SIME Darby Plantation Bhd’s third quarter (3Q) net profit fell 34.98% to RM396 million from RM609 million a year ago, due to lower earnings from its upstream segment.

In a Bursa Malaysia filing today, the plantation group said revenue for the quarter ended Sept 30, 2022 (3Q22), rose 6.54% to RM5.39 billion from RM5.06 billion a year prior, mainly due to increased revenue contributions from both its upstream and downstream segments.

However, an overall 8% decline in fresh fruit bunches (FFB) production, as well as a lower oil extraction rate resulted in the upstream segment recording a 73% lower recurring pretax profit of RM249 million from RM912 million.

“Furthermore, the sharp decline in market prices during the current quarter led to valuation losses on its oil inventory and biological assets,” it said, noting that lower profit contribution occurred despite a 13% higher realised average crude palm oil (CPO) price.

Meanwhile, on its downstream operations, Sime Darby Plantation said the segment’s pretax increased to RM337 million, mainly due to higher margins generated in Asian Pacific bulk, mitigation of lower margins registered by European refineries and decline in sales volume in all territories.

For the nine months period, Sime Darby Plantation’s net profit increased 7.72% to RM1.93 billion from RM1.79 billion a year prior due to higher recurring pretax profit earned from its downstream segment and non-recurring activities, which compensated for lower recurring profits from the upstream segment.

Cumulative revenue rose 16.85% to RM15.36 billion from RM13.15 billion previously.

In a separate statement, Sime Darby Plantation said the group expects overall FFB production in the financial year 2022 (FY22) to be lower than in FY21 due to the slow inflow of foreign workers in Malaysia.

“CPO price, which peaked in the first half of 2022, has now stabilised as increased supply in producing countries fulfil pent-up global demand.

“The CPO price is anticipated to remain attractive in comparison to alternative vegetable oils which would continue to support demand,” the group added.

Group MD Mohamad Helmy Othman Basha said the group is pushing ahead with plans to automate and mechanise several functions of its operations even as the entry of more migrant workers to Malaysia gathers speed.

“As we progressively reduce the need for manual workers in all our non-harvesting activities, we aim to achieve a land-to-man ratio of 17.5 hectares for every worker by the end of 2024, which will be a major improvement compared to the current industry average of 8ha for every worker.

“With further automation and digitalisation, we are determined to make work in plantations less laborious and more sophisticated to attract a new generation of skilled local workforce,” he added. — TMR