KUALA LUMPUR (April 24): United Plantations Bhd’s (UP) net profit grew 18.54% year-on-year to RM132.87 million for the first quarter ended March 31, 2024 (1QFY2024), mainly due to a sharp drop in finance cost, on the back of slightly higher revenue, thanks to higher crude palm oil (CPO) and palm kernel (PK) prices.

The plantation group stated in a bourse filing that its revenue grew 3.64% to RM476.75 million, from RM459.99 million a year earlier, due to increases in revenues for the plantation and refinery segments, as a result of higher CPO and PK prices.

The group’s profit before tax of RM178.4 million for the latest quarter was 18.9% higher than RM150 million a year ago, mainly due to higher contributions from the plantation segment.

According to UP, CPO prices have recovered — from a low of RM3,067 in early January to a high of RM4,197 in late March — due to lower-than-expected production in Malaysia and Indonesia, resulting in lower stocks, and also a reduction in Brazil’s estimated soybean production.

This halted the bearish trend in soybean prices, which in turn supported the positive price trend in CPO prices.

Going forward, UP will be watching the impact of weather conditions on total palm oil production of its Malaysian operations.

“Weather has been good. Combined with an improved labour situation within the plantation sector, it is expected that production [in Malaysia] will increase in the forthcoming quarter.

“This could put pressure on prices. However, much will depend on the severity of the forthcoming dry season this May to September, which management will be monitoring closely,” said the group.

Another factor that will influence both the equity and commodity prices is the assessment of global economic growth for the remainder of 2024, not least the speculation on possible interest rate cuts in the US and the development of the Chinese economy.

The escalation of geopolitical conflicts and their impact on global supply chains, which will affect business and consumer spending and ultimately determine demand for vegetable oils and fats, are also factors that will influence commodity prices, the group said.

“Amid the global uncertainties and challenges, we continue to focus on our field operations by taking steps to improve on our yields, costs and productivity. This aim is pursued through ongoing mechanisation initiatives, and through the replanting of older, less productive oil palm stands with our latest in-house produced superior planting materials.

“These efforts are vital to our ability to remain competitive and profitable, as increasing labour costs, [and costs of] energy, fertilisers, chemicals and building materials, are expected to remain at high levels, thereby exerting upward pressure on our cost base,” said UP.

The board of directors expects UP's FY2024 results to be satisfactory, based on current palm oil prices and the company’s focus on securing the budgeted crop in the remaining part of the year.

Shares in UP climbed to a record high of RM26.48 in early trade on Wednesday. The counter later pared gains to close at RM26.10, still up 34 sen or 1.32%, pushing its market capitalisation to RM10.86 billion. It is trading at a price-earnings ratio of 15.3 times.

The counter has surged over 46% year-to-date, and 57% in the past year.