KUALA LUMPUR (Nov 18): Sime Darby Plantation Bhd said on Thursday (Nov 18) its third-quarter net profit from continuing operations more than tripled to RM635 million from RM190 million a year earlier, driven by the stronger performance of its upstream segment, which compensated for a decline in profit contributed by the group’s downstream operations at a time when the company contended with a Covid-19 pandemic-driven labour shortage in its Malaysian upstream oil palm operations.
Crude palm oil (CPO) prices, which rose to record highs of above RM5,000 a tonne in 2021, primarily driven by continued tightness in global vegetable oil supplies and inventories, however mitigated the financial impact of the labour shortage, according to Sime Darby Plantation.
In a statement to Bursa Malaysia, Sime Darby Plantation said revenue from continuing operations rose to RM5.06 billion for the third quarter ended Sept 30, 2021 (3QFY21) from RM3.18 billion the year before.
"For 3QFY21, the group registered a net profit from continuing operations of RM635 million, significantly higher than the corresponding quarter of the previous year, driven by stronger recurring profit before interest and tax (PBIT) from the upstream segment which compensated for the decline in profit contributed by the downstream segment.
"The group reported lower non-recurring loss, which comprised impairment charges in the current quarter.
"During the quarter under review, the group recognised a loss on discontinued operations arising from additional provisions for impairment of RM25 million for its joint venture classified as an asset held for sale, [namely] Emery Oleochemicals (M) Sdn Bhd,” Sime Darby Plantation said.
For the cumulative nine months ended Sept 30, 2021, Sime Darby Plantation said cumulative net profit from continuing operations climbed to RM1.84 billion from RM962 million a year earlier, while revenue from continuing operations rose to RM13.15 billion from RM9.44 billion.
The company did not declare any dividend for 3QFY21.
"[On a quarter-on-quarter basis,] despite the improved performance of the upstream segment, the group reported a net profit from continuing operations of RM635 million [for 3QFY21], 2% lower than the preceding quarter, due to lower profit from the downstream segment.
"Finance costs increased in the current quarter due to higher loans as compared to the preceding quarter, and lower capitalised borrowing cost,” Sime Darby Plantation added.
Looking ahead, Sime Sime Darby Plantation said CPO prices are expected to remain elevated at least until year end before a possible downward adjustment in the second quarter of 2022 when supplies are anticipated to improve.
High prices of CPO will help compensate for the impact of the labour shortage on its Malaysian upstream operations, according to the company.
"In order to mitigate the impact of the shortage of labour in Malaysia, the group continues to ramp up its efforts in mechanisation and innovation to increase productivity, while also actively encourage more locals to join its operations.
"The Malaysian government’s recent plan to allow the recruitment of some 32,000 foreign workers to address the acute workforce shortage in the oil palm industry comes as positive news.
"The group expects demand to remain strong as more countries ease their Covid-19 restrictions, bringing back earlier suppressed demand. Barring any unforeseen circumstances, the group expects an overall strong financial-year performance for 2021,” Sime Darby Plantation said.
In a separate statement attached to its Bursa filing, the company said higher realised CPO and palm kernel (PK) prices compensated for the decline in oil palm fresh fruit bunch production in its Malaysian operations.
"In 3QFY21, the group’s upstream segment recorded a PBIT of RM913 million, 234% more than the previous corresponding period’s PBIT of RM273 million. During the period under review, realised CPO and PK prices increased by 51% and 66% respectively to an average of RM3,770 and RM2,274 per metric ton.
"The group’s oil extraction rate improved to 21.59% from 21.27% in the previous corresponding quarter,” Sime Darby Plantation added.
At 3.13pm on Thursday, the stock had risen one sen or 0.26% to RM3.88, valuing the group at about RM26.85 billion.
Sime Darby Plantation has 6.92 billion issued shares, according to its latest quarterly financial report.