Weaker CPO prices weigh on Sime Plantation Q1 earnings


Sime Plantation executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh said the industry's performance was impacted by prevailing low CPO and PK prices and a volatile external environment influenced by the US-China trade war.

Sime Plantation executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh said the industry's performance was impacted by prevailing low CPO and PK prices and a volatile external environment influenced by the US-China trade war.

KUALA LUMPUR: Sime Darby Plantation Bhd posted net profit of RM74mil in the first quarter ended March 31, 2019 due to a one-off net gain and weaker crude palm oil (CPO) and palm kernel (PK) prices.

The company said on Friday there was also the absence of a one-off net gain a year afo of RM26mil and lower profit before tax (PBT).

PBT fell by 64% to RM125mil due to the sharp decline in the average CPO and palm kernel (PK) realised prices year-on-year (YoY) and higher finance costs.

“However, this was partially mitigated by higher fresh fruit bunch (FFB) production and improved oil extraction rate (OER), as well as continued earnings improvement from Sime Darby Oils, the rebranded downstream segment of the group,” it said.

Average CPO price realised fell by 18% on-year from RM2,452 per tonne to RM2,012. Average PK price realised fell by 43% from RM2,094 to RM1,204 per MT. 

“The group also benefited from an 8% on-year rise in FFB production and a higher oil extraction rate from 21.03% to 21.41%, but these improvements were not sufficient to compensate for the adverse price impact,” it said.

Sime Plantation executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh said the industry's performance was impacted by prevailing low CPO and PK prices and a volatile external environment influenced by the US-China trade war.

“We remain encouraged by higher FFB production and OER recorded from our Upstream segment as well as continuing profitability of Sime Darby Oils during the quarter under review.

“We believe the decision to rebrand our downstream business would augur well with our strategy for a more balanced profit contribution from our upstream and downstream segments, moving forward,” he said.

On the upstream operations, there was recurring profit before interest and tax (PBIT) of RM83mil versus RM283mil a year ago due to the 18% decline in average CPO prices and 43% fall in PK prices. 

Group FFB production improved by 8% from 2.34 million tonnes to 2.52 million tonnes while OER rose from 21.03% to 21.41%.

Upstream Malaysia registered a recurring PBIT of RM113mil versus RM253mil a year ago.

Upstream Indonesia's PBIT fell to RM9mil from RM11mil due to the significantly lower average CPO and PK prices realised.

Upstream Papua New Guinea (PNG) and Solomon Islands (SI) registered a loss before interest and tax of RM19mil versus PBIT of RM38mil a year ago.

Upstream Liberia reported a loss before interest and tax of RM20mil compared with loss of RM19mil a year ago due to a fall in average CPO and PK prices.

Sime Darby Oils posted PBIT of RM85mil, up 31% from RM65mil due to better earnings from bulk products, differentiated products and trading operations. 

Corporate News , Plantations