SDP said CPO demand is expected to remain steady in the longer term.
KUALA LUMPUR: Sime Darby Plantation Bhd
’s (SDP) net profit eased by 25% to RM1.86bil in the financial year ended Dec 31, 2023 (FY23) from RM2.49bil in FY22.
This was mainly due to lower recurring profit before interest and tax (PBIT) and higher finance costs, partially mitigated by the higher non-recurring PBIT.
SDP said finance costs increased by 47% due to higher benchmark lending rates but were partially mitigated by 6% lower average borrowings.
It said the average interest rate stood at 5.4% per annum, as compared to 3% per annum in the previous corresponding period.
Revenue also declined to RM18.43bil against RM21.03bil previously, it said in a filing with Bursa Malaysia yesterday, Bernama reported.
The group said the upstream segment reported a lower PBIT of RM1.15bil for FY23.
This was largely due to lower crude palm oil (CPO) and palm kernel average realised prices, which declined by 15% and 35% respectively, and higher estate and mill operating costs, adversely affected by an increase in labour costs.
“For the fourth quarter ended Dec 31, 2023 (4Q23), the group registered a net profit of RM200mil from the previous corresponding quarter’s RM562mil.
“This was due to lower recurring profits, which were mitigated by profits from non-recurring activities,” it said.
The group said finance costs reduced slightly in the quarter, driven by lower borrowings, despite higher interest rates due to the increase in benchmark lending rates.
The average interest rate stood at 5.8% per annum, as compared to 4.3% per annum in the previous corresponding quarter.
“The upstream segment reported a recurring PBIT of RM198mil, a decline from the previous corresponding quarter’s profit of RM702mil.
“The major factors that contributed to the reduced profits are a decline in CPO and palm kernel average realised prices as well as lower compensation from government acquisition and rental income.
“The downstream sector reported a higher PBIT of RM183mil in the current quarter as compared to RM89mil in the previous corresponding quarter, driven by higher margins and volume demand in the European operations,” it said.
The group noted that this mitigated the weaker results in the Asia-Pacific bulk and differentiated refineries due to lower margins.
Group managing director Datuk Mohamad Helmy Othman Basha said that over and above the successful turnaround of the group’s Malaysian upstream operations, SDP became the world’s first palm oil company to have its net-zero targets approved by the Science Based Targets Initiative.
“These achievements are evidence of our continued commitment to our key strategic pillars for growth and long-term success, sustainability, operational excellence and innovation.
“We believe these focus areas are essential to future-proof our business and help us to effectively manoeuvre through a challenging operating environment,” he said in a separate statement.
As for FY24 outlook, SDP said CPO demand is expected to remain steady in the longer term but seasonally high stockpiles in key destination countries may impact short-term demand.
“With the improved labour situation and rehabilitation of its Malaysian upstream operations, the group is optimistic that its fresh fruit bunch (FFB) production growth will be sustained this year.
“While it continues its operational improvement efforts, the group also actively seeks strategic collaborative opportunities to advocate for positive change in the industry,” it said.
Barring any unforeseen circumstances, the group remains positive as it looks ahead to another satisfactory performance in FY24.
SDP has declared a final dividend of 6.05 sen per share, which, together with the interim dividend of 3.25 sen and the special interim dividend of 5.70 sen, translates into a total single-tier dividend of 15 sen per share for FY23.
