Sime Darby Plantation’s FY23 net profit 25 pct lower at RM1.86 bln

KUALA LUMPUR: Sime Darby Plantation Bhd’s (SDP) net profit eased by 25 per cent to RM1.86 billion in the financial year ended Dec 31, 2023 (FY23) from RM2.49 billion in FY22, mainly due to lower recurring profit before interest and tax (PBIT) and higher finance costs, partially mitigated by the higher non-recurring PBIT.

SDP said finance costs increased by 47 per cent due to higher benchmark lending rates but were partially mitigated by six per cent lower average borrowings.

It said the average interest rate stood at 5.4 per cent per annum, as compared to three per cent per annum in the previous corresponding period.

Revenue also declined to RM18.43 billion against RM21.03 billion previously, it said in a filing with Bursa Malaysia yesterday.

The group said the upstream segment reported a lower PBIT of RM1.15 billion for FY23, largely due to lower crude palm oil (CPO) and palm kernel (PK) average realised prices, which declined by 15 per cent and 35 per cent, respectively, and higher estate and mill operating costs, adversely affected by an increase in labour costs.

“For the fourth quarter ended December 31, 2023 (4QFY23), the group registered a net profit of RM200 million from the previous corresponding quarter’s RM562 million. This was due to lower recurring profits which were mitigated by profits from non-recurring activities,” it said.

The company said finance costs reduced slightly in the quarter, driven by lower borrowings, despite higher interest rates due to the increase in benchmark lending rates, with the average interest rate standing at 5.8 per cent per annum, as compared to 4.3 per cent per annum in the previous corresponding quarter.

“The upstream segment reported a recurring PBIT of RM198 million, a decline from the previous corresponding quarter’s profit of RM702 million.

“The major factors that contributed to the lower profits are a decline in CPO and PK average realised prices as well as lower compensation from government acquisition and rental income.

“The downstream sector reported a higher PBIT of RM183 million in the current quarter as compared to RM89 million in the previous corresponding quarter, driven by higher margins and volume demand in the European operations,” it said.

It noted that this mitigated the weaker results in the Asia Pacific bulk and differentiated refineries due to lower margins.

Group managing director Datuk Mohamad Helmy Othman Basha said that over and above the successful turnaround of the group’s Malaysian upstream operations, SDP became the first palm oil company in the world to have its netzero targets approved by the Science Based Targets Initiative (SBTi).

“These achievements are evidence of our continued commitment to our key strategic pillars for growth and long-term success, sustainability, operational excellence and innovation.

“We believe these focus areas are essential to futureproof our business and help us to effectively manoeuvre through a challenging operating environment,” he said in a separate statement.

As for the FY24 outlook, SDP said CPO demand is expected to remain steady in the longer term, but seasonally high stockpiles in key destination countries may impact shortterm demand.

“With the improved labour situation and rehabilitation of its Malaysian upstream operations, the group is optimistic that its fresh fruit bunch production growth will be sustained this year,” it said.