Favourable Crude Palm Oil prices which are at record levels of RM4700 per tonne is benefiting some of the local planters who are reporting exceptional results amidst the backdrop of lockdowns and the pandemic.
Sime Darby Plantation Berhad one of the country’s largest palm oil plantation company posted a net profit of RM562 million for 1QFY2021, an improvement of 20% as compared to the previous corresponding quarter. Its Upstream business improved to RM543 million compared to the same quarter in 2020 which stood at RM288 million. The good result was attributed on the back of sustained higher crude palm oil and palm kernel (PK) prices as well as increased Fresh Fruit Bunch (FFB) production.
The higher realised prices and increase in fruit production compensated for its lower OER, which was primarily the result of the acute labour shortage in Malaysia and adverse weather conditions in Indonesia. The Group’s recurring PBIT was improved by 75% year-on-year. However, its non-recurring PBIT declined by RM138 million due to reduced disposals of non-core assets. Chairman Tan Sri Dato Seti Megat Najmuddin noted while the sustained high CPO price has been a boon for the industry, he was encouraged by the operational performance despite the challenges presented by the COVID-19 pandemic. Sime Darby Plantation is on achieving its financial targets for the rest of the year.
The group also saw an improvement in the results of Sime Darby Oils in the Asia Pacific, which benefited from the market price uptrend. However, demand has yet to fully recover from the impact of COVID-19. On the labour issue with US Customs, SD Plantation is working with several parties to address the withhold release order issued by the agency among them are the appointment of a third-party assessor to undertake a comprehensive review of all its Malaysian operations.
Outlook for the year remains mixed, while CPO price in the first quarter was driven primarily by record high prices of substitute oils but its expected to soften in the second half of 2021 as production increases. On the operational front, the Group anticipates improved production this year whilst sustaining its efforts to increase efficiency and productivity through digitalisation, automation and mechanisation. Barring any unforeseen circumstances, SD Plantation expects its performance for the financial year ending to be promising.
