This article first appeared in The Edge Financial Daily on November 21, 2017

KUALA LUMPUR: The dry weather brought by the El Nino phenomenon has taken a toll on Hap Seng Plantations Holdings Bhd, which saw its net profit shrink 39% to RM25.9 million for the third quarter ended Sept 30, 2017 (3QFY17) from RM42.7 million a year ago.

It attributed the drop to lower production and sales volume.

The sales volume of crude palm oil (CPO) fell 32% year-on-year (y-o-y) to 33,376 tonnes, while that of palm kernel (PK) dipped 19% y-o-y to 8,331 tonnes, as fresh fruit bunch production slumped 15% y-o-y. Hap Seng blamed the slump on the lingering effects of the hot El Nino weather, which affected seasonal yield trends and cropping patterns, and pushed up the unit production cost for CPO.

Hap Seng Plantations also attributed its weaker profits to the lower average selling price for PK (RM2,327 versus RM2,669 last year), which was partly mitigated by the higher average CPO selling price (RM2,765 versus RM2,644). Quarterly revenue for 3QFY17 was down 29% y-o-y to RM113.58 million.

For the cumulative nine months (9MFY17), net profit rose 12% y-o-y to RM88.87 million, while revenue climbed 4% to RM391.19 million.

CIMB Investment Bank Bhd head of equity research Ivy Ng said Hap Seng Plantations’ 9MFY17 net profit made 72.3% of the research firm’s full-year net profit forecasts. “They can still make our full year if sales volume picks up in 4Q,” she told The Edge Financial Daily.