KUALA LUMPUR: The demand for crude palm oil (CPO) is expected to remain stable in the long term, according to Sime Darby Plantation Bhd.
Group managing director Datuk Mohamad Helmy Othman Basha said short-term fluctuations may occur due to temporary increases in stockpiles in major importing countries.
He added that SD Plantation is aware of persistent geopolitical risks and forecasts indicating a slowdown in global economic growth, which could impact demand.
"Unpredictable weather conditions are likely to raise supply concerns for vegetable oils globally.
"This in turn is anticipated to provide favourable support for CPO prices in 2024," he said during SD Plantation's financial performance announcement today.
Mohamad Helmy expects CPO prices to average between RM3,700 and RM3,900 per tonne this year amid the El Niño and La Nina challenges.
With the improved labour situation and rehabilitation of its Malaysian upstream operations, the group is optimistic that its fresh fruit bunch (FFB) production growth will sustain in 2024.
While SD Plantation continues its operational improvement efforts, it actively seeks strategic collaborative opportunities to advocate for positive change in the industry.
The company remains positive as it looks ahead to another satisfactory performance in the financial year 2024 (FY24).
SD Plantation's net profit fell 64.4 per cent to RM200 million in the fourth quarter ended Dec 31, 2023 (4Q23) from RM562 million a year ago.
This was primarily due to lower recurring profits, although it was partially offset by profits from non-recurring activities, the company said in a filing to Bursa Malaysia today.
Revenue for the quarter fell 6.9 per cent to RM5.28 million from RM5.67 million previously.
Its earnings per share declined to 2.90 sen from 8.10 sen in 4Q22.
For the full year, SD Plantation's net profit fell 25.24 per cent to RM1.86 billion from RM2.49 billion a year ago, while annual revenue declined 12.37 per cent to RM18.43 billion from RM21.03 billion in FY22.
It declared a final dividend of 6.05 sen per share for FY23.
This, together with the interim dividend of 3.25 sen per share and special interim dividend of 5.70 sen per share, translates to a total single tier dividend of 15 sen per share.
According to SD Plantation, its Malaysian upstream operations registered a 45 per cent year-on-year (YoY) increase in FFB production due to intensive rehabilitation efforts, with the steady return of foreign harvesters to Malaysia.
The strong performance led to a 15 per cent and six per cent YoY increase in overall FFB production for the in 4Q23 and FY23 respectively.
The higher overall FFB production helped mitigate the impact of lower average realised CPO and palm kernel (PK) prices recorded in 4Q23.
It noted that CPO prices declined by eight per cent YoY to an average of RM3,688 per metric tonne (MT) as compared to RM4,005 per tonne, while average realised PK prices declined marginally by one per cent YoY to RM1,742 per tonne from RM1,756 in 4Q22.
Meanwhile, Sime Darby Oils (SDO), the group's downstream operations, recorded a two-fold increase in its profit before interest and tax (PBIT) to RM183 million in 4Q23, an increase from RM89 million recorded in the previous corresponding quarter.
SDO's strong performance was supported by its European operations which mitigated the impact of lower margins in its Asia Pacific operations.
Mohamad Helmy said he is proud of the company's achievements in 2023, which included the successful turnaround of its Malaysian upstream operations.
"We became the first palm oil company in the world to have its net-zero targets approved by the Science Based Targets initiative (SBTi).
"These achievements are evidence of our continued commitment to our key strategic pillars for growth and long-term success, sustainability, operational excellence and innovation," he added.