KUALA LUMPUR (May 24): Genting Plantations Bhd's net profit for the first quarter ended March 31, 2023 (1QFY2023) fell 66.73% to RM38.81 million or 4.33 sen per share from RM116.64 million or 13 sen per share a year ago, as cost of sales spiked.

Revenue increased slightly to RM584.25 million during the quarter, from RM530.43 million in 1QFY2022, thanks to higher sales volume reported by its downstream manufacturing segment, which offset the lower palm product prices, according to its Bursa Malaysia filing.

"Although FFB [fresh fruit bunch] production in 1Q2023 has shown some recovery compared to the previous year, the group's operations in several regions were still adversely affected by the third consecutive year of La Nina, while replanting activities continued to be carried out extensively in Malaysia," it said in a separate statement.

The group said its downstream manufacturing segment saw its earnings before interest, tax, depreciation and amortisation (Ebitda) rising year-on-year (y-o-y) due to higher sales volume, while the Ebitda of its property segment also rose in tandem with higher sales and revenue.

Meanwhile, its plantation segment achieved crude palm oil prices of RM3,585 per metric tonne (MT) and palm kernel prices of RM1,983 per MT, which was lower than the prices in 1QFY2022, resulting in lower Ebitda y-o-y, whereas its agtech segment reported bigger losses on lower revenue and higher operating expenses.

"The group’s prospects for the rest of the year will track the performance of its mainstay plantation segment, which is in turn dependent principally on the movements in palm products prices and the group’s FFB production.

"In the short run, the palm products prices are under pressure as prices of other edible oils namely sunflower and soya oil have been on a declining trend due to better harvest, compounded by downbeat economic prospects in several major economies.

"Nevertheless, palm products prices could still see some support by supply pressure from lower than anticipated cropping in Indonesia and Malaysia, while palm oil inventory levels in both countries have also declined considerably in recent months," it said.

The group expects moderate growth for the rest of the year, thanks to more harvesting areas and progression of existing mature areas into higher yielding brackets in Indonesia, while production growth may be limited by ongoing replanting activities in Malaysia.

The group also highlighted its upcoming foray into industrial properties, namely a new development in Bandar Genting Pura Kencana, Johor, and the continued growth of its premium outlets in Johor and Genting.

Meanwhile, its agtech segment will continue to expand the application of solutions for the group's estates to enhance their operating efficiency, enabling traceability and enhancing sustainability.

"The downstream manufacturing segment is anticipated to face headwinds for its refined palm products with the declining prices of sunflower and soya oil, as well as increased competition with the Indonesian government relaxing its export restriction on palm oil.

"On the other hand, the segment’s palm-based biodiesel will cater mainly for Malaysian biodiesel mandate, as biodiesel exports remain challenging pursuant to the phasing out of palm oil in European Union's biofuel policies, in addition to the current premium pricing of palm oil," it said.

Genting Plantations closed five sen or 0.83% higher at RM6.06, for a market capitalisation of RM5.44 billion.