KUALA LUMPUR (Aug 30): Sime Darby Plantation Bhd reported today a net profit of RM27 million on revenue of RM2.88 billion for the second quarter ended June 30, 2019 (2QFY19) after the group's upstream oil palm operations registered losses due to lower crude palm oil (CPO) prices.

In a statement to Bursa Malaysia today, the group said lower profit at its downstream oil palm operations also affected its bottom line. For 1HFY19, Sime Darby Plantation said net profit stood at RM101 million on revenue of RM5.88 billion.

"There is no comparative (figure) for the quarter and half-year ended June 30, 2019. Due to the change in the financial year end from June 30 to Dec 31, the unaudited condensed consolidated statement of profit or loss for the current quarter ended June 30, 2019, being the second quarter of the financial year ending Dec 31, 2019, is not comparable with that of the second quarter of the previous financial year ended June 30, 2018," it said.

For comparative purposes, the company said it has, however, provided an analysis on the performance of the group for the corresponding quarter a year earlier.

Sime Darby Plantation said today that a year earlier, the group achieved a net profit of RM30 million on revenue of RM3.08 billion during the quarter ended June 30, 2018. For the first half ended June 30, 2018, net profit stood at RM278 million on revenue of RM6.74 billion.

For 2QFY19, Sime Darby Plantation said the group's upstream operations reported a loss before interest and tax (LBIT) of RM64 million versus a profit before interest and tax (PBIT) of RM403 million a year earlier mainly due to the 15% and 39% decline in the average CPO and palm kernel prices realised, respectively, and lower sales volumes for the commodities.

"Downstream operations registered a PBIT of RM51 million, 25% lower than the previous year corresponding quarter of RM68 million. The lower profit was attributable to weaker contribution from the differentiated businesses in Asia Pacific, Middle East and Africa due to competitive market environment. The decline in PBIT was partially compensated by improved results from the bulk businesses, which experienced higher sales volumes and better margins resulting from lower feedstock costs in the current quarter.

"Other operations reported a higher PBIT of RM5 million compared to RM1 million recorded in the corresponding quarter of the previous year due to the lower share of losses from a joint venture in the current quarter," the group said.

Looking ahead, Sime Darby Plantation said it expects the business environment for the palm oil industry to remain challenging for the rest of FY19 amid relatively flat CPO prices.

"Barring any extreme weather abnormalities, the group expects FFB (fresh fruit bunch) production to continue improving for the remainder of the financial year ending Dec 31, 2019. CPO prices are expected to remain relatively flat, mainly attributed to an expected rise in production levels due to seasonal factors, offset by a higher demand in anticipation of higher biodiesel mandates in Malaysia and Indonesia.

"Other factors such as the movement of crude oil prices and the ringgit, the heightened US-China trade tension, tax regulations in major consuming countries and competition from other edible oils are also likely to influence the market prices of CPO and other palm products," it said.