25.11.2018 (New Straits Times Online) - KUALA LUMPUR: Sime Darby Plantations Bhd's net profit plunged more than eight times in the third quarter, but its top executive is optimistic of bouncing back as early as the first quarter next year.

SD Plantations’ net profit slipped to RM115 million in the three months ended September 30, 2018 from RM1.02 billion net profit a year earlier.

Its revenue for the quarter fell to RM3.04 billion from RM3.54 billion previously.

Lower average crude palm oil (CPO) and palm kernel (PK) realised prices of slightly over RM2,000 per tonne have affected its earnings in the upstream and downstream businesses during the quarter.

The profit came below analysts’ estimate of RM265 million.

Analysts said the group’s December quarter would continue to be weighed down by falling CPO prices.

But SD Plantations executive deputy chairman and managing director Tan Sri Bakke Salleh expects CPO prices to strengthen to RM2,200 to 2,400 per tonne in the first quarter of 2019. This should then rise to RM2,400 to RM2,600 per tonne in the second quarter.

The bullish forecast was fuelled by expectation of higher demand for palm oil due to festive seasons such as Chinese New Year and Hari Raya, said Bakke at a press conference on SD Plantations’ interim results here yesterday.

“The business environment remains challenging as the CPO price traded at a low of RM2,065 per tonne on September 28. Nevertheless, we remain steadfast in our drive to improve operational efficiency,” he said.

The average CPO price realised for the group in the current quarter declined 21 per cent year-on-year from RM2,693 per tonne to RM2,117 per tonne, whereas the average PK price realised declined 22 per cent year-on-year from RM2,109 per tonne to RM1,649 per tonne.

However, the group said the decline in earnings was partially mitigated by higher fresh fruit bunch production, which had increased two per cent to 2.75 million tonne in the three-month period from 2.70 million tonne.

Bakke said the group had incorporated new breakthrough technologies and innovations into its operations in line with the aspirations of Industry 4.0.

“With higher levels of mechanisation and automation, we endeavour to increase productivity and contribute to the upskilling of our workforce. This will mitigate the impact of the upcoming new rate of minimum wage as we maintain prudent cost management,” he said.

On December quarter outlook, analysts said Malaysia’s physical palm oil prices averaged RM1,994 in the quarter through November 22, down 23 per cent from a year earlier.

“The firm’s single-digit crop production growth will do little to counter the weaker palm oil price. Improvement in refining margin however should help to partially cushion the price decline,” they said.

SD Plantations is changing its fiscal year end to December from June.