On the whole, barring any unforeseen circumstances, the palm oil price outlook in 2021 appears favourable compared with the average price of 2020, the planter said in its newly released Annual Report 2020.
“We remain optimistic on the long-term prospect of the palm oil industry,” it added.
TSH group is principally engaged in oil palm cultivation and the processing of fresh fruit bunches (FFB) into crude palm oil (CPO) and palm kernel oil.
This business activity accounted for about 88% of the group’s total revenue for the financial year ended Dec 31, 2020 (FY20).
“As the group’s revenue is substantially from its oil palm plantation business segment, its prospects for 2021 will primarily be driven by palm oil prices,” added TSH.
In this regard, CPO prices have remained buoyant, continuing from the upsurge momentum since the second half of 2020 and hitting a record high of RM4,247.50 per tonne on March 15, 2021.
The price rally primarily stems from the low inventories of palm oil in Malaysia and also the tight supply situation with its close substitute, soybean oil, due to adverse weather conditions in key production areas, added TSH.
Meanwhile, it said the Covid-19 pandemic has not significantly impacted the group’s operations nor its financial performance and position.
The launching of vaccination programmes around the world is fuelling market optimism of a swift economic recovery which will augur well for palm oil demand.
In particular, demand from India and China, two major oil palm purchasers, is expected to grow in 2021.
Furthermore Indonesia’s plans to continue with its B30 programme in 2021 will also help to absorb the anticipated production recovery in the second half of the year.
“However, we are also cognisant that notwithstanding the vaccine-fuelled optimism, things can change quickly if the new waves of Covid-19 infections or the emergence of new variants are not quickly contained.
“Geopolitical tensions or extreme weather events can also impact the market supply and demand dynamics rapidly,” explained TSH.
From a demand perspective, the consumption of palm oil is expected to increase in line with the population growth.
On the supply side, with the ageing palm tree profile across Malaysia and Indonesia and the slowdown of new plantings since 2015, TSH said this was expected to limit the global supply of palm oil.
Malaysia has also capped its oil palm planted area to 6.5 million ha whereas Indonesia had imposed a moratorium on conversions of forest and peatland for oil palm which was made permanent in 2019.
“These measures would likely result in a structural change in global supply where the output of oil palm will soon plateau.
“The supply constraints amid rising consumption will benefit palm oil prices in the long term.
“This bodes well for us as the weighted average age of our palm trees is still relatively young,” added TSH.
For FY20, the group posted a net profit from continuing operations of RM72.9mil as compared with the RM41.5mil recorded in FY19, an increase of 75.7%.
This is on the back of revenue from continuing operations of RM781.7mil, which was 8.8% higher than the previous year’s revenue of RM718.8mil.
Yesterday, TSH’s shares closed unchanged at RM1.06.