BOUSTEAD Plantations Bhd is implementing various measures to enhance its operational efficiency to offset the impact of lower crude palm oil (CPO) prices.
Vice-chairman Tan Sri Lodin Wok Kamaruddin said the upstream oil palm plantation company expected its earnings to be affected by lower CPO prices from the third quarter of this year.
“The challenge is how much the prices will go down. With various actions taken by our group, we hope the measures can improve our efficiency in operations, production and yield,” Lodin told NST Business recently.
“We expect the CPO prices to remain between RM2,400 and RM2,800 per tonne until the third quarter of this year.”
He said Boustead Plantations was able to get healthy returns from its plantation operations in the last five months.
“Even if there is a decline in earnings, overall we expect our financial performance this year to be better than last year.”
The company is focusing on improving its operational cost with the introduction of a better system for planting, application of fertilisers and managing the estates.
“We believe we can reduce the cost of production further to mitigate some of the impacts on the expected reduction in CPO prices towards the later part of this year.
“Efficiency in managing the estates is equally important to get better yields and higher production,” said Lodin.
Boustead Plantations expects higher CPO production to continue from next month until early next year.
For the first quarter ended March 31, its revenue surged 38.1 per cent to RM189 million from RM136.9 million recorded in the same period a year ago. This was attributed to buoyant palm product prices and better crop production.
Profit increased 2.6 per cent to RM43.7 million from RM42.6 million previously.
Boustead Plantations announced a first interim dividend of 2.5 sen per share payable on Friday.
Lodin said the improved first-quarter result was due to higher palm product selling prices and improved crop production.
“As crops recover from the effects of the El Nino phenomenon, the uptrend is expected to continue. However, CPO prices will likely be mitigated by the bumper crop of soyabean in the United States and South America, coupled with growing pressures on biodiesel supplies to the United States and Europe as well as low crude oil prices,” he added.
Lodin said the market was expected to remain challenging in the second half of this year, with the possibility of higher CPO production which could result in a build-up of inventories.
As of April, its CPO inventory stood at about 1.6 million tonnes compared with 2.6 million tonnes a year ago.
Lodin said the low inventory was due to encouraging demand in the last few months as consumers added more stockpile in preparation for festivities such as Hari Raya and Deepavali.
“The demand had been quite good for the last five months, which prompted the price to move up to about RM3,300 per tonne.
“Most plantation companies have been able to register higher price average this year compared with last year.”
He also said the ringgit fluctuation would affect its revenue contribution as CPO trading was done in the US dollar.