Sarawak Plantation FY22 normalised earnings margin contracted by -2.5 ppts to 13.7% from 16.2% following lower operating profit recorded at RM141.4m. This was primarily attributable to a smaller sales volume of CPO & PK, lower FFB processed CPO production, and higher cost of production. As a result, core earnings came in below consensus expectations and accounted for about 88% and 84% of full-year FY22.
Segment profit comprising estate and mill operations for the quarter decreased to RM142.9m and RM15.2m respectively. In addition, estate profit margins were hit by -10 ppt to +46% owing to the lower FFB processed and reduced external FFB purchased. Aside note, external FFB purchased made up a significant contribution to the total FFB processed c. +50%.
On the operational front, SPB reported FFB and CPO production mixed performance of 328,450Mt (+2.6%Ytd) and 114,734Mt respectively in FY22 dragged by low cycle impacts combined with labour shortage. Nonetheless, ASP for CPO and PK realized during the period slightly higher to RM4,981/Mt and RM2,846/Mt based on monthly CPO prices for local delivery.
MIDF is maintaining its forecast at this juncture pending management guidance, it understands most of the planters operates in higher production cost environments, but SPLB’s EBITDA margin to remain stable at 19-20% in FY23-24 backed by centralised mills which helps shorter FFB logistical delivery, lower seedling cost since SPB owns seedling innovation hub and prudent fertilizer application based on the availability of window to apply, cost rationalisation by the new management.
All factors considered, MIDF is maintaining its BUY call recommendation.
