KUALA LUMPUR: Sime Darby (SD) Plantation Bhd's second quarter profits ended June 2019 amounted to RM27 million while revenue stood at RM2.88 billion amid depressed crude palm oil and palm kernel prices.
For the six months period, SD Plantation posted RM101 million in profits on the back of RM5.88 billion in revenue.
There is no comparative for the quarter and half-year period due to the change in the financial year-end from June to December.
During the second quarter, SD Plantation said palm oil prices averaged at RM2,021 per tonne, 15 per cent lower than RM2,379 per tonne, a year ago. Similarly, palm kernel oil averaged at RM1,020 per tonne, 39 per cent lower than RM1,682 per tonne, previously.
In a media briefing here today, SD Plantation group managing director Mohamad Helmy Othman Basha admitted, with palm oil prices averaging at around RM2,000 per tonne, it has been challenging for his team operating oil palm estates across Malaysia, Indonesia, Papua New Guinea and Liberia.
In the past month, however, prices have been on an uptrend. "Palm oil prices have moved up slightly and is trading at around RM2,200 per tonne. We pray .. this price uptrend would continue and surpass RM2,300 per tonne."
"Even if prices were to only trade rangebound at RM2,200 per tonne until the end of the year, our upstream operations would become profitable, going forward," he told reporters in a briefing here today.
Today, the third month benchmark palm oil futures on the Malaysian Derivative Exchange rose RM13 to close at RM2,234 per tonne.
Also present at the briefing here were Sime Darby Oils managing director Mohd Haris Mohd Arshad, chief financial officer Renaka Ramachandran, chief advisor & value officer Datuk Franki Anthony Dass and chief strategy & innovation officer Dr Shariman Alwani Mohamed Nordin.
When asked for an update on Sime Darby Oils’ partnership with China's top food company Cofco Group Co Ltd, Haris replied for many decades, China has been a traditional market for Malaysian palm oil.
"So far, our partnership with Cofco has seen additional four shipments of olein to China. This is over and above our usual export of 100,000 to 150,000 tonnes of palm oil per year," Haris added.
Two weeks ago, Sime Darby Oils announced partnership with Abu Dhabi Vegetable Oil Company (ADVOC) to boost palm oil exports into the Middle East and North Africa region.
ADVOC is part of BRS Ventures conglomerate, which in turn is controlled by Indian-born billionaire Dr Bavaguthu Raghuram Shetty and his family.
Going forward, Haris expressed optimism of Sime Darby Oils' partnership with ADVOC exporting more higher-valued palm bakery fats, red palm olein and other specialty fats in these growing markets of the Middle East and North Africa.
SD Plantation, in its filing to the stock exchange, recorded a one-off gain of RM9 million from the sale completion of PT Mitra Austral Sejahtera. Helmy affirmed this sale is aligned with the group’s strategy to monetise non-performing assets.
Helmy went on to say SD Plantation will cut losses at Liberia and had already informed the government there of its plan to exit responsibly.
"The Liberian estate remains loss-making but we are quite confident that in the next few months we will exit in an appropriate manner.
“We have been present there for more than 10 years. So when we leave, we want to do so in the best way possible,” he said.
“We're currently in talks with three potential buyers for our Liberian estate, of which we've planted 10,500ha with oil palms. We hope to reach a positive outcome by the end of the year.
"If the talks do not work out, our last option would be to revert the concession to the Liberian government. The agreement does provide for some compensation," he added.