TH Plantations’ Q3 net loss due to lower prices

PETALING JAYA: TH Plantations Bhd suffered a net loss of RM19.80 million during the third quarter ended Sept 30, 2018 compared with a net profit of RM15 million a year ago due to lower prices of crude palm oil (CPO) and palm kernel (PK).

The group said in a statement, the average realised CPO price recorded for the quarter was RM2,095 per metric tonne, which was 18% lower than the price recorded a year ago while the average realised PK price was RM1,724 per metric tonne, 22% lower than a year ago.

The group said that profit margins were significantly squeezed by lower prices and volumes during the quarter. In addition, it did not recognise any fair value in forestry during the quarter.

“Additionally, lower fresh fruit bunches (FFB) production (down by 4% from the corresponding period) and CPO production (down by 5%) as well as weaker sales (CPO sales down by 11% while PK sales down by 18%) also negatively impacted revenue,” it said.

Revenue for the quarter fell 25.57% to RM140.91 million from RM189.31 million a year ago due to lower average realised prices of CPO, PK and FFB as well as lower sales volume of CPO and PK.

For the nine months ended Sept 30, 2018, the group posted a net loss of RM16.37 million compared with a net profit of RM50.68 million a year ago while revenue fell 21.47% to RM400.70 million from RM510.27 million a year ago.

During the period, the group’s FFB production rose 4% but this was offset by the 18% drop in average realised CPO prices against last year and 24% drop in average realised PK prices. CPO and PK sales volumes also fell by 5% and 11% respectively.

“The group’s bottom line was also negatively impacted by lower fair value on government grant as well as lower fair value change, both for the group’s forestry assets, which collectively led to a variance of almost RM20 million to its year-to-date profit at operating level,” it said.

TH Plantations CFO Mohamed Azman Shah Ishak said the industry is seeing a repeat of the challenging operating conditions that plagued the industry about two to three years ago, with unfavourable market dynamics pushing prices lower while the high stockpile has exacerbated the low price environment.

“On top of these, the industry continues to grapple with labour issues and higher wages, pressure as well as stiff competition from other vegetable oils. TH Plantations, as a pure upstream player, is visibly more affected by the current challenges,” he added.

Improved production and across the industry have led to a surge in CPO stock levels in the country, which may delay the recovery of palm product prices.

The group expects prices to remain range-bound in the near-term, causing continued pressure on profit margins for the industry, particularly when stock levels peak in November and December 2018.

However, demand is expected to pick up in 2019, driven by higher exports to .

Source: The Sun Daily

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