This article first appeared in The Edge Financial Daily on November 23, 2017

KUALA LUMPUR: Sabah-based TSH Resources Bhd’s net profit almost tripled to RM30.69 million in the third quarter ended Sept 30, 2017 (3QFY17) from RM11.09 million a year ago, on strong fresh fruit bunch (FFB) production growth, coupled with the higher crude palm oil (CPO) selling price of RM2,576 per tonne in the current quarter under review.

In a filing with Bursa Malaysia yesterday, TSH reported a 20.4% increase in 3QFY17 revenue to RM256.82 million from RM213.26 million in 3QFY16.

In a separate statement, it said the FFB production upsurge came from the yield improvement in its overall oil palm plantations, which are leaving behind the lagged effect of the major 2015 El Nino drought phenomenon.

“About 60% of TSH’s plantation [palms] are still young, namely immature or young mature. They are expected to improve FFB production and continue on a growth path as more oil palms are approaching optimum production yield and more planted areas are going into the harvesting phase,” said TSH.

It added that operational cost efficiency has also improved as reflected in its gross profit margin of 41% in 3QFY17 from 36% in 3QFY16.

For the nine months ended Sept 30, 2017 (9MFY17), TSH’s net profit rose 15.9% to RM92.34 million from RM79.65 million a year ago, while its revenue grew 27.9% to RM803.55 million from RM628 million in 9MFY16.

On prospects, TSH group chairman Datuk Kelvin Tan opined that unit cost of production is likely to benefit and trend lower given the step-up in FFB yield compared with last year.

“Putting together higher FFB production and possible decrease in unit cost of production, the company has reasons to be confident of its longer-term profitability,” he said.

The group is also optimistic about the long-term prospect of the palm oil industry.

“The increase in demand for edible [oils] will continue with income improvement globally and population growth. The company will continue to focus on productivity and efficiency to remain competitive in this industry,” it said.