CEO Morning Brief

TSH's 1Q Profit Up Six Times Over on Stronger Palm Product Prices, Disposal Gain

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Publish date: Wed, 25 May 2022, 08:40 AM
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TheEdge CEO Morning Brief
TSH's 1Q profit up six times over on stronger palm product prices, disposal gain

KUALA LUMPUR (May 24): TSH Resources Bhd's profit surged to RM101.86 million for the first quarter ended March 31, 2022 (1QFY22), over 6.5 times the RM15.57 million it recorded in the same quarter last year, thanks to higher palm product prices and gains from the disposal of an estate and palm oil mill, partially offset by lower sales volume.

The planter's revenue grew 38.21% to RM337.35 million from RM244.08 million, its bourse filing showed. Earnings per share jumped to 6.99 sen from 1.51 sen. The Sabah-based company did not declare any dividend.

The group said 92.57% of its group revenue was contributed by its palm products segment, from which it gained a profit of RM129.41 million — more than double the RM61.14 million it achieved in 1QFY21. Excluding the pre-tax disposal gain of RM53.2 million, the palm products segment's profit would have come in at RM76.2 million, as significantly higher average selling prices (ASPs) of crude palm oil and palm kernel lifted earnings.

According to TSH, the ASP of CPO came in at RM4,779 per metric tonne (MT), up 59% from RM3,007 per MT recorded in 1Q2021, while the ASP for PK rose 87% to RM3,950 per MT, from RM2,112 per MT.

The group's fresh fruit bunch production, however, was down 13% to 197,947 MT from 228,188 MT previously, mainly due to wet weather conditions in Indonesia.

The rest of the group's revenue came from its "others" segment, under which it sells electricity generated from a biomass power plant. This segment reported a loss of RM4.3 million for 1QFY22, compared with a profit of RM700,000 in 1QFY21, as the sale of electricity from the power plant was discontinued during 3QFY21, following the expiry of a power purchase agreement.

"A new power purchase agreement has since been executed and the supply of electricity by the biomass power plant recommended in March 2022," it added.

Moving forward, TSH anticipates that the CPO price will remain elevated, supported by the higher price of edible oils because of supply concerns arising from the Russia-Ukraine conflict, and the lack of rain in two major exporting countries of soybean — Argentina and Brazil — which will put pressure on the price of soybean oil.

In addition, restrained hectarage growth in oil palm planting over the last few years due to regulations imposed by the Roundtable on Sustainable Palm Oil (RSPO) and the Indonesian government’s moratorium on deforestation will have an impact over the global palm oil supply.

As such, the board is optimistic of achieving satisfactory performance for the year 2022, as it anticipates stronger demand for palm products, the group's core earnings contributor.

TSH’s share price finished 1 sen or 0.7% higher at RM1.44 on Tuesday (May 24), bringing a market capitalisation of about RM1.99 billion.

Source: TheEdge - 25 May 2022

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