MARKET DEVELOPMENT
Slow China CPO Demand as Beijing Reins in Credit Growth
Slow China CPO Demand as Beijing Reins in Credit Growth
21/08/2014 (The Star) - Demand for palm oil from China, one of the world’s largest consumers of edible oils, could wane as the government reins in credit growth, says Kuala Lumpur Kepong Bhd (KLK).
“With tougher measures being imposed on opening of letters of credit in China, demand for palm oil will be affected,” the plantation giant said in a stock exchange filing.
However, it added that current crude palm oil (CPO) prices of around RM2,100 per tonne should be supported by biodiesel usage, even as it expected oilseeds output to improve, leading to an ample supply of soft oils.
“Notwithstanding the above, plantations profit for the current financial year is expected to exceed that of the previous financial year in view of the results achieved to-date and contracted forward sales,” KLK said.
Its overall profit for the current financial year ending Sept 30, 2014 was expected to top last year, according to the group.
China is the world’s No. 2 buyer of palm oil. A Reuters report dated May 7 said Chinese palm oil imports could be hit as buyers struggle for funding amid Beijing’s crackdown on commodity financing caused by slowing domestic demand.
With some 70% of China’s palm oil imports tied to this kind of financing, and a growing sense of foreboding among Chinese lenders, traders and industry officials estimate that shipments were likely to drop, Reuters said.
KLK yesterday posted a 12.95% increase in net profit for its third quarter ended June 30 to RM213.66mil from RM189.16mil a year ago, thanks to higher CPO and palm kernel (PK) prices.
It told Bursa Malaysia that revenue jumped 34.36% to RM2.92bil versus RM2.18bil. Earnings per share (EPS) climbed to 20.1 sen from 17.8 sen.
Net profit in the nine months to June rose a stronger 24.44% to RM820.95mil from RM659.74mil during the same period last year, while revenue grew 24.05% to RM8.35bil from RM6.73bil. EPS stood at 77.1 sen versus 61.9 sen.
KLK said in the notes to its accounts that plantation profits doubled in the third quarter to RM229.8mil, boosted by improved selling prices of palm products, higher fresh fruit bunch (FFB) production and lower production costs.
The group realised an average CPO price of RM2,507 per tonne for the quarter versus RM2,260 per tonne a year earlier, up 10.9% year-on-year.
Average prices for its PK products surged 67.9% to RM1,783 per tonne, but rubber fell 20.4% to RM7.78 per kg.
Its manufacturing sector saw profits dip slightly despite turnover improving 24.6% due to narrower profit margins, which were caused by higher raw material prices and processing costs.
The oleochemical division recorded a marginal decline in profit, while its property arm was hit by a 53.8% plunge in profit to RM10.6mil on the back of a 40.3% drop in sales because of lower progress billings for Bandar Seri Coalfields.
In the year-to-date, KLK saw its plantation profits climb 34.1% to RM775.1mil, courtesy of better CPO and PK prices, even as FFB production rose slightly and production costs for CPO fell.
“With tougher measures being imposed on opening of letters of credit in China, demand for palm oil will be affected,” the plantation giant said in a stock exchange filing.
However, it added that current crude palm oil (CPO) prices of around RM2,100 per tonne should be supported by biodiesel usage, even as it expected oilseeds output to improve, leading to an ample supply of soft oils.
“Notwithstanding the above, plantations profit for the current financial year is expected to exceed that of the previous financial year in view of the results achieved to-date and contracted forward sales,” KLK said.
Its overall profit for the current financial year ending Sept 30, 2014 was expected to top last year, according to the group.
China is the world’s No. 2 buyer of palm oil. A Reuters report dated May 7 said Chinese palm oil imports could be hit as buyers struggle for funding amid Beijing’s crackdown on commodity financing caused by slowing domestic demand.
With some 70% of China’s palm oil imports tied to this kind of financing, and a growing sense of foreboding among Chinese lenders, traders and industry officials estimate that shipments were likely to drop, Reuters said.
KLK yesterday posted a 12.95% increase in net profit for its third quarter ended June 30 to RM213.66mil from RM189.16mil a year ago, thanks to higher CPO and palm kernel (PK) prices.
It told Bursa Malaysia that revenue jumped 34.36% to RM2.92bil versus RM2.18bil. Earnings per share (EPS) climbed to 20.1 sen from 17.8 sen.
Net profit in the nine months to June rose a stronger 24.44% to RM820.95mil from RM659.74mil during the same period last year, while revenue grew 24.05% to RM8.35bil from RM6.73bil. EPS stood at 77.1 sen versus 61.9 sen.
KLK said in the notes to its accounts that plantation profits doubled in the third quarter to RM229.8mil, boosted by improved selling prices of palm products, higher fresh fruit bunch (FFB) production and lower production costs.
The group realised an average CPO price of RM2,507 per tonne for the quarter versus RM2,260 per tonne a year earlier, up 10.9% year-on-year.
Average prices for its PK products surged 67.9% to RM1,783 per tonne, but rubber fell 20.4% to RM7.78 per kg.
Its manufacturing sector saw profits dip slightly despite turnover improving 24.6% due to narrower profit margins, which were caused by higher raw material prices and processing costs.
The oleochemical division recorded a marginal decline in profit, while its property arm was hit by a 53.8% plunge in profit to RM10.6mil on the back of a 40.3% drop in sales because of lower progress billings for Bandar Seri Coalfields.
In the year-to-date, KLK saw its plantation profits climb 34.1% to RM775.1mil, courtesy of better CPO and PK prices, even as FFB production rose slightly and production costs for CPO fell.