Malaysia's Sime Darby Plantation, the world's largest oil palm planter by land holdings, has also expressed interest in Ruchi Soya.
KUALA LUMPUR: Sime Darby Plantation Bhd
's net profit fell by 70% in the second quarter ended Dec 31, 2018 to RM129mil from RM429mil a year ago, impacted by lower average crude palm oil (CPO) and palm kernel (PK) prices.
The company, which is the world’s largest oil palm plantation company by planted area, announced on Thursday its revenue declined to RM3.50bil from RM4.08bil a year ago.
Its earnings per share fell to 1.90 sen a share from 6.30 sen. It declared a dividend of 1.7 sen a share compared with 3.5 sen.
Average CPO price realised declined by 30% from RM2,654 per tonne to RM1,870 per tonne.
Average PK price declined by 49% from RM2,624 per tonne to RM1,338 in the quarter under review.
However, the group’s fresh fruit bunches (FFB) production rose by 2% in the current quarter from 2.76 million tonnes to 2.81 million tonnes. The oil extraction rate (OER) improved on-year from 21% to 21.28%.
Sime Plantation said its Malaysian upstream operations posted a recurring profit before interest and tax (PBIT) of RM176mil, down by 57% on-year from RM414mil a year ago.
It said the weaker performance was largely due to the lower average CPO and PK prices realised.
Average CPO price realised fell by 30% from RM2,654 to RM1,870 whereas average PK price realised declined by 49% from RM2,624 to RM1,338.
As for recurring PBIT of its Indonesian upstream operations, it plunged by 97% from RM144mil to RM5mil. The main factor was due to the significantly lower average CPO which fell by 34% on-year from RM2,533 to RM1,663 while PK prices realised tumbled by 51% on-year from RM2,344 to RM1,140.
“The prices were driven to below global market prices due to the bumper crop and high inventory levels in Indonesia,” it explained.
Sime Plantation said upstream Papua New Guinea (PNG) and Solomon Islands (SI) reported a lower recurring PBIT of RM27mil versus RM39mil a year ago.
Its Upstream Liberia operations posted hiigher loss before interest and tax of RM23mil versus RM20mil loss last year, again hit by lower average CPO and PK prices.
For the six months ended Dec 31, 2018, its net profit tumbled by 83% to RM244mil (recurring net profit of RM230mil and a non-recurring net profit of RM14mil) from RM1.448bil in the previous corresponding period (including non-recurring net profit of RM749mil related to the gain on sale of land to a related company and a one-off writeback of donation to Yayasan Sime Darby.)
Its profit before tax fell by 76% to RM457mil due to the sharp decline in the average CPO and PK realised prices. The average CPO price fell by 26% on-year from RM2,672 per tonne to RM1,974 whilst the average PK price realised was lower by 38% from RM2,374 to RM1,479.
Its revenue declined by 14.2% to RM6.54bil from RM7.62bil.
Sime Plantation executive deputy chairman and managing director Tan Sri Mohd Bakke Salleh said the financial period continued to present a challenging environment for the group’s operations.
“Despite an overall increase in our FFB production and OER, the palm oil industry continued to weather prevailing low CPO and PK prices, arising from the pressures on the US-China trade war, as well as the relentless negative sentiment on palm oil from Europe.
“On a brighter note, the industry is off to a reasonable start in 2019 with inventories declining on the back of the seasonal low production cycle and the reduction of India’s import duties on palm oil, resulting in CPO prices rebounding,” he said.
Bakke said these factors augured well for Sime Plantation’s performance moving forward, as the group continues to drive operational efficiency through productivity enhancements and cost rationalisation.
“Sime Plantation’s diversified upstream operations across different territories will also continue to complement each other in driving our overall FFB productivity and OER performance, as can be seen during this quarter ended Dec 31, 2018,” added Mohd Bakke.
He said the company was also encouraged by its downstream's operations performance but its international reach had allowed the business to fare well in this current environment.
“We are optimistic that new developments to our downstream business, which will be announced very soon, will take it to even greater heights,” he added.
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