KUALA LUMPUR (May 23): TH Plantations Bhd slipped into the red to the tune of RM7.15 million or 0.81 sen a share for the first quarter ended March (1QFY16).

The plantation arm of the national pilgrimage fund Tabung Haji reported a net profit of RM6.58 million or 0.74 sen for 1QFY15.

The group attributed the loss to lower oil palm production on the back of dry weather brought on by the El Nino phenomenon, lower fair value recognition of forestry assets and a foreign currency translation loss from its Indonesian assets.

Revenue increased 8.77% to RM89.52 million from RM82.3 million, it said in a statement today.

TH Plantations said the uptick in revenue was mainly driven by stronger sales prices of crude palm oil (CPO) at RM2,235 per tonne and palm kernel (PK) at RM1,888 per tonne, which were higher by 8% and 17% respectively.

However, the impact of higher sales prices was offset by weaker production where fresh fruit bunches (FFB) production only increased by 1%, despite a 9% increase in mature oil palm land bank.

TH Plantations said production had been anticipated to be seasonally weak for 1QFY2016, but conditions were exacerbated by effects of the El Nino phenomenon and “weather anomalies seen in recent months.”

CPO production for the quarter fell 5% to 29,502 tonnes, it said.

The company also recognised lower fair value from its forestry assets, as well as a foreign currency translation loss from its Indonesian assets during the quarter.

Chief executive officer and executive director Datuk Zainal Azwar Zainal Aminuddin said the El Nino phenomenon has caused significantly lower crop production among industry players, including TH Plantations.

“Although the subdued production supports the prices of palm oil and its products in the near term, the positive effects of higher prices are neutralised by lower FFB and CPO production,” he said.

“Our margins also continue to be impacted by higher expenses in the form of depreciation and amortisation, as well as finance expenses, following the major acquisitions we made in 2012.

“These are pains that are necessary to facilitate our growth, but weaker production has amplified the impact of these growth pains on our bottom line,” he added.

Zainal Azwar said the group is hopeful for improved performance in the second quarter, on the back of better production and stable CPO prices.

“We will continue with initiatives to mitigate the challenges we face, particularly those that are within our control, as best as we can.

“We have tightened our belts and implemented comprehensive cost control measures throughout our operations,” he added.

Zainal Azwar said although these measures may not be enough to negate the impact of the current operating and economic challenges, it will help cushion the effects.

“At the same time, we are also in the process of exploring options to safeguard our financial position under the current operating conditions,” he added.

TH Plantations shares closed unchanged today at RM1.15, for a market capitalisation of RM1.02 billion.