United Malacca profit plunges on lower CPO and palm kernel prices

PETALING JAYA: The earnings of local plantation group United Malacca Bhd (UMB) took a steep plunge by nearly 71% year-on-year (y-o-y) in its fourth quarter ended April 30, primarily on the back of lower average prices of crude palm oil (CPO) and palm kernel (PK).

The company said its bottom line for the fourth quarter dropped to RM8.52mil from RM29mil a year earlier.

“This was mainly due to lower average prices of CPO and PK by 20% and 29%, respectively, as well as the impact of 4,640ha of newly matured palms that came into harvesting at the beginning of the current financial year with low fresh fruit bunches (FFB) yield and high unit cost of production,” it said in a filing with Bursa Malaysia.

UMB’s earnings in the three-month period was also affected by lower investment profit as compared to a year ago. Meanwhile, the group’s revenue for the quarter was down by 11.41% y-o-y to RM62.26mil.

The plantation player’s earnings per share stood at 4.06 sen in the final quarter. UMB has declared a dividend of six sen in the quarter in review.

Cumulatively, for financial year 2018 (FY18), UMB recorded a 43.44% lower net profit of RM47.83mil compared to RM84.55mil in the previous corresponding period.

The group cited the decline in average prices of CPO and PK by 7% and 18%, respectively, in the last 12 months as the main factor which pulled down its earnings performance.

Low FFB yields and high unit cost of production for its newly-matured plantations in Malaysia and Indonesia also caused lower earnings in FY18, apart from a reduced investment profit in the 12-month period.

As for the group’s top line in FY18, it rose slightly by 1.1% y-o-y to RM277.73mil from RM274.71mil a year ago.

Moving forward, the group has cautioned the shareholders that its profit in FY19 could take a further hit.

“The group expects higher FFB production for FY19 ending April 30 due to improved FFB yields from the matured palms and an additional 1,015ha coming into maturity.

“However, the adoption of the new accounting standards, Malaysian Financial Reporting Standards, effective FY19 will require the value of bearer plants to be amortised.

“Assuming CPO prices remain at the current level, with the additional amortisation of bearer plants, the group’s profit in FY19 is expected to be significantly lower,” UMB said.