Sarawak Oil Palms’ 9M exceed expectations
Sarawak Oil Palms Bhd (Sarawak Oil Palms) posted core earnings of RM451.5 million for the first nine months of its financial year 2022 (9MFY22), which exceeded consensus expectations, at 90 per cent of full year forecasts.
Its core net profit jumped 60 per cent year on year (y-o-y) on higher average palm oil and palm kernel prices of RM5,656 per tonne and RM3,968 per tonne.
Production uptick was seen in the third quarter of FY22 (3Q2FY2) as fresh fruit bunch (FFB) output rose 18.6 per cent quarter on quarter (q-o-q) and 3.8 per cent y-o-y, but 9MFY22 FFB declined 6.8 per cent y-o-y.
“Labour shortage has not improved much, remaining at 30 to 35 per cent levels,” observed analysts with RHB Investment Bank Bhd (RHB Research).
“While management initially guided that labour issue would be resolved by end-of the second half of 2022, progress has been slow as the timing of new worker influx remains uncertain.
“Management continues to guide for a four per cent drop in FFB output for FY22F while we keep our minus 4.9 per cent assumptions. However, we cut our PK output growth forecast to minus three per cent given the lower-than-expected production.”
Given the shortage of manpower, RHB Research saw that Sarawak Oil Palms only managed to complete 60 to 65 per cent of its FY22 fertiliser application as of end-September and only expects to be able to fulfil 70 per cent of the requirement by year-end.
Management has yet to tender for its FY23 fertiliser requirements and would only do so towards year-end.
“Although no disclosure was made, we believe the downstream segment remained positive in 3Q22 y-o-y given the 80 to 90 per cent utilisation, albeit, recorded a lower performance qo-q considering the falling price environment.
“We remain optimistic on this segment, as Sarawak Oil Palm’s additional 800 tonnes per day refinery expansion should improve its margins in FY23F, given its focus on producing higher quality, tailored refined products for customers.
“We lower our FY22 earnings by six per cent as we anticipate 4Q earnings will be slightly weaker considering the relatively lower prevailing CPO prices while FY23F-24F earnings are maintained.”