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Plantation Sector Expected To Continue Its 1Q Momentum
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11/06/2025 (Business Today) - RHB Research is maintaining its “OVERWEIGHT” call on the plantation sector, anticipating robust earnings growth throughout 2025, buoyed by higher Crude Palm Oil (CPO) and Palm Kernel (PK) prices. The research house’s top picks for the sector include Johor Plantations Group (JPG), Sarawak Oil Palms (SOP), Bumitama Agri (BAL), PP London Sumatra Indonesia (LSIP), and SD Guthrie (SDG).

The first quarter of 2025 (1Q25) saw strong year-on-year (YoY) earnings growth for most plantation companies, largely meeting market expectations. This positive trend is projected to continue for the remainder of the year.

Out of 14 planters covered by RHB Research, eleven reported in-line earnings, while three underperformed. The underperformances came from Ta Ann (due to larger-than-expected losses in its timber division), Golden Agri (lower-than-expected downstream contributions and steeper unit costs), and FGV (losses on milling external Fresh Fruit Bunches (FFB) and higher unit costs). RHB Research is maintaining its 2025-2026 CPO price estimates at MYR4,300 and MYR4,100 per tonne, respectively.

In Malaysia, FFB output for covered planters experienced a c.19% quarter-on-quarter (QoQ) decline, or a marginal 0.7% YoY fall, in 1Q25. However, most Malaysian planters expect a moderate improvement in output during 2H25, anticipating mid-single-digit growth due to normalized weather conditions. Spot CPO prices in 1Q25 dipped 3% QoQ to MYR4,713/tonne but surged 18% YoY. PK prices, meanwhile, rose 4% QoQ to MYR3,629/tonne and a significant 62% YoY.

Malaysian palm oil (PO) inventory increased 7% month-on-month (MoM) to 1.99 million tonnes in May, despite higher exports (+26% MoM), driven by a 5% MoM rise in output. RHB expects output to continue ramping up towards the peak season, while demand should also improve as CPO prices currently trade at significant discounts compared to competing oils.

Indonesian planters under RHB’s coverage saw an average 21.6% QoQ decline in output but a strong 6.4% YoY output growth in 1Q25. This robust YoY recovery is attributed to a recovery post-El Nino impact, which affected productivity in the first nine months of 2024. Indonesian players are projecting a stronger output recovery in 2025, with most expecting mid-single-digit to high-single-digit growth. In Indonesia, CPO prices (net of taxes) decreased 5% QoQ but rose 8% YoY in 1Q25.

For Indonesian planters with downstream operations, margins declined QoQ in 1Q25, despite a slightly larger tax differential between upstream and downstream products. Conversely, Malaysian planters with downstream operations saw their margins grow QoQ. This trend is expected to reverse in 2Q25, with downstream EBIT margins for Malaysian planters likely to contract again as Indonesia’s increased levy takes effect in May 2025, while Indonesian planters’ margins are anticipated to improve QoQ.

RHB Research reiterated its “OVERWEIGHT” rating for the sector, noting that no changes were made to their recommendations during the 1Q25 reporting season.

https://www.businesstoday.com.my/2025/06/11/plantation-sector-expected-to-continue-its-1q-momentum/