United Plantations' 1Q net profit falls 20.2% to RM59.7m

KUALA LUMPUR (April 26): A sharp 121% increase in windfall tax of RM20.4 million reduced United Plantations Bhd's net profit by a fifth to RM59.69 million in the first quarter ended March 31, 2022 (1QFY22) from RM74.83 million in the year-ago period.

Earnings per share declined to 14.39 sen from 18.04 sen, its Bursa Malaysia filing showed on Tuesday (April 26).

Quarterly revenue, however, increased by 60.87% to RM642.91 million compared with RM399.65 million, due to revenue increases in the plantation and refinery segments.

On a quarterly basis, the plantation group's net profit tumbled by 61.1% from RM154.15 million in the immediate preceding quarter (4QFY21) while revenue jumped by 22.34% from RM525.50 million in 4QFY21.

Moving forward, the group said it will continue to replant areas of its older and less productive oil palm stands in Malaysia this year.

It projects crude palm oil prices to trend higher due to the Ukraine-Russia war and concerns that global vegetable oil supply will remain tight combined with a pickup in demand from India and China as lower national inventories need to be replenished.

"Cost efficiencies and improved productivity including optimising all possible steps of mechanisation will continue as a vital part of sustaining our positive development going forward.

"Based on the increased palm oil prices and the company's ability to minimise any significant crop losses so far in spite of the acute labour shortages, the board of directors expects that the results for the year will be satisfactory and better than in 2021," the group stated.

Meanwhile, United Plantations warned that if the government does not provide an urgent yet safe avenue to recruit guest workers, it will become impossible to avoid serious crop losses in 2022 as the acute labour shortage have now reached a breaking point in several plantation companies.

It said even though the government had introduced the recruitment of guest workers into Malaysia, the main challenge for the plantation sector is to onboard these workers as expeditiously as possible including the steps required to provide them with work permits, vaccinations and other important pre-conditions before work can proceed.

"It is therefore not a measure that will create relief in 2Q 2022 and at best case, the industry will only likely feel the positive impact of this by the end of 1Q 2023,” it said.

United Plantations also said edible oil supplies, including palm oil remain tight and most edible oil markets are in an inverse market structure with high prices in the spot month and large discounts on the forward months.

“Palm oil prices have been rising during the first quarter of 2022 and reached a high of RM8,000per tonne on the spot month position. On the third month position, CPO prices have risen from RM4,700 per tonne in January to around RM6,250 per tonne currently,” it added.

Shares in United Plantations settled 12 sen or 0.72% higher at RM16.90 on Tuesday, giving it a market capitalisation of RM7.03 billion.