KUALA LUMPUR (Nov 26): TH Plantations Bhd reported a net loss of RM19.8 million or 2.24 sen a share in the third quarter ended Sept 30, 2018 (3QFY18), versus a net profit of RM15 million or 1.7 sen a share last year, due to lower crude palm oil (CPO) and palm kernel (PK) prices.

This was its first quarterly net loss since two and a half years ago.

Its quarterly revenue was down 25.57% to RM140.91 million, from RM189.31 million in 3QFY17, according to a filing with Bursa Malaysia today.

In a separate statement today, TH Plantations explained the average realised CPO price recorded for the quarter was RM2,095 per metric tonne, an 18% decrease against the price recorded in the same period last year, while the Group’s average realised PK price was RM1,724 per metric tonne, a 22% decline from the same quarter last year.

Additionally, TH Plantations said the lower Fresh Fruit Bunches (FFB) production and CPO production of 4% year-on-year (y-o-y) and 5% y-o-y respectively, as well as weaker CPO sales and PK sales of 11% y-o-y and 18% y-o-y respectively, also negatively impacted revenue.

For its cumulative nine-months ended Sept 30, 2018 (9MFY18), TH Plantations saw a net loss of RM16.37 million or 1.85 sen per share against a net profit of RM50.68 million or 5.73 sen per share in the previous year, while revenue slipped 21.47% to RM400.7 million, from RM510.27 million a year ago.

“Unfortunately, we are now seeing a repeat of the challenging operating conditions that plagued the industry barely two to three years ago. Unfavourable market dynamics have pushed prices lower, while the high stockpile has exacerbated the low price environment,” said its chief financial officer Mohamed Azman Shah bin Ishak.

“On top of these, the industry continues to grapple with labour issues and higher wages, environmental pressure, as well as stiff competition from other vegetable oils. THP, as a pure upstream player, is visibly more affected by the current challenges,” he added.

Furthermore, Mohamed Azman said the efficiency and affordability of palm oil compared with other vegetable oils, are indeed a key factor to ensuring demand for palm oil and its products remain steady over time. He added that the industry’s commitment to improving the efficiency and sustainability of palm oil will strengthen the industry’s resilience in the longer term.

Looking ahead, TH Plantations said improved production and weak exports across the industry have led to a surge in CPO stock levels in the country, which may delay the recovery of palm product prices.

“Prices are expected to remain range-bound in the near-term, causing continued pressure on profit margins for the industry, particularly when stock levels peak in November and December 2018,” TH Plantations said.

However, the market anticipates demand to pick up in 2019, driven by higher exports to China, it added.

Shares of TH Plantations closed two sen or 3.39% down at 57 sen today, valuing it at RM503.78 million. Year-to-date, the stock fell about 48.97% from RM1.12.