05/12/2012 (Bernama) - The earnings of plantation companies is expected to recover in the first quarter of 2013 as the price of crude palm oil (CPO)regains its footing in the early part of the new year.

An analyst with a local research house told Bernama that for the rest of this year, the earnings would likely remain on a downtrend in the face of the subdued CPO price.

"The plantation counter in the fourth quarter is quite depressing due to the weakening CPO price. Between October and November, the CPO traded between RM2,100 and RM2,200 per metric tonne, which was lower than previously," said the analyst.

The plantation index fell 34.67 points to 7,890.62 points at the close of trading on Bursa Malaysia Tuesday.

Among plantation stocks, IOI Corp Bhd eased nine sen to RM4.84 and Felda Global Ventures Holdings Bhd rose two sen to RM4.61, while Kuala Lumpur Kepong Bhd was up two sen to RM20.70.

"There are two key factors that will boost the CPO price in early 2013. They are the lower production of palm oil between January to March and the new tax structure for palm oil to be implemented from Jan 1," said the analyst.

The government will reduce CPO export taxes and discontinue a tax free shipment quota beginning Jan 1, as the country is looking to strengthen its market share and increase competitiveness among refiners.

There is still room for the share prices of plantation stocks to drop further due to the threat of earnings going "off the cliff" in the next earnings result season in February 2013, said Kenanga Investment Bank Bhd.

The investment bank said the earnings of plantation companies is poised to fall at least 20 per cent in the fourth quarter of this year due to a lower selling price for the commodity.

"The high investory at more than two million metric tonnes might continue throughout the first quarter 2013 and keep the CPO price upside limited to below RM3,000 per metric tonne.

"The high CPO discount against soybean oil might linger on for another three months as the northern hemisphere will be entering the winter season soon.

"As palm oil tends to solidify in cold temperatures, consumers may prefer to use rapeseed oil and soybean oil despite the higher price against palm oil," it added.