KUALA LUMPUR: Sime Darby Plantation Bhd reported net profit of RM27mil in the second quarter ended June 30,2019 as it was weighed down by weak crude palm oil (CPO) and palm kernel (PK) prices but partially cushioned by lower finance costs.
It announced on Friday the 10% decline in net profit from RM30mil a year ago was due to average CPO price realised declining by 15% on-year to RM2,021 per tonne from RM2,379. average PK price realised fell by 39% to RM1,020 per tonne from RM1,682.
Sime Plantation's fresh fruit bunches (FFB) production of 2.43 million tonnes was comparable to the 2.44 million tonnes a year ago.
However, the oil extraction rate (OER) increased to 21.27% in Q2 from 21.11%. But the group’s earnings continued to be negatively impacted by weaker CPO and PK realised prices.
Sime Plantation’s group managing director Mohamad Helmy Othman Basha said: “Low commodity prices continue to impact the industry as well as Sime Plantation’s earnings.
“We have aggressively put in place measures that would help us navigate through the current market conditions. These include the strategy to balance the profit contribution from both our upstream and downstream segments as a mid-to-long term solution, ” he said.
Sime Plantation also said in Q2, it recorded a non-recurring profit of RM9mil arising from the disposal of the group’s entire shareholding in a unit PT Mitra Austral Sejahtera (PT MAS) compared with a non-recurring loss of RM283mil mainly due to impairment charges a year ago.
“The disposal of PT MAS, which was a loss-making subsidiary, is positive to the group and aligns with the group’s strategy to monetise non-performing assets, ” it said.
In Q2 FY2019, upstream operations posted a recurring loss before interest and tax (LBIT) of RM64mil versus a recurring profit before interest and tax (PBIT) of RM403mil a year ago.
The weaker performance was driven by the 15% on-year decline in average CPO prices and 39% decline in average PK prices realised respectively. There was lower sales volume, which was in line with the 4% YoY decline in CPO and PK production.
Upstream Malaysia registered a recurring profit before interest and tax (PBIT) of RM43mil, down 82.3% from RM243mil a year ago.
Upstream Indonesia reported a recurring loss before interest and tax (LBIT) of RM11mil compared with a recurring PBIT of RM92mil a year ago.
The weaker performance was due to lower average CPO and PK prices realised, which declined by 10% on-year to RM1,940 per tonne, and 38% on-year to RM864 per tonne, respectively.
Sime Plantation also said Upstream Papua New Guinea (PNG) and Solomon Islands (SI) were impacted by lower CPO prices. LBIT was RM76mil compared with PBIT of RM77mil a year ago.
Also weighing on the earnings were that average CPO price realised fell 18% on-year to RM2,115 per tonne.
While Upstream Liberia operations recorded 8% higher FFB production and 2.95% increase in OER to 24.54%, it recorded a loss of RM20mil versus loss of RM9mil due to a 6% on-year lower average CPO price realised.
First half 2019
In the first half, Sime Plantation posted net profit of RM101mil on the back of RM5.88bil in revenue.
The net profit of RM101mil was a 64% decline from the previous corresponding period.
“Improvements from a 4% on-year rise in FFB production, increase in OER at 21.3%, as well as higher earnings from its recently rebranded downstream segment, Sime Darby Oils (SDO), were not sufficient to mitigate the adverse impact of weaker CPO and PK prices realised, which declined by 16% on-year from RM2,414 per tonne to RM2,016 and by 41% on-year from RM1,897 per tonne to RM1,116 per tonne respectively, ” it said.