PETALING JAYA: Sime Darby Plantation Bhd’s net profit rose over four times to RM394 million for its first quarter ended March 31, 2020 against RM90 million reported in the corresponding period of the previous quarter attributed to a RM262 million gains on land disposal and contributions from both upstream and downstream segment.
Revenue for the period improved 1.5% to RM3.04 billion compared to RM3 billion reported previously.
Its upstream operations reported a higher profit before interest and tax (PBIT) of RM288 million for the quarter compared to RM103 million reported previously on the back of higher crude palm oil (CPO) and palm kernel (PK) averaged realised prices, unrealised gains from fair value commodity hedges of RM136 million attributed to decline in market prices since the start of the year and the increase in its oil extraction rate to 21.89%
Its downstream operations saw a PBIT of RM89 million, a 5% increase from RM85 million reported in the previous quarter attributed to higher profits of the refinery in Europe due to better sales margin and the fair value gain in commodity hedges for the period which compensated for the weaker performance in its Asia Pacific operations.
Sime Darby Plantation chairman Tan Sri A Ghani Othman said the group remains cognisant that it will continue to face a challenging environment as countries around the world grapple with the spread of the Covid-19 and manage the economic repercussions of the pandemic.
“While the group will not be insulated from the impact of this global crisis, we are fortunate to be operating in an industry that provides essential products to the world,” he said in a statement today.
Ghani pointed out that as a key ingredient for both food and non-food products, it is reassured that the demand for palm oil will remain intact in the long term.
He also believes that Sime Darby Plantation’s focus on value creation strategy and prudent cost management will continue to place its operations and finances in a satisfactory position to weather the challenges ahead.
Its managing director Mohamad Helmy Othman Basha said the group is prepared to embrace a “new normal” in mitigating the impact of the pandemic to its business.
“We expect to face challenges due to disruptions in logistics and supply chain in the event of a prolonged global pandemic. The domino effect of the looming global recession eventually may spill over to the palm oil industry impacting the group’s value chain as well as the global demand for palm oil.”
Helmy revealed that Sime Darby Plantation has carried out a business assessment and implemented some mitigation plans to counter these threats.