KUALA LUMPUR (May 14): United Plantations Bhd net profit for the first quarter ended March 31, 2012 fell 15.6% to RM72.65 million from RM86.09 million a year earlier, due mainly to higher production costs.
It said on Monday that its revenue for the quarter rose 21.65% to RM338.67 million from RN278.39 million in 2011 due to higher production of crude palm oil and palm kernel.
Earnings per share declined to 34.90 sen from 41.37 sen.
Net assets per share was RM9.93.
Reviewing its performance, United Plantations said the increase in production cost was due to changes in the basis of cost allocation to palm kernel in Indonesia.
It said a combination of unfavourable weather conditions in South America has triggered a reduction in global soybean crop estimates so far totalling 20 million MT.
“This combined with the unusually high rainfall in many parts of Malaysia during the first 3 months of the year coupled with the seasonally lower production of FFB in Malaysia and Indonesia have resulted in an appreciation of vegetable oil prices in the beginning of 2012,” it said.
United Plantations said that with an increasing world population and affluence in particular Asia, it was anticipated that the demand for vegetable oils will continue to be positive.
“However, palm oil production is expected to increase from 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.
The company said that with the Indonesian export tax changes introduced in September 2011 benefitting the Indonesian downstream sector, Malaysian refineries had been affected by the increased competitive position enjoyed by the Indonesian refining sector.
Without any intervention by the Malaysian government to support the downstream sector of Malaysia, the refining industry will continue to be under significant pressure in 2012, it said.
United Plantations said several of its plantations in Malaysia were also subject to an unusually high rainfall in the first quarter of 2012 which on certain estates was 36% - 87% higher than the average rainfall obtained during the first quarters of the last 5 years.
The adverse weather conditions resulted in prolonged flooding on several estates that increased crop losses, it said.
Meanwhile, the company said it was replanting a large area in Malaysia in 2012 in accordance with its replanting policy.
Some areas in its Indonesian operations came into maturity in 2011 and more areas are maturing in 2012, it said.
The Indonesian production is thus compensating for the crop loss from the replanted areas in Malaysia as well as the crop losses due to the high rainfall mentioned above, and as such the total production for the Group for 2012 is expected to be slightly better than 2011., it said.
“As a result of the above, the directors are of the opinion that the group’s results for the current financial year ending Dec 31, 2012 whilst lower than 2011 will still be favourable and higher than that achieved in 2010,” It said.