Sime Darby Plantation 1Q net profit grows 28%, expects lower FFB production in FY22

Sime Darby Plantation 1Q net profit grows 28%, expects lower FFB production in FY22
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KUALA LUMPUR (May 20): Sime Darby Plantation Bhd saw its net profit for the first quarter ended March 31, 2022 (1QFY22) grow 27.76% year-on-year to RM718 million from RM562 million, driven by stronger recurring profit before interest and tax (PBIT), which compensated for the lower profits from non-recurring transactions, a result of lower gains from compulsory land acquisition by the government.

Earnings per share rose to 10.4 sen from 8.2 sen a year earlier.

The plantation group's quarterly revenue increased 19.28% to RM4.38 billion from RM3.67 billion, according to Sime Darby Plantation's filing with the bourse on Friday (May 19).

Sime Darby Plantation said the recurring PBIT rose 55% to RM839 million versus RM543 million in the corresponding quarter, primarily due to higher crude palm oil and palm kernel prices, which increased by 40% and 84%, respectively.

"This compensated for the 13% decline in fresh fruit bunch (FFB) production during the quarter.

"Meanwhile, finance cost increased to RM20 million, mainly due to lower interest capitalised in the quarter under review, in line with lower capital work-in-progress balances, mitigated by lower borrowings.

"PBIT from the downstream sector increased to RM132 million in the current quarter, mainly due to higher margins generated by the Asia-Pacific bulk operations which benefited from RSPO premiums on CPKO sales, mitigating lower sales volumes and margins in its Asia-Pacific differentiated and European operations.

"Other operations reported higher profits mainly due to higher share of results from the group's associates and joint ventures," said the company.

While palm oil demand may be impacted by current elevated prices, this will be mitigated by the tight supply and availability of alternative vegetable oils as well as supply chain disruptions caused by the ongoing Russia-Ukraine conflict, said the group in a separate statement.

The group also anticipates lower overall FFB production against FY21 as the intake of new foreign workers for the plantation industry is only expected to arrive in the second half of the year.

On April 26, the company submitted a comprehensive report to the United States Customs and Border Protection (CBP) to address the requirements of the United States' import regulations and international labour standards.

Sime Darby Plantation group managing director Mohamad Helmy Othman Basha said the company engaged with the CBP on the submission and will continue to give its full cooperation as the company works towards modifying the findings.

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

Barring any unforeseen circumstances, the group expects encouraging performance for FY22.

At Friday's noon break, Sime Darby Plantation shares fell 11 sen or 2.1% to RM5.12 with some 1.34 million shares done.

At the current price, the group is valued at RM35.41 billion.

Since the beginning of this year, the stock has risen 33.33% from RM3.84.

Surin Murugiah