KUALA LUMPUR (Aug 23): Hap Seng Plantations Holdings Bhd posted a net profit of RM9.42 million for the second quarter ended June 30, 2023 (2QFY2023), its lowest quarterly earnings since a net loss in 1QFY2020.

Year-on-year, net profit dropped 86% from RM66.9 million, which the company said was due to lower average selling prices of all palm products, higher production cost, and losses from adjustments to fair value of biological assets. 

Correspondingly, basic earnings per share fell to 1.18 sen, compared with 8.37 sen previously.

In a bourse filing on Wednesday (Aug 23), Hap Seng Plantations also said revenue declined by 31% to RM168.8 million for 2QFY2023, from RM246.86 million a year ago.

The group declared a first interim dividend of 1.5 sen per share — as opposed to five sen for the corresponding quarter last year — to be paid on Sept 21.

It said higher sales volumes of crude palm oil (CPO) and palm kernel (PK), however, helped in mitigating the lower average selling prices of all palm products in 2QFY2023.

The CPO sales volume was 17% above 2QFY2022, while the PK sales volume was 11% higher, mainly benefiting from higher fresh fruit bunch (FFB) production. 

“FFB production was 10% higher than the preceding year's corresponding quarter, benefiting from a higher FFB yield, due to seasonal yield trends and changes in cropping patterns,” Hap Seng Plantations said. 

For the cumulative six months ended June 30, 2023 (1HFY2023), the group posted a net profit of RM32.84 million, an 81% decrease from RM168.57 million the year before. 

Hap Seng Plantations highlighted that profit after tax for 1HFY2022 had included a gain of RM26.5 million arising from the completion of disposal of assets held for sale. 

For 1HFY2023, revenue was recorded at RM328.72 million, down by 33% from RM489.02 million a year earlier.

Moving forward, the group expects its full-year financial results to be influenced by movements in commodities prices, high production cost, and uncertainties in global economies.

It said palm oil exports are expected to increase further in August and September, as major palm oil-importing countries, such as India, China, Bangladesh and Pakistan, are expected to take advantage of the current wide price discounts of palm oil to soy oil and sunflower oil. 

“Prices of soy oil and sunflower oil have increased recently, due to concerns of lower global soybean production and uncertainties of Black Sea sunflower oil supply, after Russia withdrew from the Black Sea Grain Initiative and caused hostilities in Odesa, one of Ukraine's main ports for exporting grain,” Hap Seng Plantations shared. 

“The current palm oil price discounts to competing soft oils are likely to narrow, as rising exports would reduce palm oil inventories in both Malaysia and Indonesia, which may render improved palm oil prices.”

Notably, it said, the average CPO price per tonne was RM3,897 in July. In the first 10 days of August, daily prices ranged between RM3,723.50 and RM3,846.50 per tonne.

Hap Seng Plantations added that production cost is expected to remain high, due to inflationary pressures and high prices of fertilisers, diesel and other input materials, as well as higher labour cost. 

To mitigate this, the group said it will continue to focus on improving FFB yields and extraction rates, while making concerted efforts to improve overall cost efficiencies of its operations. 

Shares in Hap Seng Plantations finished a sen or 0.51% lower at RM1.95 on Wednesday, valuing the group at RM1.56 billion. In the past one year, the counter had fallen by 12.56%.