Hap Seng Plantations pays five sen dividend after 41% profit rise in 2Q; warns CPO price will soften more in 2H
24/08/2022 (The Edge Markets) - Hap Seng Plantations Holdings Bhd's net profit for the second quarter ended June 30, 2022 (2QFY22) jumped 41.08% to RM66.9 million from RM47.42 million a year ago, on the back of higher selling prices for crude palm oil (CPO) and palm kernel (PK), despite lower sales.
Earnings per share climbed to 8.37 sen from 5.93 sen, the planter’s Bursa Malaysia filing on Wednesday (Aug 24) showed. Revenue grew 36.33% to RM246.86 million from RM181.07 million.
It declared a first interim dividend of five sen per share — as opposed to 1.5 sen in the corresponding quarter last year — to be paid on Sept 22.
Hap Seng Plantations said the average selling price (ASP) per tonne for CPO in 2QFY22 rose to RM6,737 from RM4,365 in 2QFY21, while PK's climbed to RM3,769 from RM2,709. The stronger ASPs offset the 10% drop in CPO sales volume as well as the 14% fall in PK sales volume in the same period.
It said the drop in sales volume was mostly due to lower production; production of CPO dropped 16% in 2QFY22, while PK's fell 14%, due to lower fresh fruit bunches (FFB) produced and purchased.
“FFB production in the current quarter was 13% below the preceding year's corresponding quarter (2QFY21), affected by lower FFB yield due to seasonal yield trend and changes in cropping patterns,” it added.
For the six months ended June 30, the planter posted a net profit of RM168.57 million, up 119.52% from the RM76.79 million it made in the corresponding six months last year, as cumulative revenue jumped 61.72% to RM489.02 million from RM302.39 million.
Hap Seng said CPO prices eased after the Indonesian government lifted its CPO export ban on May 23. Monthly average price per tonne of CPO, which ranged between RM5,354.50 and RM6,873 in the first half of 2022, dropped to RM4,063 per tonne in July — the lowest-to-date in 2022.
Looking forward, the planter said CPO prices are expected to soften further in the second half of 2022, on weaker global demand growth and expectations of higher palm oil supplies.
“Palm oil industry analysts expect average CPO price for 2022 to remain in the range of RM4,500 to RM5,600, supported by the tight supply situation of other vegetable oils and the wide price gaps between CPO and these oils,” it said.
Meanwhile, higher fertiliser costs as well as the increased minimum wage to RM1,500 — which took effect from May 1, 2022, under the Malaysian Minimum Wage Order 2022 — will also continue to push production costs higher, it said.
“Based on the foregoing, the group expects its results for the financial year ending Dec 31, 2022 (FY22), to be influenced by movements in commodities prices, rising production costs, uncertainties in the global economies and the global shift from the Covid-19 pandemic to endemic stage,” it added.
Shares in Hap Seng Plantations finished unchanged at RM2.23 on Wednesday, giving the group a market capitalisation of RM1.78 billion.