Analysts: 3Q in line for Sarawak Plantations
KUCHING: Sarawak Plantations Bhd (Sarawak Plantations) saw a margins squeeze for its earnings before interest, tax, depreciation and amortisation (EBITSA) of 8.1 percentage points for the third quarter of financial year 2022 (3QFY22) to 21.6 per cent from 29.7 per cent in 3QFY21 following lower operating profit recorded at RM34.9 million.
This was primarily attributable to smaller sales volume of crude palm oil (CPO) and palm kernel (PK); lower selling prices of CPO and PK; as well as high cost of production.
“Nevertheless, core earnings, which comprised 76 per cent of our full-year prediction, were in line with our estimates at RM92 million after accounting for the loss on fair value adjustments of biological assets,” commented MIDF Amanah Investment Bank Bhd’s research team (MIDF Research) in its analysis yesterday.
“Its oil palm segment profit comprise estate and mill operations for the quarter, which increased to RM121.4 million and RM9 million respectively.
“However, gross profit margins were hit by increased in costs of goods sold amounting to RM578 million owing to the lower fresh fruit bunch (FFB) processed and reduced external FFB purchased.”
Operational wise, Sarawak Plantations reported FFB and CPO production of 239,699 metric tonnes (MT) and 81,002MT respectively in the first nine months of FY22, dragged by wet weather impacts coupled with labour shortage.
Nonetheless, ASP CPO and PK realised during the period significantly higher to RM5,445 per MT and RM3,239 per MT based on monthly CPO prices local delivery.
“We understand most of the planters operates in higher production cost environments, but Sarawak Plantations’s EBITDA margin to remain stable at 19 to 20 per cent in FY22 to FY24,” it said.
The team at Public Investment Bank Bhd (PublicInvest Research) saw that Sarawak Plantation is targeting FFB production growth of 21 per cent y-o-y to 400,000MT for FY23.
“During the quarter, enhancement area stood at 965 hectares (ha) and is expected to improve to 850ha by year-end. Another 600ha is expected to normalise next year. To note, 440ha were replanted and is expected to rise to 800ha by year-end. Sarawak Plantations’ new mature area stood at 1,800ha with total harvestable area standing at 20k ha.
“As replanting activity is expected to pick up in the remaining months amid high fertiliser cost, CPO production cost is expected to hit RM3,300 per MT for FY22.
On the positive side, major fertiliser cost has started to moderate in recent months, down from RM3,900 to RM3,200 per MT. Coupled with the strong FFB production growth, management expects to see CPO production cost to improve to RM2,700 per MT for FY23.