Sime Darby Plantation to see a better 2023

PETALING JAYA: Sime Darby Plantation Bhd expects its fresh fruit bunch (FFB) production to be lower in 2022 than in the previous year due to the slow inflow of foreign workers into Malaysia.

However, the plantation giant is optimistic that its overall production would improve next year, supported by the arrival of more foreign workers, as well as the group’s ongoing efforts to digitalise, mechanise and automate operations to increase productivity, particularly in the country.

According to Sime Darby Plantation group managing director Mohamad Helmy Othman Basha, the entry of more migrant workers is gathering speed.

For the third quarter ended Sept 30, 2022 (3Q22), Sime Darby Plantation posted a lower net profit of Rm396mil, or 5.7 sen per share, as compared with Rm609mil, or 8.8 sen per share, for the corresponding quarter last year, amid lower FFB production rate and oil extraction rate (OER).

During the quarter in review, the group saw its overall FFB production decline 8% year-on-year (y-o-y), led by the drop in Malaysia at 27% y-o-y, which offset higher production in Indonesia and Papua New Guinea. Its OER fell to 20.88% in 3Q22 from 21.59% in 3Q21.

The decline in productivity was largely due to the shortage of harvesters but this was mitigated by higher average realised crude palm oil (CPO) prices.

The group saw an increase of 6.5% in revenue to Rm5.39bil in 3Q22 from Rm5.06bil in 3Q21.

Year-to-date, Sime Darby Plantation’s net profit rose 7.7% to Rm1.93bil for the nine months ended September 2022 (9M22) from Rm1.79bil in 9M21 on higher earnings from the downstream segment, as well as gains from land disposal in Malaysia and earned-out settlement for disposal of a former subsidiary in Liberia.

Its nine-month revenue rose 16.9% Rm15.36bil from Rm13.15bil previously.

Mohamad Helmy said the group was working to restore its plantations to optimal condition.

“As we progressively reduce the need for manual workers in all our non-harvesting activities, we aim to achieve a land-to-man ratio of 17.5ha for every worker by the end of 2024, which will be a major improvement compared to the current industry average of eight ha for every worker.

“With further automation and digitalisation, we are determined to make work in plantations less laborious and more sophisticated to attract a new generation of skilled local workforce,” he said.

Sime Darby Plantation expects demand for CPO to remain resilient, supported by the commodity’s “attractive” price in comparison to alternative vegetable oils.

It is of the opinion that the CPO price, which peaked in the first half of 2022, has stabilised as the increased supply in producing countries had fulfilled pent-up global demand.