KUALA LUMPUR: Sime Darby Plantation Bhd (SDPlant) expects weaker crude palm oil (CPO) demand from China due to the Covid-19 outbreak.
Group managing director Mohamad Helmy Othman Basha said demand from China has ‘dried up’ and that has put pressure on CPO prices.
“However, we do not sell that (CPO) much to China but rather mainly to India. We had one shipment in January this year to China. We did not face problem (delay or deferment) at ports in China,” he said at a press conference after announcing the company’s full-year financial year results here today.
He said SDPlant sold over 100,000 tonnes of CPO to China last year from a production of 2.5 million tonnes of CPO.
However, the negative impact to CPO prices would be cushioned by higher biodiesel mandates in Indonesia and Malaysia.
On the ongoing Malaysia-India trade spat, he said there will be little impact on SDPlant, as the group able to exports palm oil from its Indonesian operation.
“We operate from both Malaysia and Indonesia, it is an advantage for us,” he added.
Mohamad Helmy said a comfortable CPO prices will be between RM2,500 and RM2,600 this year.
Meanwhile, he said SDPlant is expected to gain about RM500 million from its joint-venture exit in oleochemicals business by the financial year ending December 31, 2020 (FY20).
Earlier in January, SDPlant divested its entire stake in Sime Darby Plantation (Liberia) Inc to Mano Palm Oil Industries Ltd due to various operating challenges.
He said the expectation of a slowdown in crop production in Malaysia and Indonesia has resulted in the price recovery of palm products this year.
However, the rise in prices is expected to me moderated over concerns on the global economic growth with the outbreak of the Covid-19.
Restrictions placed by India on imports of refined palm oil may have am impact on prices, while the biodiesel mandates in Indonesia and Malaysia are expected to keep palm product prices resilient in the near term.
SDPlant recorded a net profit of RM122 million for the financial year ended December 31, 2019 (FY19) from RM729 million previously, while revenue recorded at RM12.06 billion
It said the lower earnings were due to lower CPO and palm kernel prices, production fresh fruit bunches (FFB) production and sales volume.
For the fourth-quarter ended December 31, 2019, SDPlant incurred a net loss of RM45 million from a net profit of RM172 million previously due to a decline in FFB production and contribution from Sime Darby Oils downstream operations.
Its Q4 revenue at RM3.40 billion due to lower finance costs, resulted from higher capitalisation of borrowing costs, and lower tax expense in the quarter.
SDPlant changed its financial year end to December 31 from June 30 previously.