CPO prices to rise to RM2,200 by year-end — Bakke

KUALA LUMPUR: Sime Darby Plantation Bhd (SD Plantation) expects crude palm oil (CPO) prices to increase to between RM1,900 and RM2,200 per tonne by year-end, driven mainly by re-emerging demand from China and India.

Chief Operating Officer Downstream Mohd Haris Mohd Arshad said the forecast was based on the fact that speculative trading activities among traders on CPO, which dragged prices lower, had already ended.

"Now the fundamentals of demand and slowing down productions will kick in so price will be based on demand and production, which is expected to drive the CPO price upwards moving forward," he told a press conference on the company's three months financial results breifing here, yesterday.

Executive Deputy Chairman and Managing Director Tan Sri Mohd Bakke Salleh said the positive trend is expected to continue into the first half next year, where the CPO price is the expected to be lingering between RM2,400 and RM2,600 per tonne by the first half of 2019.

Meanwhile, Mohd Bakke said the group has incorporated new breakthrough technologies and innovations inti its operations in line with the aspirations of Industry 4.0.

"We are well into the halfway mark of the sixth-month financial period as SD Plantation moves towards Dec 31, 2018. The business environment remains challenging as the CPO price traded at a low of RM2,605 per metric on Sept 28 this year. Nevertheless, we remain steadfast in our drive to improve operational efficiency," he said.

With higher levels of mechanisation and automation, he said the group endeavours to increase productivity and contribute to the upskilling the company's workforce, which would mitigate the impact of the upcoming new rate of minimum wage as the group maintain prudent cost management.

For the third quarter ended Sept 30, 2018, Mohd Bakke said the group's profit before interest and tax (PBIT) declined 49 per cent to RM259 million as compared to the same quarter last year, due to lower profit contributions from both upstream and downstream segments, as to lower average CPO and palm kernel prices realised.

"Fundamentally, our operations and finances remain strong. The affirmation by various rating agencies over the course of the past few months augurs well for our business as we move forward into the new financial year in January 2019," he added.