KUALA LUMPUR (Feb 22): Sime Darby Plantation Bhd saw net profit rise 34.5% to RM429 million in the second financial quarter ended Dec 31, 2017 (2QFY18)  from RM319 million a year ago, on higher earnings from its upstream operations arising from higher sales of palm products and reduced finance costs as a result of lower borrowings.

Earnings per share rose to 6.3 sen from 4.7 sen in 2QFY17. Quarterly revenue also grew 4.1% to RM4.09 billion in 2QFY18 from RM3.93 billion in 2QFY17.

The group also declared an interim dividend of 3.5 sen per share for the financial year ending June 30, 2018 (FY18), payable on May 4.

In a statement today, Sime Darby Plantation said its upstream operations (Malaysia, Indonesia, Papua New Guinea and Solomon Islands, and Liberia) posted a higher profit before interest and tax (PBIT) of 26% year-on-year (y-o-y) at RM577 million in 2QFY18.

The group’s fresh fruit bunch (FFB) production improved by 2% y-o-y to 2.76 million tonnes in 2QFY18 as it recovers from the impact of El Nino. Average crude palm oil (CPO) price realised, however, fell 6% y-o-y to RM2,654 per tonne in 2QFY18 largely on account of weaker sentiment in the market.

For the cumulative six months (1HFY18), Sime Darby Plantation’s net profit more than tripled to RM1.45 billion from RM470 million a year ago, thanks to a gain on sale of land to Sime Darby Property Bhd of RM676 million and a one-off reversal of accruals of RM95 million in 1QFY18.

Excluding the gains on sale of land, normalised net profit for 1HFY18 was 39.8% higher at RM657 million, from RM470 million a year ago, mainly driven by its Malaysian upstream operations, which saw PBIT increase over three-fold to RM1.49 billion from RM402 million previously — thanks to FFB production uptick which mitigated lower CPO average prices.

"We are very encouraged by the group’s performance following its listing exercise back in November 2017. Our upstream operations have been strategically geared towards achieving our initiatives to enhance productivity, profitability and cost efficiency," said Sime Darby Plantation executive deputy chairman and managing director Tan Sri Dato’ Seri Mohd Bakke Salleh in the statement.

"Accelerated replanting efforts, mechanisation and water management initiatives across our operations are well underway and have shown positive results,” he added.

Barring any extreme weather abnormalities, the group expects the full year FFB production to improve from the previous financial year as the El Niño effect tapers off in line with increased FFB output in the oil palm industry.

"Although this is expected to continue putting a downward pressure to CPO prices, the recent suspension on CPO export taxes by the Malaysian government and the upcoming festive periods will lend support to demand," said Sime Darby Plantation.

Overall, the group expects its operating performance for FY18 to be satisfactory.

In a separate filing with Bursa Malaysia today, the group also announced that it will change its financial year end from June 30 to Dec 31, beginning this July.

At noon market break, shares of Sime Darby Plantation rose one sen or 0.18% higher at RM5.54, giving it a market capitalisation of RM37.61 billion.