CEO Morning Brief

FGV’s 3Q Net Profit Falls 86.8% on Lower CPO Prices

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Publish date: Thu, 30 Nov 2023, 08:42 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 29): FGV Holdings Bhd posted an 86.8% decrease in net profit for its third quarter ended Sept 30, 2023 (3QFY2023) to RM31.98 million, from RM241.67 million a year ago (3QFY2022), owing to a significant fall in profit contribution from its plantation segment.

In a bourse filing on Wednesday, the plantation group said its quarterly revenue fell 20.6% to RM4.91 billion versus RM6.18 billion previously, on the back of lower crude palm oil (CPO) realised prices.

No dividends were declared for the quarter.

The group’s core business, its plantation segment, posted a 74.3% fall in gross profit to RM110.97 million from RM431.41 million in 3QFY2022, as average realised CPO prices dropped to RM3,879 per metric tonne (MT) from RM4,830 per MT previously. CPO sales volume was also 12% lower year-on-year, while there was a 25% increase in CPO production costs ex-mill.

“The sector’s results were further brought down by the lower margin achieved in downstream business and share of loss results in joint ventures of RM9.55 million, compared to a share of profit of RM10.77 million in the corresponding quarter of the previous year. Fair value charge on LLA (land lease agreement) was higher at RM67.12 million, compared to RM51.35 million in the corresponding quarter of the previous year,” it said.

“Operationally, fresh fruit bunches (FFB) production reduced to one million MTs from 1.07 million MTs, while yield decreased to 3.73 MTs per hectare from 3.93 MTs per hectare in the corresponding quarter of the previous year,” it added.

FGV was more bullish about the quarter ahead, as it projected CPO prices of between RM3,800 per MT to RM4,000 per MT.

“This positive trajectory is supported by the anticipated impact of El Niño, heightened demand in India driven by Diwali restocking activities, and the expanding palm biodiesel industry, all contributing to a bolstered price environment.

“Although production costs are expected to remain elevated, a potential moderation is foreseen due to lower fertiliser and energy prices,” it said.

Barring any unforeseen circumstances, FGV said it anticipates to achieve a satisfactory financial performance.

At the time of writing on Wednesday, FGV shares were unchanged at RM1.37, giving the group a market capitalisation of RM4.96 billion.

Source: TheEdge - 30 Nov 2023

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