KUALA LUMPUR (Nov 16): United Plantations Bhd (UP) recorded a net profit of RM235.68 million for its third quarter ended Sept 30, 2023 (3QFY2023), up 19.8% from RM196.72 million in the previous year’s corresponding period, despite lower revenue and share of results from its joint ventures, thanks largely to lower operating and income tax expenses.

The group declared an 80 sen dividend for its financial year ending Dec 31, 2023 (FY2023), comprising an interim payout of 40 sen per share and an extraordinary dividend of 40 sen per share. Both dividends will be paid on Dec 14. The group just paid, in May this year, RM1 per share as dividends for FY2022, bringing its total payout for that year to RM1.40 per share.

Based on its results filing, the group shaved off 32.2% from its operating expenses, which dropped to RM238.71 million from RM352.16 million, while income tax expense shrank by 34% to RM69.21 million from RM104.89 million previously.

At the same time, finance costs dropped 35.2% to RM182,000 from RM281,000. Also helping to boost its bottom line was a near doubling in other operating income to RM3.7 million from RM1.94 million, while interest income grew 85.9% to RM5.92 million from RM3.18 million.

These helped to offset the 16.85% drop in the group's quarterly revenue to RM540.16 million from RM649.62 million amid lower average crude palm oil (CPO) and palm kernel (PK) prices, and the easing of its share of results from JVs to RM2.43 million from RM3.55 million.

For the nine months ended Sept 30 (9MFY2023), UP’s net profit rose 14.9% to RM506.79 million from RM441.05 million in 9MFY2022, despite revenue falling by 26.3% to RM1.47 billion from RM1.99 billion, as it reduced its operating expenses by 33.4% to RM920.47 million from RM1.38 billion, while other operating income jumped to RM92.34 million from RM18.74 million, and interest income more than tripled to RM19.5 million from RM5.64 million.

Income tax expense for 9MFY2023 was down 20.3% to RM153.96 million from RM193.23 million, despite the higher profit before tax, due to the one-off Prosperity Tax on 33% of chargeable income being imposed by the government last year on those making more than RM100 million profit.

UP noted that palm oil prices, which ranged between RM3,637 and RM4,209 per tonne in 3QFY2023, have come under pressure amid the seasonal increase in production in Malaysia and Indonesia, in tandem with stocks rising to its highest in more than a year. This was combined with negative sentiments associated with rising interest rates that has dampeend outlook for the world economy, including demand for general commodities.

While prices recovered in September due to drier weather in East Malaysia and vast parts of Kalimantan and southern Sumatra, which resulted in lower-than-expected output of palm oil, it said it is premature to determine the severity and full impact of the ongoing El Nino weather phenomenon on the group’s production in 2024.

Other price-making factors to consider are the developments in North and South America in relation to the soybean production and planting season respectively, it noted.

As such, UP is "mindful of the challenges which the final part of 2023 will bring" amid the consequences of higher inflation and recession fears, and the escalation of global conflicts in Ukraine and the Middle East.

In the meantime, the group said it will continue to direct further attention to implementing greater levels of mechanisation, and to complete its replanting programme, to take full advantage of its latest high-yielding planting materials produced by its research department.

UP shares, up over 10% since the start of this year, closed at RM16.82 on Thursday, valuing the group at RM7 billion.