CPO Price Volatility Pushing Players Into Property, Renewables
07/03/2026 (Business Today) - Despite a five-year record in quarterly production, Kenanga Investment Bank has maintained a “Neutral” outlook on the Malaysian plantation sector. In its latest report, the research house highlighted a tug-of-war between robust harvest volumes and cooling crude palm oil (CPO) prices as the industry enters 2026.
While the 2025 financial year (CY25) ended on a high note—with upstream earnings jumping 14% year-on-year—the path ahead looks flatter as supply levels stabilise globally.
The fourth quarter of 2025 (4QCY25) delivered the strongest quarterly production in five years, allowing planters to lower their unit costs despite a 6% year-on-year dip in CPO prices. The sector saw a 7% rise in revenue, driven by firm CPO prices (average +4%) and a significant 34% surge in Palm Kernel (PK) prices.
Kenanga warns of “seasonal slowness” in the first quarter of 2026. Higher labor, fertiliser, and energy costs are expected to squeeze margins as harvest volumes dip from their recent peaks.
The downstream segment (refining and oleochemicals) has endured a grueling year, with margins shrinking to a razor-thin 1% in CY25 due to aggressive capacity expansion in Indonesia. However, a recent 36% quarter-on-quarter earnings rebound in 4QCY25 suggests the worst may be over.
Analysts are keeping a close eye on the “specialty products” sub-sector, though new capacity is looming:
Johor Plantation-Fuji Oil: An integrated plant in Kota Tinggi is set to commence later in 2026.
KLK-AAK JV: A new facility in Pasir Gudang is scheduled for completion in late 2027 (revised from earlier estimates).
To mitigate the volatility of CPO prices, major players are aggressively diversifying into real estate and renewable energy. SD Guthrie (SDG), KLK, and Genting Plantations (GENP) are leading this push.
SDG recently recorded a lumpy RM490 million land disposal gain, and more frequent contributions from solar farms are expected. While IOI Corp is eyeing the future with its palm wood and EFB-to-pulp joint ventures, though meaningful contributions aren’t expected until CY27–28.
With CPO prices expected to hover around the RM4,100 per MT mark through 2026, Kenanga favours companies with strong organic growth or recovering trajectories: