The Edge Markets (24/05/2021) - KUALA LUMPUR (May 24): Hap Seng Plantations Bhd posted a net profit of RM29.37 million in the first quarter ended March 31, 2021 (1QFY21), compared with a net loss of RM6.02 million a year earlier, due to higher average crude palm oil (CPO) and palm kernel (PK) prices.

The CPO and PK prices averaged at RM3,854 and RM2,585 a tonne respectively during the quarter, against RM2,814 and RM1,702 in 1QFY20, the group said in a bourse filing.

However, CPO sales volume was 16% lower year-on-year at 26,288 tonnes, while PK sales volume was 11% lower at 6,763 tonnes following lower production and higher closing stocks due to the timing of deliveries for both products, it said.

Hap Seng said CPO and PK production was lower by 9% and 8% respectively compared to 1QFY20 due to lower extraction rates following wet weather conditions.

Quarterly revenue was up by 19% at RM121.32 million, from RM101.86 million in 1QFY20.

On a quarter-on-quarter basis, Hap Seng saw its net profit declined 21% from RM36.95 million. Revenue also declined 21% from RM153.27 million.

The planter did not declare any dividends for the quarter.

On its prospects, Hap Seng said the imposition of the latest movement control order (MCO 3.0) is not expected to impact the plantation sector operations as the sector is categorised as an essential economic sector.

It observed that CPO prices continue to be on the uptrend and have surpassed the RM4,000 mark in March, a level that was last seen 13 years ago in March 2008.

“CPO price closed at a high of RM4,400 per tonne at end April 2021 with an average price of RM4,220 per tonne for the month. On May 18, 2021, CPO price recorded the highest price in the palm oil industry history at RM4,773.50 per tonne,” it added.

Hap Seng expects palm oil production to increase in the second half of the year, but said global demand for edibles oils may slow down with rising Covid-19 cases amid the discovery of new variants that resulted in countries reinstating lockdown measures.

The planter expressed concerns over the situation in India, which is the world's largest palm oil importer, with the high infections there causing uncertainties in the global demand outlook of palm oil.

Accordingly, global palm oil stocks are likely to increase, which may lower CPO prices to below RM4,000 per tonne, it said.

Shares in Hap Seng closed 0.51% or one sen higher at RM1.98, valuing the group at RM1.58 billion. The counter saw 165,000 shares done.

Read more at https://www.theedgemarkets.com/article/hap-seng-plantations-swings-back-black-1q-following-higher-commodity-prices