Higher production costs dragged Hap Seng Plantations’ 3Q net profit down by 57%

KUALA LUMPUR (Nov 23): Hap Seng Plantations Holdings Bhd registered a net profit of RM22.88 million in the third quarter ended Sept 30, 2022 (3QFY22), a 56.78% decline from RM52.93 million registered in the same quarter last year.

As a result, the plantation group’s earnings per share (EPS) fell to 2.86 sen per share in 3QFY22, compared with 6.62 sen per share in the corresponding quarter.

The drop in net profit was mainly due to higher production costs as a result of higher fertilizer and diesel costs, as well as an increase in minimum wage, the group said in its filings with Bursa Malaysia on Wednesday (Nov 23).

Loss from fair value adjustments of biological assets of RM24.2 million during the quarter, as compared to a gain of RM2.6 million in the corresponding quarter, also contributed to the lower financial performance, the group stated.

The fall in earnings was despite its quarterly revenue increasing 4.81% to RM181.99 million, from RM173.63 million in 3QFY21. Higher average selling prices (ASP) of crude palm oil during the quarter had pushed the group’s revenue upwards.

Nevertheless, Hap Seng Plantations are still in a better position this year than the previous year.

For the nine months ended Sept 30 (9MFY22), the group’s net profit grew 47.59% to RM191.45 million from RM129.72 million, having benefitted mainly from higher ASPs for all palm products in the first half of the year.

Revenue for 9MFY22 also expanded 40.96% to RM671 million, from RM476.02 million.

Accordingly, basic EPS year-to-date at 23.94 sen was 48% above the preceding year’s corresponding period of 16.22 sen.

Hap Seng Plantations noted that its higher earnings in 9MFY22 also included a gain of RM18.8 million and RM26.5 million (net of real property gains tax of RM7.8 million and reversal of deferred tax of RM15.5 million) respectively, arising from the completion of its wholly-owned subsidiary Hap Seng Plantations (Ladang Kawa) Sdn Bhd.

On prospects, Hap Seng Plantations said that the higher fertiliser prices and increase in the minimum wage to RM1,500 with effect from May 1, continue to push production costs higher.

To mitigate this, the group is focused on improving fresh fruit bunch yield and extraction rates, while making concerted efforts to improve overall cost efficiencies.

Additionally, it expects results for the rest of the financial year to be influenced by movements in commodities prices, rising production costs, uncertainties in global economies and the global shift from the Covid-19 pandemic to the endemic stage.

Hap Seng Plantations shares closed down one sen or 0.50% to RM2.01 on Wednesday, valuing the group at RM1.61 billion.