KUALA LUMPUR: Sime Darby Plantations Bhd posted a 93% increase in net profit to RM1.69bil for the nine months ended March 31, 2018 due to stronger overall fresh fruit bunches (FFB) production, lower finance costs and non-recurring gains.
The world’s largest producer of certified sustainable palm oil (CSPO) announced on Thursday this was a sharp increase from the previous corresponding period's net profit of RM879mil.
Its profit before tax increased by 70.2% to RM2.23bil from RM1.31bil. Its revenue was up 1.7% to RM11.28bil from RM11.09bil.
SD Plantation’s executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh said the group was encouraged by the earnings for the financial year to-date notwithstanding the challenging business environment that has impacted the group’s performance in this quarter.
“As we move towards the final quarter, we remain steadfast to deliver satisfactory results and we believe we are on track to achieve this on the back of continuous efforts to enhance productivity and cost efficiency.
“We are confident that the various efforts to improve operational performance such as accelerated replanting, mechanisation and water management at our estates, in addition to numerous other initiatives for cost reduction, will support the achievement of our targets,” said Mohd Bakke.
For the third quarter ended March31, 2018 (Q3 FY18), its earnings slumped 39.2% to RM249m fron RM410mil a year ago. Its revenue declined 15.8% to RM3.66bil from RM4.348bil.
SD Plantation said the group’s third quarter performance was affected by lower production of FFB particularly in Indonesia, Papua New Guinea and Solomon Islands.
It was also affected by lower average crude palm oil (CPO) price and palm kernel (PK) price realised. However, this was mitigated by lower finance costs incurred in line with lower borrowings during the quarter.
SD Plantation said in Q3 FY18, its recurring profit before interest and tax (PBIT) fell by 50% to RM362mil compared to RM721mil a year ago.
The lower PBIT was due to lower profit from the upstream operations arising from weaker FFB production and lower CPO and PK price realised.
SD Plantation group’s FFB production fell by 5% from 2.46 million tonnes in Q3 FY2017 to 2.34 million tonnes in Q3FY18 due to lower FFB production from Indonesia and Papua New Guinea and Solomon Islands.
Average CPO price realised declined by 20% on-year to RM2,452 per tonne in the quarter under review largely on account of weaker sentiment in the market.
“The group expects the full year FFB production to improve from the previous financial year as the El Nino effect tapers off.
“Although this is expected to continue putting downward pressure on CPO prices, the upcoming festive season, and possible tariffs by China on soybean imports from the US could lend support to palm oil demand,” it said.
SD Plantation's upstream Malaysia operations registered a PBIT of RM253mil in Q3FY18, down 39% from RM417mil a year ago in largely due to the lower average CPO price realised at RM2,480 per tonnes compared to RM2,994 per tonne a year last year.
FFB production in the region improved by 6% to 1.37 million MT from 1.29 million MT in the previous year corresponding quarter, mainly stemming from replanting activities showing positive yields.
SD Plantation's upstream Indonesia reported a profit of RM11mil in Q3FY18 compared to RM138mil a year ago. The decline in profit was mainly due to lower average CPO price and adverse weather conditions.
The weaker performance was due to a reduction in FFB production of 0.52 million tonnes this quarter versus 0.64 million tonnes a year ago.
SD Plantation's upstream Papua New Guinea and Solomon Islands reported lower earnings of RM38mil in Q3FY18 against RM181mil a year ago, which fell 79% on-year.
The FFB production reduced by 16% as compared to the same quarter last year, and average CPO price realised declined by 20% to RM2,644 per tonne in the current quarter versus RM3,304 a year ago.
Upstream Liberia registered a lower loss of RM19mil this quarter versus a loss of RM67mil the same quarter last year.
SD Plantation's downstream operations earnings rose 52% to RM65mil from RM43mil mainly due to its Differentiated product business, driven by higher sales volume and better contribution margin, resulting from greater capacity utilisation of our speciality refineries in the current quarter.
Other operations reported a PBIT of RM13mil versus RM9mil a year ago. The recognition of dividend income of RM21mil compensated the higher losses from associates and joint ventures.
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