KUALA LUMPUR (May 31): Sime Darby Plantation Bhd (KL:SIMEPLT) sees crude palm oil prices (CPO) averaging above RM4,000 per tonne in 2024 as severe drought limits supply from Indonesia, the world largest palm producing nation.

“Given that palm is the cheapest oil compared to other [vegetable oils, while] fresh fruit bunch (FFB) production in Indonesia [is] still an issue, we expect CPO prices to remain fairly supportive,” chief operating officer Mohd Haris Mohd Arshad told reporters after the group’s first-quarter results announcement at a briefing on Friday.

The third-month CPO contract, which peaked at RM4,261 per tonne on April 3, stood at RM4,079 per tonne at 6pm, according to Bloomberg data.

For the first quarter ended March 31, 2024 (1QFY2024), Sime Darby Plantation’s average realised crude palm oil (CPO) price was RM3,880 per metric tonne (MT).

Mohd Haris also noted that FFB production in Indonesia is expected to be lower this year. 

For 1QFY2024 alone, Sime Darby Plantation said the group’s FFB production in Indonesia decreased to 507,000 per MT from 566,000 per MT a year earlier. 

Mohd Haris said prolonged dryness and severe drought conditions have reduced FFB production in Indonesia, particularly affecting young mature fields in the region.

In contrast, FFB production in Malaysia increased to 1.04 million metric tonnes from 785,000 metric tonnes, attributable to better crop ripening and increased harvesting coverage due to resolution of labour shortage and extensive rehabilitation exercise. 

Sime Darby Plantation’s net profit for 1QFY2024 jumped over fourfold to RM211 million from RM69 million a year earlier, thanks to lower tax expense, coupled with strong downstream operations. Revenue rose 6.7% to RM4.34 billion from RM4.07 billion. 

The group, the world’s largest palm oil producer by acreage, will be traded under its new name SD Guthrie Bhd starting next Wednesday.