PETALING JAYA: Sime Darby Plantation Bhd
(SDP) expects to register better results in the second half of 2023 (2H23) compared with 1H23, underpinned by higher crop production amid steady crude palm oil (CPO) prices.
Group managing director Datuk Mohamad Helmy Othman Basha said plantation operations are subjected to crop trends and there is usually a greater crop yield in the second half of the year.
“Currently, in August, we are already seeing an uptick in crop yield and we will probably see more production in the months of September, October and November.
“This means there will be better income and profit for us in 2H23, albeit subjected to the CPO price” he said in a virtual media briefing yesterday.
Sime Darby Oils Sdn Bhd managing director Haris Arshad said the price of CPO is expected to trade within the current range of between RM3,800 and RM3,900 per tonne.
He projects CPO price could likely reach the RM4,000-per-tonne mark in the late third quarter of 2023.
For the second quarter ended June 30, 2023 (2Q23), SDP said the average CPO price realised was RM3,765 from RM5,213 in 2Q22, a 28% decline year-on-year (y-o-y).
“The CPO price is expected to remain stable throughout 2H23 at about the current level and may go up to about RM4,000, or slightly above RM4,000 at times.
“As the CPO price will likely be stable in 2H23, the impact of price will be quite neutral to us.
“We are expecting a higher crop yield that should allow us to capitalise on the steady pricing of CPO in 2H23,” Mohamad Helmy said.
He also projects that SDP’s overall fresh fruit bunches production will see a 5% to 8% increase in 2H23.
Mohamad Helmy said improving labour conditions will also contribute to a better financial outlook for SDP.
“We have received the full complement for Peninsular Malaysia, at least, of our workers, so that should work well for our profitability going forward.
“However, for Sabah and Sarawak, we do not have the full establishment of workers yet. Sabah and Sarawak constitute about 26% of our planted area.”
He said despite being short of workers, it is seeing an increase in production.
“We hope we will be able to receive the workers that we require in time, in order for us to take advantage of the big cropping area that we expect to take place in September, October and November,” he said.
Moreover, Mohamad Helmy said SDP has yet to see much impact from the El Nino phenomenon in Malaysia.
However, he noted that some locations in Indonesia, especially in Kalimantan, are entering a dry period.
“Malaysia constitutes about 50% of our planted area but we see the impact of El Nino to be quite muted here. For the industry at large, El Nino will have some impact as Indonesia is a big producer,” he said.
In 2Q23, SDP registered a net profit of RM380mil compared with RM812mil in 2Q22. The group’s earnings per share stood at 5.5 sen from 11.7 sen previously.
Lower average realised CPO and palm kernel prices, which have dropped from peak levels in the previous year, were the main reason behind the decline.
The situation was made worse by higher operating expenditure, like higher fertiliser prices and labour costs, particularly in Malaysia where SDP is rehabilitating its operations.
“Our results in 1Q23 were very much influenced by the poor results of upstream Malaysia and this poor results actually continued until April, but in May and June, we began to see very strong results coming from Malaysia.
“So back in 1Q23, our production in Malaysia was down by 11% y-o-y but with a strong month in May and June, that 11% deficit has actually come down to about 5%. This strong recovery for crop production continues for us,” Mohamad Helmy said.
SDP has declared an interim dividend of 3.25 sen, payable on November 17.
