KUALA LUMPUR (Nov 29): Sime Darby Plantation Bhd (SD Plantation) has reported a net profit of RM32 million for its third quarter ended Sept 30, 2019 on revenue of RM2.82 billion.

There are no comparative figures due to the change in the company's financial year end from June 30 to Dec 31, its exchange filing today showed.

However, according to SD Plantation, the group reported a net profit from continuing operations of RM32 million, lower than RM126 million recorded in the corresponding quarter of the previous year, mainly due to lower recurring profit before interest and tax contributed by the upstream segments and total non-recurring loss of RM44 million arising from impairment charges on assets in Indonesia and a loan to a joint venture.

"The adverse impacts were partially cushioned by higher profits from the downstream segment, lower finance costs and lower tax expense in the current quarter," it said.

The group's discontinuing operations registered a net loss of RM275 million in the current quarter, largely attributable to the impairment charge on assets in Liberia of RM256 million.

The above resulted in a total net loss for the group of RM243 million, as compared to a net profit of RM115 million recorded in the corresponding quarter of the previous year.

For the cumulative three quarters ended Sept 30, net earnings from continuing operations stood at RM167 million, while revenue came in at RM8.69 billion.

SD Plantation said the weaker earnings from continuing operations in the current period were partially compensated by lower losses from non-recurring transactions and the net tax income of RM59 million, mainly arising from the recognition of deferred tax assets on losses suffered by subsidiary companies.

Discontinuing operations registered higher net loss of RM309 million compared to RM163 million in the same period of the previous year, mainly due to the impairment charge on assets in Liberia of RM256 million, higher than impairment charge of RM112 million incurred last year.

As a result, the net loss registered by the group for the current period was RM142 million, compared to the net earnings of RM393 million recorded in the same period last year, it said.

SD Plantation's group managing director Mohamad Helmy Othman Basha said he believes the group will be more resilient as it puts performance improvement measures in place to overcome industry challenges and strive for greater profitability and productivity targets.

"Given the group's committed forward sales, the recent improvements in crude palm oil and palm kernel prices will have minimal impact on the group's results for the financial year ending Dec 31, 2019.

"Nevertheless, should the prices continue to rally, the group's prospects will improve in the next financial year. By then, SD Plantation's legacy issues impacting the group's current results are also expected to be fully resolved," stated Mohamad Helmy.

Meanwhile, SD Plantation said its wholly-owned New Britain Palm Oil Ltd (NBPOL) has signed a foreign currency arrangement with related party Hastings Deering (PNG) Ltd for direct payments to Hastings' offshore suppliers.

Sime Darby Bhd holds an indirect 100% equity interest in Hastings.

SD Plantation said in an exchange filing today that the agreement, signed on July 1, states that NBPOL agrees to make direct payments to the suppliers in US dollar after receiving certain instructions and payment in Papua New Guinean Kina (PGK) from Hastings, based on an agreed exchange rate.

Under the agreement, from time to time, Hastings will request that NBPOL pays for goods Hastings purchased from offshore suppliers.

After the request is received, NBPOL will issue an invoice to Hastings for the amount in PGK which incorporates a margin that NBPOL imposes through the exchange rate used.

The total amount received from Hastings for the period July 2019 to October 2019 was PGK29 million, equivalent to approximately RM35.5 million, which consists of payments to Hastings' offshore suppliers of approximately RM33.7 million and margin of approximately RM1.8 million derived from the agreed exchange rates.

SD Plantation said the arrangement enables NBPOL to assist Hastings, a related party which is facing operational difficulty in a foreign market.

"The arrangement has been given due consideration and approval by the Central Bank of PNG; and through this arrangement, NBPOL will also benefit from a margin earned on the exchange rates advised by the Central Bank of PNG on a daily basis," it added.

Shares in SD Plantation fell 13 sen to RM4.92 at 3.32pm, valuing the group at RM34.56 billion.