Genting Plant’s 3Q misses expectations, hit by surge in production cost
Genting Plantations Bhd (Genting Plantations) third quarter of the financial year 2022 (3QFY22) missed expectations due to the rise in the cost of production, analysts observed.
In a report, the research team at AmInvestment Bank Bhd (AmInvestment) noted that Genting Plantations’ 9MFY22 core net profit (ex-unrealised forex gains of RM18 million) was 25 per cent was below expectations.
“Genting Plantations’ results were poor in 3QFY22 due to a surge in the cost of production. The group’s all-in cost of production increased to RM2,690 per tonne in 3QFY22 from RM2,290 per tonne in 2QFY22 dragged by higher costs of fertiliser and wages.
“Also, average CPO price shrank by 31 per cent to RM3,368 per tonne in 3QFY22 from RM4,907 per tonne in 2QFY22,” it said.
It also explained that Genting
Plantations’ all-in cost of production rose to RM2,370 per tonne in 9MFY22 from RM1,895 per tonne in 9MFY21, dragged by higher costs of fertiliser, labour and transportation.
“The group’s fertiliser costs are envisaged to double in FY22E due to global shortages resulting from the Ukraine-Russia war,” it said.
Nevertheless, pointed out
that comparing 9MFY22 against 9MFY21, however, Genting Plantations core net profit climbed by 49 per cent to RM398 million on the back of robust palm product prices. Plantation EBITDA surged by 25 per cent y-o-y to RM780 million in 9MFY22.
This compensated for a 19 per cent fall in downstream EBITDA, it said.
Apart from strong CPO prices, Genting Plantations benefited from improved contribution from its premium outlets.
Genting Plantations’ share of net profit in associates (mainly premium outlets) jumped to RM30 million in 9MFY22 from RM9 million in 9MFY21.
All in, AmInvestment maintained its ‘hold’ rating on the stock.