Genting Plantations 3Q net profit rises by three folds on higher palm prices

Genting Plantations 3Q net profit rises by three folds on higher palm prices
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KUALA LUMPUR (Nov 25): Genting Plantations Bhd saw its net profit for the third quarter ended Sept 30, 2020 (3QFY20) surge by more than three folds to RM61.38 million, from RM17.96 million a year ago, driven by higher revenue and palm oil prices.

Revenue rose 35.8% to RM645.56 million from RM475.37 million, underpinned by stronger palm products prices and higher demand for refined palm products, the group said in a  bourse filing.

On a quarter on quarter basis, the group’s net profit was higher by 171.15% from RM22.64 million in 2QFY20, while  revenue rose 18.6% from RM544.32 million.

Genting Plantations said its profit before tax improved quarter-on-quarter, mainly due to the higher contribution from the plantation and downstream manufacturing segments, on account of the combined impacts of stronger palm product prices, higher fresh fruit bunches (FFB) production and increased sales volume from refinery.

For the nine months ended Sept 30, 2020 (9MFY20), the group’s net profit more than doubled to RM175.31 million, from RM80.39 million a year earlier.

Revenue rose 8.39% to RM1.76 billion from RM1.62 billion in 9MFY19), buoyed by better palm products prices which more than compensated for the impact of weaker crop.

The group said its achieved crude palm oil price in 3QFY20 and 9MFY20 were RM2,504 and RM2,478 per tonne respectively, while palm kernel price was RM1,420 and RM1,432 per tonne respectively.

The group’s fresh fruit bunches (FFB) production in 3QFY20 was marginally lower year-on-year, aided by a higher crop output in Malaysia, which almost offset the weather-induced weaker production in Indonesia.

Meanwhile, FFB production for 9MFY20 declined year-on-year, mainly due to the lagged effect of dry weather conditions in 2019, which curtailed crop output this year.

Quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) for the plantation segment improved year-on-year, on the back of stronger palm product prices.

The EBITDA for 9MFY20 was similarly higher, as the impact of stronger palm product prices eclipsed that of lower FFB production.

The EBITDA for the property segment for 3QFY20 and 9MFY20 were lower year-on-year, consistent with its lower revenue.

Genting Plantations said the biotechnology segment’s losses narrowed year-on-year, in tandem with its lower research and development expenditure.

The EBITDA for the downstream manufacturing segment for 3QFY20 increased year-on-year, mainly on account of higher sales volume from its refinery. However, the EBITDA for 9MFY20 declined year-on-year, as both its biodiesel and refinery operations registered lower capacity utilisation, along with margin compression.

The group said its prospects for the remaining months of 2020 will track the performance of its mainstay plantation segment, which is in turn dependent principally on movements in palm products prices and the group’s FFB production.

“Despite the headwinds from the Covid-19 pandemic, palm product prices have staged a rebound by the end of 3QFY20, trading at levels prior to the pandemic outbreak.

“The group expects palm products prices to continue to be influenced by factors such as the demand and supply dynamics of palm oil, as well as substitute oils and fats, global economic conditions and the implementation of higher biodiesel mandates by Indonesia and Malaysia. These factors are in turn contingent on the impact of the Covid-19 pandemic,” it said.

“The group also expects the recovery in crop output from the lagged effect of drought in 2019 to continue into the quarter ending Dec 31, 2020 (4QFY20), barring any adverse impact arising from the forecasted La Nina weather event.

“Notwithstanding the crop recovery, production for the full year of 2020 is unlikely to surpass the level attained in 2019,” it said.

The group added that in view of the prevailing uncertain economic outlook weighing on purchasers’ sentiments, the property segment will focus on marketing its offerings to the broader market.

“Meanwhile, the patronage and sales of both the Premium Outlets have shown encouraging recovery towards the end of 3QFY20 but the recent upsurge in local Covid-19 cases and the reimposition of Conditional Movement Control Order in multiple states, will adversely affect its performance in 4QFY20,” it said.

It said the biotechnology segment will continue developing commercial solutions and applications to enhance the yield and productivity of oil palm.

The group also said the outlook for the downstream manufacturing segment for the remaining months of the year continues to be challenging, as demand for its products is expected to remain uncertain in the wake of the Covid-19 pandemic and the prevailing unfavourable palm oil-gas oil spread.

Genting Plantations’ share price fell five sen or 0.51% to RM9.80 today, valuing the group at RM8.79 billion.

S Kanagaraju