SDP’s net profit jumps 221% on higher CPO, PK prices

by S BIRRUNTHA / pic by TMR FILE

SIME Darby Plantation Bhd’s (SDP) impressive third quarter (3Q) net profit signals a bumper earnings year for plantations companies enjoying record high prices for crude palm oil (CPO) despite suffering from labour shortage especially fruit harvesters.

The plantation giant posted a 221.1% year-on-year (YoY) jump in net profit to RM610 million or earnings per share of 8.8 sen for 3Q ended Sept 30, 2021 (3Q21) underpinned by CPO and palm kernel (PK) prices.

Revenue for the quarter surged 59% YoY to RM5.06 billion, according to the group’s filing to Bursa Malaysia yesterday.

The group registered a RM635 million net profit from continuing operations driven by stronger recurring profit from its upstream segment which helped compensate for the decline in profits from its downstream segment.

“The group reported lower non-recurring loss, which comprised impairment charges in the current quarter.

“During the quarter under review, the group recognised a loss on discontinued operations arising from additional provision for impairment of RM25 million on its joint venture classified as an asset held for sale, Emery Oleochemicals (M) Sdn Bhd,” it noted.

SDP stated that the higher CPO and PK prices compensated for the decline in fresh fruit bunch production at its Malaysian operations.

In the 3Q, the group’s upstream segment recorded a profit before interest and tax of RM913 million, 234% more YoY.

“Realised CPO and PK prices increased by 51% and 66%, respectively, to an average of RM3,770 and RM2,274 per metric tonne. The group’s oil extraction rate improved to 21.59% from 21.27% in the previous corresponding quarter,” the planter stated in a separate statement.

SDP expects palm oil prices to remain elevated at least until the year-end before a possible downward adjustment in the 2Q22 when supplies are anticipated to improve.

It added that the high prices will help compensate for the impact of labour shortages on the group’s Malaysian upstream production.

“The group also expects demand to remain strong as more countries ease their Covid-19 restrictions, bringing back earlier suppressed demand.

“Barring any unforeseen circumstances, the group expects an overall strong financial year performance for 2021,” it noted.

For the cumulative nine months (9M21), SDP posted a net profit of RM1.79 billion versus RM1.04 billion in 9M20, while revenue climbed to RM13.15 billion from RM9.44 billion in 9M20.

SDP did not declare any dividend for the quarter.

SDP group MD Mohamad Helmy Othman Basha noted that the last 21-month have been challenging for the group due to the acute labour shortage made worse by the restrictions on movement.

He said the group welcomes the decision by the federal government to allow the industry to recruit foreign workers again.

“The pandemic has certainly put a spotlight on the critical need to accelerate the mechanisation, automation and digitalisation of plantation operations, to reduce dependence on manual labour.

“SDP is spearheading this reinvention of plantation operations and will continue to ramp up our efforts to transform the nature of work in plantations,” he added.

Mohamad Helmy also said the group is determined to make plantations work less arduous, more efficient and productive for its workers.

He added that the company is intensifying its efforts to recruit more local workers.