Sarawak Oil Palms’ minimal forward position main factor behind stellar 1H profit
29/08/2022 (Borneo Post Online), Kuching - Sarawak Oil Palms Bhd’s (Sarawak Oil Palms) minimal forward position was a main factor behind its stellar profit in the first half of 2022 (1H22), which analysts believe enabled it to benefit from higher crude palm oil (CPO) spot prices.
“The main culprit – the labour shortage – has not improved much, and remains at 30 to 35 per cent levels.”
RHB Research gathered that Sarawak Oil Palms partly alleviates this issue by reallocating more workers to high-yield areas, as well as hiring contract workers for maintenance and upkeep work.
“Management believes this shortage will only be resolved by end-2H22.
“However, if this is prolonged and the influx of workers gets delayed, the company may again not be able to fully benefit from the peak season.”
That said, the research firm made no changes to its FFB growth, on the assumption that output will pick up in 2H.
Meanwhile, RHB Research opined that the group will face challenging quarters ahead for downstream segment.
Although no disclosures were given, the research firm believed downstream margins remained stable, given the high utilisation at around 80 per cent.
“However, margin compression may be likely in an environment of falling prices, given the higher cost of feedstock bought (this is processed one to two months later, at lower prices).
“We remain optimistic on this segment, as Sarawak Oil Palms’ downstream expansion is set to be completed in 2H22 – where the focus is on producing higher-quality, tailored refined products for customers.”