PETALING JAYA: The lower average crude palm oil prices of RM3,700 per tonne forecast for this year are likely to affect Kretam Holdings Bhd
’s earnings for financial year 2023 (FY23) and FY24.
Kretam, however, should enjoy slightly better pricing power as about half of its palm oil is sold at premium prices to its European buyers as its acreage are Roundtable on Sustainable Palm Oil, Malaysian Sustainable Palm Oil and German-backed ISCC certified, according to Kenanga Research.
The group collected a harvest of 95,764 tonnes for the first quarter of 2023 (1Q23), suggesting that its FY23 fresh fruit bunch (FFB) output would likely increase year-over-year (y-o-y).
Kretam, which has faced increasing costs since FY22, is also set to enjoy lower fertiliser prices which in turn will ease the rising cost pressure especially in the second half of FY23.
On another note, Kenanga Research said the oil palm group could opt for future expansion plans given the lack of a strict dividend policy or consistent payout history after completing 1Q23 with net cash of RM39mil.
The research house added that as good upstream oil palm assets are not easy to come by, the downstream expansion by Kretam cannot be ruled out.
According to a recent filing with Bursa Malaysia, Kretam said it was hopeful that with better yields.
Kretam also planned to take steps to mitigate the sector-related risks with prudent cost management, boosting yields and productivity of the group in the coming quarters. The upstream palm oil group recorded revenue of RM178.9mil and net profit of RM24.5mil or an earnings per share of 1.06 sen for first quarter ended March 31.
The Sabah-based group has 24,744ha in Sandakan, Lahad Datu and Tawau, of which 80% was already planted with oil palm and producing 300,000 tonnes to 340,000 tonnes of FFB a year. The average age of its oil palm acreage is 15 years.
Kretam’s aim to have better-than-average FFB yields in Sabah will make it necessary for the group to do more aggressive replanting within three to five years, if not sooner.
As for its downstream segment, the group has an integrated downstream facility consisting of a refinery and biodiesel plant which is supported by its upstream operations.
