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This article first appeared in The Edge Financial Daily on May 25, 2017

KUALA LUMPUR: Sabah-based oil palm planter TSH Resources Bhd said its core profit before tax (PBT) in the first quarter ended March 31, 2017 (1QFY17) jumped up 63% to RM41.1 million from RM25.2 million.

“This significant improvement in profitability was made possible by several factors, including increase in fresh fruit bunch (FFB) production volume, lower production cost and better crude palm oil (CPO) price. The core PBT was derived after adjusting for non-cash and unrealised exchange translation gain or loss to enable a fair comparison,” the plantation firm said in a media statement yesterday.

“Higher average CPO selling price of RM2,985 for 1QFY17 has also contributed to the improved core pre-tax margin,” TSH said.

It said its oil palm plantations are continuing to show signs of leaving behind the lagged effects caused by one of the worst experienced El Nino in recent history that occurred in 2015.

“The company expects the production of FFB in the forthcoming quarters to improve in line with the recovery from the El Nino impact, coupled with growing maturity profile and higher yielding ages of oil palm trees,” it added.

With higher FFB output and stringent cost control operationally, TSH said it expects to reduce the unit cost of production throughout this year, which should result in better profit margin barring unforeseen volatility of the market CPO price.

Net profit for the period came in at RM33.95 million from RM54.72 million a year ago, mainly due to lower foreign exchange gain of RM7.8 million in the quarter, compared with RM39.2 million previously, its Bursa Malaysia filing showed. Revenue, however, grew 43% to RM288.5 million from RM202.28 million previously.

It said its board of directors remained confident about the outlook for the palm oil industry and its underlying demand growth from emerging markets.

“The palm products segment, which accounts for more than 85% of the revenue and profit of the group, will remain a significant contributor to group profit,” it added.

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