Sime Darby Plantation Berhad (SDP), which has been recently rebranded as SD Guthrie Berhad, 1QFY24’s core earnings surged 1.2x to RM229.0m with margins expanding to 9.0% (+1.6pts), attributed to higher operating profit in Malaysia’s upstream subsegment due to recovery in FFB and CPO production amid elevated average CPO prices realised.
MIDF Research, in a note today (June 4) said the optimism, however, was offset by the situation in Indonesia and PNG area, where crops were impacted by dry weather and flooding due to EL-Nino and heavy rainfall earlier the year.
Conversely, refinery profit continues it uptick, rising to RM135.0m (>100%yoy) on recovery demand of PPO products.
Overall, the results were broadly within MIDF’s expectations but below the consensus.
The group’s upstream top and bottom-line posted mixed results, with sales falling to RM440.0m (-18.4%qoq, -33.5%yoy) while profit jumped to RM265.0m (+33.8%qoq, +20.5%yoy), respectively, following higher profit contributions from Malaysia side.
Operationally, Malaysia’s FFB & CPO production continued its recovery, albeit with single digit growth, this, however, still managed to boost the group’s FFB and CPO production to grew by +8.6%yoy and 9.4%yoy, respectively.
Note that, group’s average CPO and PK realised prices stabilised at RM3,880/Mt (-0.2%yoy) and RM1,940/Mt (+8.1%yoy).
The downstream’s profit improved significantly rose more >100%yoy to RM135.0m thanks to the decent sales volume and steady utilisation rate in differentiated and trading segment.
Profit from differentiated (Oleo based) strengthen, driven by improved margins in European operations on the back of higher selling prices and lower costs.
MIDF maintains a NEUTRAL call with an unchanged TP of RM4.18 remaining optimistic with its upstream subsegment where recovery in Group’s FFB yield projected to touch 19.00Mt/ha level in FY24, thanks to the intensive rehabilitation efforts undertaken last year in Malaysia side. Additionally, downstream prospects look promising on reversal of PPO products demand, in Europe and Asia Pacific regions.
