18/11/2010 (AGRI MONEY) - Buoyant palm oil prices have staved off a profits miss at Anglo-Eastern Plantations, after the hangover from dry weather last year cut the productivity of its plantations.

The Indonesian-based company, which is listed in London, said that palm fruit yields from its 50,000 hectares of developed plantations had fallen below expectations in the first nine months of the year, leading to a 6% slide in palm oil production.

"Changing and extreme weather patterns across the region last year and earlier this year has resulted in biological tree stress," Anglo-Eastern said.

The group has previously acknowledged that the hilly terrain of its Bengkulu estates, the company's biggest holding in terms of mature trees, made it more vulnerable to the droughts caused in 2006 and 2007 by the El Nino weather pattern, which also struck last year.

Palm takings surge
Nonetheless, the company said it was on track to hit internal revenue and profit expectations, thanks to strength in palm oil prices, which hit a two-year high of 3,452 ringgit a tonne in Kuala Lumpur last week.

The price that Anglo-Eastern has achieved for its palm oil was, at $826 a tonne, 22% higher in the first nine months of the year than in the same period of 2009.

"Lower fresh [palm] fruit bunch production and the weaker dollar are the principal drivers behind the increase," the company said. A weaker dollar makes assets denominated in it more affordable to buyers in other currencies.

The United Nations, in a report on Wednesday forecasting palm oil supplies would reach a "critically low" level, also noted the role of poor global rapeseed and sunflower harvests in curbing production of vegetable oils.

Planting delays
Anglo-Eastern added that poor weather this year, when the La Nina weather pattern has brought flooding to many areas of South East Asia, had hindered efforts to plant on the rest of its land bank, which totals 141,000 hectares.

"New plantings remained behind schedule," the company said.

Nonetheless, it said it was "confident of reporting a satisfactory level of profitability and cash flow generation" for the rest of 2010.

Anglo-Eastern shares closed down 2.9% at 585p.

In Kuala Lumpur, palm oil closed up 1.6% at 3,318 ringgit ($1,055) a tonne, helped by a firm performance by other commodities, and recovering from early weakness blamed on lingering concerns over a clampdown on food prices by China, which vies with india to be the biggest buyer of vegetable oils.