Sarawak Plantation Berhad (Saawak Plantation) reported a core PATAMI of RM17.0 million for 2QFY24, marking a significant 42.8% year-on-year increase. This brings the group's 1HFY24 earnings to RM24.6 million, up 16.8% year-to-date. The results align with expectations, accounting for 36% and 39% of the full-year estimates from the company and consensus, respectively. Despite the solid performance, the company has maintained a NEUTRAL rating with a revised target price of RM1.98, down from RM2.20 previously.

The strong 2QFY24 performance was driven by improved upstream results, highlighted by a 70.8% year-on-year increase in operating profit to RM24.1 million. This growth was supported by a higher average selling price (ASP) for crude palm oil (CPO), which rose 5.6% to RM4,007 per tonne, and a 16.0% increase in fresh fruit bunch (FFB) output. Profitability from the estates saw a notable increase, with earnings growing 75.0% year-on-year to RM21.4 million. However, mill earnings experienced a decline of 35.2% year-on-year to RM5.0 million due to a reduction in the oil extraction rate (OER) to 19.64%.

Operationally, Sarawak Plantation benefited from favourable dry weather conditions, which boosted harvestable hectarage and FFB production by 11.0% and 16.0% year-on-year, respectively. The company's FFB yield stood at approximately 3.81 tonnes per hectare. External purchases also contributed to the rise in FFB processed, which increased by 2.0%. Despite these positives, the OER level was impacted by past dry weather, affecting fruitlet ripeness.

Looking ahead, Sarawak Plantation's earnings forecasts have been adjusted, anticipating a modest increase for FY24 but significant reductions for FY25 and FY26, reflecting changes in the CPO price outlook. The revised forecast includes an average CPO price of RM3,800 per tonne for FY24, with subsequent decreases in the following years.

Source: MIDF
Title: FFB Production Grew In-line with Seasonal Factors