PETALING JAYA: The plantation sector’s earnings is expected to improve progressively from the second quarter of financial year 2026 (2Q26) onwards, with production recovery already visible, as Malaysia’s crude palm oil (CPO) production rises by 18.4% month-on-month in April, signalling a start of the higher-crop cycle.
BIMB Research said CPO prices have strengthened materially, with the Malaysian Palm Oil Board spot prices averaging RM4,567.50 per tonne in April and RM4,498.50 per tonne in May, both significantly above the average realised prices reported by plantation companies in 1Q26.
“CPO prices remain elevated, supported by stronger edible oil demand driven by higher regional biodiesel mandates (Indonesia’s B50 and Malaysia’s B15), alongside higher US biofuel requirements.
“But there is potential tightening in the global palm oil supply, and emerging El Niño risk into the second half of 2026, which could disrupt production should dry weather conditions intensify,” the research house said.
While fertiliser, diesel and logistics costs remain key risks, BIMB Research believes stronger CPO price should be able to offset input cost pressures for most plantation companies under its coverage.
It added most plantation companies under its coverage reported 1Q26 results that were largely within its expectations, with only TSH Resources Bhd
coming in below estimates.
“The negative variance for TSH was primarily driven by higher-than-expected production costs.
At the sector level, earnings moderated from the exceptionally strong 4Q25 quarter, reflecting the seasonal low-crop cycle and lower realised palm product prices.
“Total revenue across companies under our coverage declined 9% quarter-on-quarter (q-o-q), while core profit after tax and minority interests fell 19.3% q-o-q.”
The research house added the Plantation Index outperformed slightly compared to the FBM KLCI Index by 2% year-to-date (as of June 3, 2026), likely reflecting expectations of stronger earnings in the coming quarters amid recovering production and firmer CPO prices.
“The latter has been supported by the prolonged US-Iran conflict, which strengthened energy-linked sentiment, as well as growing demand from higher biodiesel mandates globally.”
The research house added downstream performance remained mixed in 1Q26, with margins continuing to face pressure from excess regional refining capacity, intense competition and uneven demand recovery across key end markets.
“Looking ahead, we expect downstream business to remain challenging in the near term, with a thin margin due to intense regional competition and potentially softer demand amid inflationary pressures and a weaker global economic environment.
“Elevated CPO prices may also increase feedstock costs and compress refining spreads, particularly for commodity-based downstream operators.”
On implications of Indonesia’s export policy, the research house believes the earnings impact on companies under its coverage is likely to be limited at this stage.
“IOI Corp Bhd, Genting Plantations Bhd and TSH primarily operate upstream businesses in Indonesia and largely supply domestic refiners, limiting their exposure to potential export-related measures.”
SD Guthrie Bhd and Kuala Lumpur Kepong Bhd have downstream operations in Indonesia, although these facilities are mainly integrated within their existing supply chains and in-house requirements.
