Higher palm oil price boost for Sime Darby

Plantation group’s 1Q net profit up 28%

“The group has started the financial year with a solid set of results on the back of continuing high commodity prices caused by ongoing supply chain disruptions.” Tan Sri Megat Najmuddin Megat Khas

PETALING JAYA: Higher crude palm oil (CPO) and palm kernel (PK) prices helped lift Sime Darby Plantation Bhd’s (SDP) net profit in the first quarter ended March 31, 2022 (1Q22), to Rm718mil, a 27.76% increase over Rm562mil in 1Q21.

The plantations group said revenue rose 19% year-on-year (y-o-y) to Rm4.38bil as the higher prices offset the negative impact resulting from a prolonged labour shortage in the Malaysian palm oil industry and normalisation in Indonesian fresh fruit bunch (FFB) production.

For the quarter, the group reported that average realised CPO and PK prices were up 40% and 84% y-o-y respectively in 1Q22 to RM4,465 and RM4,105 per tonne.

Meanwhile, the groups’ downstream business, Sime Darby Oils, recorded a 23% increase in profit before interest and tax of Rm132mil in 1Q22 compared to the year-ago quarter on the back of higher margins in its Asia Pacific bulk operations.

“The group has started the financial year with a solid set of results on the back of continuing high commodity prices caused by ongoing supply chain disruptions.

“As palm oil plays a crucial role in fulfilling the demand for vegetable oils in the global market, I am confident that SDP will be able to leverage on current opportunities and continue to deliver an encouraging performance in 2022,” said its chairman Tan Sri Megat Najmuddin Megat Khas in a statement.

Group managing director Mohamad Helmy Othman Basha added that the group is engaged with the United States Customs and Border Protection on the submission of its report to address the requirements of the US’ import regulations and international labour standards.

“Our commitment to continuous improvement extends beyond our own operations to include our entire supply chain, which we hope will help the industry to move forward proactively,” he said.

Moving forward, the group expects palm oil demand to be impacted by the current elevated prices although this will be mitigated by the tight supply of alternative vegetable oils as well as supply chain disruptions caused by the ongoing Russia-ukraine conflict.

The group anticipates lower overall FFB production against financial year 2021, as the intake of new foreign workers for the plantation industry is only expected to arrive in the second half of the year.

“Barring any unforeseen circumstances, the group expects encouraging performance for the financial year ending Dec 31,” it added.