On a year-to-date basis, the planter’s core net profit surged by 291 per cent to RM986 million in 1H21, boosted mainly by higher FFB output and realised palm product prices at upstream segment, higher downstream margins and lower finance cost.
KUCHING: Sime Darby Plantations Bhd (Sime Darby Plant) core net profit of RM549 million in its second quarter of financial year 2021 (2QFY21) took the group’s first half (1H) sum to RM986 million, beating expectations and accounting for 60.4 per cent of consensus full-year estimates.
Core net profit of RM986 million in 1H21 was arrived after adjusting for fair value gains of RM22 million, disposal gains of RM127 million, net impairment charges of RM56 million, unrealised forex losses of RM39 million, fair value gain on biological assets of RM36 million, RM4 million write-off, and RM99 million gain from retirement benefit plan in Indonesia, as a result of amendments introduced by the Omnibus Law in Indonesia.
Hong Leong Investment Bank Bhd (HLIB Research) saw that on a quarterly basis, Sime Darby Plant’s core net profit rose 26 per cent to RM549 million in 2Q21, driven mainly by higher fresh fruit bunch (FFB) output, extraction rate, and realised palm product prices at upstream segment.
“It was also boosted by improved downstream earnings, arising from higher earnings contribution from European and African refineries,” it said in its review yesterday.
“Year on year (y-o-y), core net profit more than quadrupled to RM549 million in 2Q21, boosted mainly by sharply higher palm product prices and higher downstream margins, which more than mitigated lower FFB production and lower downstream sales volume.”
On a year-to-date basis, the planter’s core net profit surged by 291 per cent to RM986 million in 1H21, boosted mainly by higher FFB output and realised palm product prices at upstream segment, higher downstream margins and lower finance cost.
Meanwhile, its FFB output grew by two per cent to 4.66 million metric tonnes (MT) in 1H21, as strong output recovery from Indonesia operations by 19 per cent more than mitigated lower FFB output contribution from Malaysia and Papua New Guinea.
“Management now expects FFB output growth to be flattish for the full year, as higher FFB output in Indonesia will be offset by lower FFB output in Malaysia, as a result of labour shortage, which will likely be protracted into the next six to nine months,” HLIB Research added.
“We raise our FY21-23 core net profit forecasts by 3.4, 2.8 and 2.6 per cents respectively, mainly to account for lower finance cost and higher downstream margin assumptions.
“We are keeping our CPO price assumptions unchanged for now, pending a sector-wide review post results season. Based on our estimates, every RM100 per MT change in our CPO price assumption will result in our FY21-23 core net profit forecasts changing by eight to nine per cent.
MIDF Amanah Investment Bank Bhd (MIDF Research) also expect Sime Darby Plant’s earnings to continue to be supported by favourable CPO price.
Nonetheless, it remained concerned on possible impact to the group’s FFB production in view of the shortage of foreign labour which may interrupt bunch pollination.
“As for the downstream segment, we expect it to continue performing well on the back of better performance of bulk business,” it said in its own analysis.
“On a side note, in regards to the latest development of the Withhold Release Order (WRO) issued by US Customs and Border Protection (CBP) against Sime Darby Plant and its subsidiaries, we understand that the nationwide lockdown has led to a slow progress of assessment report.
“Nonetheless, we believe that the group’s outlook will remain resilient as Sime Darby Plant is planning to implement the necessary improvements and specific action plan upon the completion of the assessment report in early 2022.”