Sarawak Plantation records strong start to 2020
Sarawak Plantation Bhd (Sarawak Plantation) saw a strong start to 2020, but analysts warn the company could see slower growth in the second quarter (2Q) due to lower crude palm oil (CPO) prices.
In a report, the research team at Public Investment Bank Bhd (PublicInvest Research) noted that Sarawak Plantation's 1Q of the financial year 2020 (FY20) core earnings of RM7.8 million were within expectations.
“The steady results were attributed to an increase in both CPO product prices and fresh fruit bunches (FFB) production. Nevertheless, we expect earnings growth to slow in 2Q on lower CPO prices, though partly mitigated by stronger output growth,” it highlighted.
It explained the group's plantation sales jumped 43 per cent y-o-y to RM98.9 million, led by an increase in both CPO prices and FFB production.
“During the quarter, FFB production rose 11 per cent yo-y to 65,269 MT. It also had an external FFB production of 102,277 MT, making up 61 per cent of the total FFB processed,” it added.
The research team also noted that the average realised CPO price jumped 32.5 per cent y-o-y to RM2,643 per MT while average realized palm kernel price in 1QFY20 rose from RM1,142 per MT to RM1,597 per MT. FFB yield also improved, while oil extraction rate stood at 19.86 per cent.
“Excluding the change in fair value of biological assets amounting to RM1.7 million, the group's core earnings rose 37 per cent y-o-y to RM7.8 million, mainly driven by stronger plantation margin.
“During the quarter, earnings before interest and tax (EBIT) margin improved from 8.3 per cent to 10.3 per cent. 1QFY20 allin CPO cost of production (expalm kernel credit: RM200 per MT to RM300 per MT) averaged at RM2,015 per mt,” PublicInvest Research said.