United Plantations posts its best quarterly profit, declares 40 sen dividend
07/11/2022 (The Edge Markets), Kuala Lumpur - United Plantations Bhd's net profit for the third quarter ended Sept 30, 2022 (3QFY22) jumped 27.62% to RM196.72 million — its best quarterly net profit to date — from RM154.15 million in the same period last year, thanks to elevated crude palm oil (CPO) and palm kernel (PK) prices.
Revenue for the quarter under review climbed 23.62% to RM649.62 million from RM525.5 million, the plantation group's Bursa Malaysia filing showed.
Earnings per share advanced to 47.43 sen from 37.16 sen. The group declared an interim dividend of 40 sen per share, to be paid on Dec 5, with an ex-date of Nov 18.
For the cumulative first nine months of FY22, United Plantations' net profit grew 20.9% to RM441.05 million from RM364.76 million, as revenue jumped 41.7% to RM1.99 billion from RM1.41 billion, due to increases from its major segment of plantation (up 23.1%) and its refinery business (up 50.9%).
Average CPO price was RM3,839 per metric tonne (MT) during the period under review, up 25.7% year-on-year (y-o-y), whereas average PK price was RM2,905 per MT, up 38.9% y-o-y.
"CPO production was lower by 1.3%, whereas PK production was marginally higher by 0.9% in the current period. As a result of higher fertiliser prices, higher minimum wages and the newly concluded collective agreement, the cost of production of CPO and PK were 44.6% and 26.6% higher. With CPO price surging to more than RM7,500 per MT before correcting to RM3,418 per MT as at Sept 30, 2022, windfall tax increased by 46.7% to RM55.5 million in the current period from the corresponding period," it noted.
As for the refinery segment, profit before tax (PBT) saw a significant recovery in 3QFY22, surging 397.8% y-o-y to RM112.7 million from RM22.6 million, due to the recovery of a significant part of the hedging losses incurred in the previous quarters with the deliveries of finished goods produced with cheaper raw materials. The PBT also included its share of profit from joint venture Unifuji Sdn Bhd, which recorded a profit of RM2.96 million versus a loss of RM300,000 previously.
United Plantations said commodity prices in 3QFY22 reached new lows for the year, as they continued the fall from historic highs experienced during the first half of 2022 amid a bearish economic outlook, combined with the ongoing conflict between Russia and Ukraine.
"CPO prices for the third-month benchmark contract plunged to near 20-month lows of RM3,220 in September, weighed down by erosion in the external vegetable oil markets amid the bearish global market sentiment. The seasonal higher yields and rising stocks reaching a new high for the year in Malaysia and Indonesia's decision to remove the export levy and reduce export taxes also impacted global palm prices negatively as supply into the world market improved.
"However, recent concerns on supply constraints due to wetter weather in Malaysia and parts of Indonesia combined with the huge price discount of palm oil versus competing oils and the weak ringgit against the US dollar led to stronger buying activities thereby reversing the bearish sentiments," said United Plantations.
As a result of this, CPO prices rebounded from the recent lows edging above RM4,000 per MT for the third-month benchmark contract.
On the local front, United Plantations said labour shortages experienced in Malaysia have also turned the corner with the government finally opening up avenues for recruitment to take place. "This will nevertheless not create much relief in 2022 due to the prolonged onboarding process and in the best case, the industry will only feel the positive impact of this during the first quarter of 2023," it added.
United Plantations' share price settled 10 sen or 0.7% higher at RM14.34 on Monday (Nov 7), bringing the group a market capitalisation of RM5.97 billion.