United Plantations 1Q net profit surges 87.7% boosted by turnaround at refinery segment

KUALA LUMPUR (April 27): United Plantations Bhd said its first quarter net profit surged 87.78% to RM112.1 million from RM59.69 million a year earlier, helped by a turnaround in its refinery segment's earnings.

The Perak-based group's earnings per share rose to 27.02 sen for the first quarter ended March 31, 2023 (1QFY23), from 14.39 sen previously.

Quarterly revenue, however, slipped 28.45% to RM459.1 million from RM642.91 million, due to lower revenues from both its plantation and refinery segments.

The group did not declare any dividend during the quarter.

In its filing with Bursa Malaysia, United Plantations said the lower revenue from the plantation segment was due to lower crude palm oil (CPO) and palm kernel (PK) production, and lower average prices.

The average CPO price was RM3,668 per tonne, down by 3.4% year-on-year (y-o-y), while the average PK price was RM1,998 per tonne, down by 33.2% y-o-y.

The production of CPO and PK also decreased by 6.9% and 9.3% y-o-y, respectively.

"The above-mentioned factors, together with higher costs of production in the current quarter as a result of higher fertiliser inputs, higher minimum wages and the new collective agreement which was concluded in the second half of 2022, resulted in the decrease of the profit before tax of this segment by 36.8% in the current quarter when compared to the corresponding quarter," the group said.

“As a result of lower production and significantly lower Malaysian Palm Oil Board (MPOB) CPO prices in the current quarter, the windfall tax incurred at RM6.1 million was 70.1% lower than the corresponding quarter,” it added.

United Plantations said its refinery segment posted a pre-tax profit of RM42.8 million in 1QFY23, from a pre-tax loss of RM91.5 million a year earlier, on the back of hedging gains realised through buyback of earlier sold futures.

The profit included the share of profit of its joint venture Unifuji Sdn Bhd, totalling RM0.99 million compared to a loss of RM0.84 million, in the same quarter last year, mainly due to higher product contribution.

United Plantations said it is mindful of the challenges that 2023 may bring, especially amid the uncertainties of high inflation and recession fears coupled with the ongoing Russia-Ukraine war and its impact on global supply chains.

“In addition, the cost of energy, fertilisers, chemicals, building materials and spare parts are expected to remain at high levels, resulting in our cost base increasing to its highest levels ever.

"Concerted efforts are therefore underway to alleviate these challenges by identifying areas that can improve our cost efficiencies without compromising on quality," it said.

While labour shortages and field operations have improved significantly, the group said special attention will continue to be given towards increasing yields and productivity.

“This will be pursued relentlessly through continued mechanisation efforts and replanting of the older and less productive oil palm stands in order to take full advantage of our latest superior planting materials produced at our research department as a vital part of sustaining our positive development," it added.

Based on the current palm oil prices and the group’s focus on securing the crop, the board of directors expect that the results for the full year will be satisfactory.

United Plantations shares finished two sen or 0.12% lower at RM16.74 each on Thursday (April 27), bringing the group a market capitalisation of RM6.97 billion.