to RM91.3 million in the same period last year due to a weaker downstream manufacturing segment.

Revenue dropped 6% YoY to RM536.58 million from RM569 million last year. Earnings per share stood at 7.1 sen compared to 10.18 sen previously.

Genting Plantations said it achieved crude palm oil (CPO) and palm kernel (PK) prices of RM2,916 per tonne and RM2,243 per tonne respectively during the quarter.

“Reflective of the higher palm products selling prices, 1Q21’s Ebitda for the plantation segment improved on an annual basis, on account of better margins.

“FFB production in 1Q21 was 2% lower YoY, arising from production setbacks in Malaysia largely attributed to the compounded lagged effects of droughts in early 2019 and early 2020,” it said.

On the other hand, the group said its Indonesia operations saw production growth from an enlarged harvesting area and improved age profile.

The company said CPO prices experienced volatile trading at the beginning of 2021, tumbling to a low of RM3,500 per tonne in January before trending upwards by the end of the quarter.

“Average monthly prices for March 2021 breached RM4,000 per tonne, driven by supply tightness arising from adverse weather events and shortage of labour.

“Soaring prices of competitor vegetable oils further supported the rally. Overall, the group recorded higher YoY CPO and PK prices of RM2,916 per tonne and RM2,243 per tonne respectively,” it said.

Genting Plantations’ downstream manufacturing segment registered Lbitda of RM5.9 million in 1Q21 compared to a positive contribution in 1Q20, due to lower sales volume and squeezed margins.

“The outlook for the downstream manufacturing segment for the rest of this year will remain challenging due to the unfavourable palm oil-gas oil spread and squeezed margins for its products.

“Nevertheless, the demand for refined palm products is expected to be sustained given its competitive pricing against other substitute soft oils,” it said.

Its biotechnology business recorded an improved performance with Lbitda narrowing to RM800,000 from RM3.2 million compared to a year earlier.

The group’s property segment recorded a lower Ebitda of RM5 million against RM5.5 million in 1Q20.

Genting Plantations share price dropped 26 sen, or 3.04%, to RM8.30, valuing the company RM7.45 billion.