This article first appeared in The Edge Malaysia Weekly on March 23, 2026 - March 29, 2026

JOHOR Plantations Group Bhd (KL:JPG) is largely insulated from near-term cost pressures due to higher fertiliser prices, having locked in prices and volumes for 2026 through supplier tenders, says managing director Mohd Faris Adli Shukery.

“We secured our tender in the fourth quarter of 2025 and negotiated the volumes, pricing and supplier selection. Once that was finalised, whatever prices that were agreed upon [will] carry over for the full year. Some companies do it on a half-year basis, but we did it on a full-year basis.”

Escalating tensions in the Middle East have caused freight disruptions that are expected to push fertiliser costs higher. The Strait of Hormuz is a key route for fertiliser exports from the region.

Although fertiliser prices were already rising even before tensions in the Middle East, Mohd Faris notes that JPG’s overall fertiliser spending has remained broadly stable year on year (y-o-y), owing to the group’s accelerated replanting programme.

“Our total fertiliser cost for 2026 is around RM60 million, broadly in line with 2024. While the cost per tonne has increased by 10% to 15%, the overall spend remained stable mainly because of lower volumes, following our accelerated replanting programme, which temporarily reduces fertiliser requirements. We also made some advance purchases using last year’s prices, anticipating that fertiliser prices would rise in 2026. That helped us manage and contain the increase in costs,” he tells The Edge in an interview.

Analysts say disruptions caused by the Middle East crisis could raise fertiliser procurement costs, potentially pushing up crude palm oil (CPO) production costs in subsequent periods.

Rising operating costs are already evident in JPG’s financial performance. For the financial year ended Dec 31, 2025 (FY2025), the group reported that its CPO production cost rose 3.2% to RM2,312 per tonne from RM2,241 per tonne in FY2024 while the cost of palm products increased 3% to RM1,840 per tonne from RM1,786 per tonne, owing mainly to higher harvesting, transport and upkeep expenses.

Asked whether the group is prepared for even higher fertiliser costs beyond the current year, Mohd Faris says: “We will continue our disciplined procurement approach, securing both price and volume through our annual tender process, typically held in September. This provides better cost visibility and helps manage exposure to fertiliser price volatility.”

Mohd Faris highlights that JPG does not bear freight costs for its palm oil sales, as most of its output is sold directly to local refiners. About 70% of the company’s production goes to refiners — mainly multinational corporations (MNCs) — while the remaining 30% is sold to third-party buyers. He reckons that some of JPG’s oil does end up in Europe.

Some analysts say higher crude oil prices would make biodiesel more competitive, encouraging higher blending and boosting domestic palm oil demand and prices.

However, Mohd Faris takes a more cautious view on the price outlook.

“For prices this year, I’ll be a bit bearish. They are unlikely to match the 2025 average of nearly RM4,500 per tonne, despite the recent spike to around RM4,800 per tonne. But if prices continue to rise because of the war and that trend sustains, we could probably deliver profitability similar to last year,” he says.

JPG’s net profit rose 34% to RM345.02 million for FY2025, from RM257.32 million a year earlier, as revenue increased 13.1% to RM1.72 billion from RM1.52 billion.

The group’s average CPO selling price rose 3.5% y-o-y to RM4,480 per tonne, outperforming the Malaysian Palm Oil Board benchmark price, while palm kernel (PK) prices surged 27.7% y-o-y to RM3,671 per tonne.

Despite the strong performance, Mohd Faris says the group may struggle to repeat last year’s output due to unusually dry weather conditions. Crop production was stronger in January but began to decline in February, but he says this could help ease high palm oil inventories.

“The dry weather is not normal compared with previous years, especially in Johor,” he says.

The US National Oceanic and Atmospheric Administration’s Climate Prediction Center said last week there is a 62% chance of El Niño, which brings hot and dry weather, emerging between June and August, following the end of the current La Niña, the cold phase of the climate pattern.

JPG processed 1.58 million tonnes of fresh fruit bunches (FFB) in FY2025, up 6.4% y-o-y from 1.5 million tonnes, while FFB yield inched up 1.8% to 22.8 tonnes per hectare (ha) from 22.4 tonnes per ha previously.

Mohd Faris says the group has seen encouraging improvements in its oil extraction rate (OER) this year, owing to dry weather conditions, compared with 20.6% achieved last year.

“We are getting north of 21% already. So, if that can be sustained this year, that would be positive for the OER. You have less contaminants and moisture, so that’s why you can get a higher OER,” he adds.

JPG plans to accelerate its replanting programme to 6% to 7% annually over the next three years. The average age of its palms is currently close to 14 years, but it aims to reduce this to around 11 years by 2029 by replacing palms in older or lower yielding areas with new planting materials developed in-house to improve productivity.

“We are looking at a capex of around RM100 million for 3,500ha to 3,600ha over the next three years. So, each year, we expect to incur that level of replanting capex,” he says.

For this year, JPG expects yields to improve as crop volumes recover, supported by improvements in the group’s crop profile following replanting.

“This year, it most likely will be a combination of both good crop volume as well as a reduced mature area. That will lead to higher yields per ha. We are looking at north of 23 tonnes per ha. That’s our target,” he says.

JPG is expanding its milling capacity via a new mill being built at its Integrated Sustainable Palm Oil Complex (ISPOC) in Pasir Logok Estate, Johor. The mill will have a rated capacity of 90 tonnes per hour and is expected to be completed by the end of the third quarter of this year.

JPG currently operates five mills with a combined processing capacity of 310 tonnes per hour, equivalent to about 1.49 million tonnes of FFB annually. The mills are located across Kluang, Kota Tinggi, Kulai and Segamat.

Mohd Faris says the new mill is expected to further improve processing efficiency and the OER.

“One of our mills is easily hitting an OER of 22% to 23%, depending on the period. Once the new mill at ISPOC comes in, it should be at least 23%. I don’t want to promise 25%, but if we can hit that, it would be great. But that’s a combination of crop quality and other factors.”

The ISPOC, built at a cost of RM600 million, will also include a refinery producing speciality oils and fats, a kernel-crushing plant to produce PK oil, a bio-energy power plant for sustainable energy generation, and an animal feed mill.

The refinery, which is a 51:49 joint venture between JPG and Japan-based Fuji Oil Asia Pte Ltd, will be the first greenfield palm oil refinery to be powered by biomass waste generated from agricultural operations.

“Fuji was already our customer. When we started looking at moving downstream, we discussed many things. Technology you can buy, and talent you can hire if you have the money. But what you cannot immediately buy is the network — the buyers and the business relationships,” he says.

“We needed a partner who could help us penetrate the market quickly. Otherwise, we might have spent the next two years running losses while trying to build that network. Fuji already had relationships in the market and they rely on us for upstream supply; so, the partnership made sense.”

As at January, the refinery was about 70% completed and it is expected to begin contributing modestly to revenue once operations start. The plant, which has an annual capacity of 150,000 tonnes, will process Roundtable on Sustainable Palm Oil (RSPO) identity-preserved (IP) certified palm oil, targeting multinational customers in markets such as Europe.

“In 2027, the contribution will be more significant, with utilisation reaching about 80%. By 2028, it should reach full capacity. Basically, the Japanese are refining it for other MNCs as well, including for Europe and other markets,” he says.

Listed three years ago, JPG is majority-owned by Johor Corp (JCorp) via Kulim (Malaysia) Bhd’s 64.44% interest in the planter. JPG has 59,783ha of plantation land across 23 oil palm estates, mainly in Johor.

Asked about land-bank expansion, Mohd Faris says the group has considered expanding but continues to prioritise Johor, noting that the group’s concentration in a single state has helped it secure premiums for its products.

“We have been contemplating that, but our emphasis has always been Johor. We get premiums because we are based in Johor, [where our geographical location allows us to command a premium]. As the end-buyer, they would like to have a supplier whose risk is contained.

“Let’s say I buy from Johor Plantations — I know the risk profile attached to my supplier is quite contained. If you have locations in Johor and another location in Sabah, your risk totally changes.

“The risks attached to different geographical locations are different, especially when you talk about policies or other issues related to labour, government regulations and policies,” he explains.

Meanwhile, the premiums that JPG offers to certified smallholders has incentivised other farmers to get certified. In recent years, the company has been paying farmers on its smallholder inclusion programme about RM10 per tonne above market prices for RSPO-certified crops.

“We do not fund them; they have to obtain certification on their own. But they are happy because whatever effort they put in is rewarded immediately once they achieve it. In the past, you could get certified but you didn’t know what would happen. There was never any assurance that the offtaker would pay you extra just because you had certification. So, we started this and we’ve seen a very positive response,” says Mohd Faris, adding that the programme has also helped improve productivity among participating growers.

“When they move into RSPO certification, they adopt best practices from harvesting to fertilising. As a result, yields improved from around 12 tonnes to about 18 tonnes simply by following proper field practices,” he says.

“That is one of the key reasons others are keen to join the programme. Besides receiving a premium, they also see higher yields.”

Since its listing in mid-2024, JPG shares have doubled to close last Tuesday at RM1.59, giving the company a market capitalisation of RM3.97 billion.

According to AskEdge, JPG was trading at a trailing 12-month price-earnings ratio of 11.23 times, cheaper than industry leader United Plantations Bhd’s (KL:UTDPLT) 25.14 times but more expensive than TH Plantations Bhd (KL:THPLANT), which has a similar land bank, at 6.11 times. 

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