This article first appeared in The Edge Financial Daily, on November 19, 2015.

KUALA LUMPUR: Palm oil producer TSH Resources Bhd slipped into the red in its third quarter ended Sept 30, (3QFY15) with a net loss of RM48.19 million compared to a net profit of RM24.28 million a year ago, due to lower average crude palm oil (CPO) selling price, lower crop production, and loss on foreign exchange (forex).

Loss per share stood at 3.54 sen for 3QFY15 compared to earnings per share (EPS) of 1.8 sen a year ago.

Revenue dropped 26.56% to RM181.38 million from RM246.95 million.

According to TSH’s filing with Bursa Malaysia yesterday, core profit before taxation (PBT) fell 50% to RM20.09 million for 3QFY15 from RM40.1 million a year ago.

“The core PBT achieved by the company was decent considering the challenging quarter caused by the depressed CPO price at that time. The CPO price was at its lowest point in 3Q15 thus far this year,” the group said in a press statement.

In its Bursa announcement, TSH (fundamental: 0.3; valuation: 0.5) explained that the decline in PBT for the quarter and nine-month period from a year ago was mainly attributed to lower core PBT and higher unrealised foreign translation losses.

According to its financial statement, loss on forex amounted to RM71.315 million in 3QFY15 compared with RM6.45 million a year ago.

As at Sept 30, 2015, the group had total borrowings of RM1.357 billion, of which RM563.14 million were denominated in US dollars.

Year-to-Sept 30, the ringgit weakened by 25.7% against the greenback.

For the cumulative nine-month period (9MFY15), the group reported a net loss of RM34.67 million compared to a net profit of RM111.83 million a year ago. This translated to loss per share of 2.58 sen compared to EPS of 8.31 sen a year ago. Revenue fell 28.99% to RM593.57 million from RM835.87 million last year.

TSH said that the haze and dry season in Kalimantan had also caused a lower fresh fruit bunch (FFB) yield for its plantations there.

“For 3QFY15, the palm oil segment reported a lower operating profit of RM20.1 million due to lower crop production of 152,768 tonnes compared with 163,646 tonnes in 3QFY14 and lower average CPO price of RM1,987 per tonne — the lowest among the first three quarters of 2015,” it said.

“[The continued] high CPO stock levels and slowing global demand resulted in the reduction of the CPO price. For the year to date, the average CPO selling price reduced from RM2,393 per tonne in 2014 to RM2,099 per tonne. FFB production also decreased from 483,048 tonnes in 2014 to 449,988 tonnes. Both these adverse factors resulted in lower operating profit of RM88.2 million,” said the Bursa note.

The group’s wood product manufacturing segment saw a higher operating loss of RM1.7 million, and achieved lower revenue of RM10.1 million due to the lower selling price and unfavourable mix.

For 3QFY15, its bio-integration and “others” segment reported revenue and operating profit of RM14 million and RM7.3 million respectively, which were marginally lower than the RM14.7 million and RM7.6 million respectively a year ago.

In the press statement, the group said that the recent increase in CPO price should augur well for the industry.

“TSH is expecting stronger FFB production for the fourth quarter of this year. The board of directors remains confident with the long-term outlook of the palm oil industry. [TSH] shall maintain [its] focus on oil palm planting in Malaysia and Indonesia. The company remains steadfast in controlling cost and improving productivity. [The] palm oil business is expected to remain the largest contributor to the company’s revenue and profit.”

TSH shares fell 1.47% or three sen at market close to RM2.01, for a market capitalisation of RM2.73 billion.

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.