21/05/2008 (The Star Online), Petaling Jaya - There is unlikely to be a slowdown in earnings for plantation companies, thanks to strong crude palm oil (CPO) prices.

“I believe the demand for palm oil is still there and prospects will continue to remain buoyant this year and the next,” an analyst told StarBiz.

He said compared with last year’s average CPO price of about RM2,418 per tonne, plantation companies were making “very good” profit margins at current prices.

CPO futures (August contract) closed at RM3,554 per tonne yesterday.

“Notwithstanding a world recession which could trigger a drop in demand, the sector is relatively stable,” said an analyst with a bank-backed brokerage.

She added, however, that potential changes in European Union policy on biofuel imports such as palm oil due to environmental concerns remained a challenge for the industry.

Meanwhile, plantation companies have so far been reporting a slew of strong results that reflect the buoyant CPO price.

Yesterday, Boustead Holdings Bhd reported a 140% jump in net profit to RM152.3mil, or 24.21 sen per share, for its first quarter ended March 31 against a net profit of RM63.4mil, or 10.59 sen per share, in the same quarter last year, mainly attributed to its plantation division.

The company declared an interim dividend of 5 sen per share.

In a statement, group managing director Tan Sri Datuk Lodin Wok Kamaruddin said: “This time around, the plantation division has done us proud by being the primary contributor to the group’s bottom line, delivering 45% of the group’s total profit for this quarter, amounting to RM104mil.”

This compares with RM32mil for the first quarter last year.

The statement added that the plantation division’s performance was due to the increase in CPO price, which averaged RM3,029 per tonne for the first quarter, up 61% year on year compared with the average of RM1,882 per tonne in the first quarter a year ago.

FFB production was also 5% higher at 309,895 tonnes.

Boustead’s heavy industries division was its second largest contributor, contributing a profit of RM68mil.

Another plantation outfit, Cepatwawasan Group Bhd, also posted good first quarter results last week, recording a 268% jump in net profit to RM14.7mil against RM4mil for the same quarter a year earlier.

Among planters, IOI Corp Bhd reported a more than 80% jump in plantation operating profit to RM434.8mil in the quarter ended March compared with the corresponding quarter last year while United Plantations Bhd’s net profit leapt 194% to RM68.9mil for its first quarter against that in the same quarter in 2007.