KUALA LUMPUR (Aug 14): Wilmar International is expected to see shortfalls in production in 2027-2028 compared to the second half of this year (2H2026), as risks of a prolonged dry spell in Indonesia pressure plantations.
The outlook came as international agribusiness Wilmar International Ltd delivered its 1H2026 briefing read-through, where it stated that deteriorating rainfall in Kalimantan, Indonesia since July could strongly affect the production yield of crude palm oil (CPO).
“With 70% to 80% of Wilmar’s Indonesian estates located in Kalimantan, prolonged dry conditions could affect yields with a lag, leaving production more exposed in 2027-2028 than in 2H2026,” CIMB Securities said in a note on Friday, following an analyst briefing.
Wilmar’s fresh fruit bunch (FFB) yield is estimated to have dropped 6% year-on-year (y-o-y) to 1.92 million tonnes in 1H2026.
Despite the decline, Wilmar’s plantation weakness was mostly offset by the group’s high sales volumes and robust earnings growth for 1H2026, with pre-tax profit rising 13% y-o-y to a whopping US$1.06 billion, based on a revenue of US$38.6 billion.
For now, the house noted that Indonesia’s tightening palm oil export supply could potentially provide additional upsides for Malaysia.
Weather conditions would also be a strong pricing catalyst, with the previous 2023-2024 El Niño causing FFB yields of the group to decline 1% in 2025 and 5% in 1H2026.
CIMB has accordingly been guided to maintain its ‘overweight’ stance on Malaysia’s plantation sector, while retaining its CPO price forecasts of RM4,450/tonne for 2026 and RM4,550/tonne for 2027.
Reflecting this, the research house has chosen IOI Corporation Bhd (KL:IOICORP) and Kuala Lumpur Kepong Bhd (KL:KLK) as its top picks, and assigned the groups ‘buy’ calls with target prices of RM4.54 and RM23.66 respectively.
While SD Guthrie Bhd (KL:SDG) was also highlighted, CIMB continued to maintain its ‘hold’ rating on the stock with a target price of RM6.86 a share.
CPO futures are currently trading at RM4,725 per tonne on Bursa Malaysia’s derivatives market, with prices having risen 4.58% since last year.