IJM Plantations faces crop losses
KUALA LUMPUR: IJM Plantations Bhd may face major crop losses if the logistics issues continue to delay the harvesting process at its East Kalimantan estates, says Affin Hwang Capital Research.
The firm said IJM Plantations was exposed to lower fresh fruit bunch (FFB) output and higher crude palm oil (CPO) and production costs.
Affin Hwang has reduced its earnings forecast for IJM Plantations.
“We are cutting our financial year (FY) core earnings per share, ending March 31 2019 and 2021 (FY19) and (FY21), by between 11 and 41 per cent. Hence, we reaffirm our ‘sell’ call, with a lower target price of RM1.51 from RM1.88 previously,” wrote Affin Hwang plantation analyst Nadia Aquidah in a report yesterday.
She said the delay in harvesting at IJM Plantations’ East Kalimantan estates was due to insufficient barges to the refineries.
“There were days that IJM Plantations had to stop harvesting as they were unable to process the FFB.
“We are lowering our FY19 FFB production assumption for Malaysia to 470,000 tonnes from 500,000 tonnes previously, while FFB production for Indonesia now falls to 500,000 tonnes from 520,000 tonnes previously.”
Nadia said IJM Plantations’ production costs were likely to be higher in FY19, dragged by its Malaysian operations as labour costs had increased and production was tracking lower than expected.
“The CPO production costs for Malaysia in FY19 may climb to RM1,800 to 1,900 per tonne from RM1,650 per tonne in FY18, while Indonesian costs of production are likely to stay between RM2,100 and RM2,200 per tonne.
“Our CPO average selling price forecast for IJM Plantations is at RM2,250 to RM2,450 per tonne for FY19-21, from RM2,532 per tonne in FY18,” she said.