15 May 2012
United Plantations' Q1 2012 net profit falls 15.6% on higher wages and lower selling prices of CPO, anticipates CPO prices to weaken in second half of 2012 due to recovery in the biological yield cycle coupled with more favourable weather conditions
(UTDPLT opening stock price today (15.5.2012) was RM 25.00)
United Plantations Bhd’s net profit fell 15.6% to RM72.65mil for the first quarter ended March 31, versus a year earlier, mainly due to higher production costs of crude palm oil (CPO), palm kernel and coconuts.
In a filing with Bursa Malaysia, the company said its revenue for the quarter was higher at RM338.67mil compared with RM278.39mil a year earlier.
During the quarter, United Plantations’ production of CPO, palm kernel and coconut rose 8%, 7.5% and 22.5%, respectively, compared with the corresponding period a year ago. Higher production of CPO and palm kernel was due to newly matured fields coming into production from the group’s estates in Indonesia.
“However, the increase in contribution from the higher production was offset somewhat by the higher production costs of CPO, palm kernel and coconuts by 6.5%, 24.5% and 4.8%, respectively, due to higher wages and lower selling prices of CPO and palm kernel by 4.6% and 29.9% respectively in the current quarter from the corresponding quarter in 2011,” the company said.
“The comparatively higher increase in production cost of palm kernel was due to changes in the basis of cost allocation to palm kernel in Indonesia in the current quarter,” it added.
The company said it expected demand for vegetable oils to remain positive on the back of increasing world population and affluence, particularly in Asia.
“However, palm oil production is expected to increase from the second quarter of 2012 due to the recovery in the biological yield cycle coupled with more favourable weather conditions in South-East Asia. We therefore anticipate the likelihood that prices will start to weaken in second half of 2012,” it said.
With the continuation of the European debt crisis and uncertainty of an improvement in the global financial situation, in particular Europe and the United States, the company said there was a risk that the global economy could be hit with another downturn. And that in turn would dampen vegetable oil prices further.