United Plantations 2Q net profit up 52% on higher production, average selling prices

KUALA LUMPUR (July 31): United Plantations Bhd's second-quarter net profit rose 51.7%, mainly due to higher production, higher crude palm oil (CPO) and palm kernel (PK) prices, and lower costs of production.

Net profit for the three months ended June 30, 2017 (2QFY17) rose to RM109.75 million from RM72.35 million a year ago. Earnings per share grew to 52.82 sen in 2QFY17 from 34.82 sen in 2QFY16.

Quarterly revenue also increased 27.9% to RM355.26 million from RM277.73 million in 2QFY16.

For the cumulative six months (1HFY17), the group posted a 41.9% increase in net profit to RM187.42 million from RM132.12 million a year ago, while revenue grew 36.7% to RM734.5 million from RM537.31 million in 1HFY16.

In a filing with Bursa Malaysia today, United Plantations said CPO and PK production increased by 22.5% and 22.1% year-on-year (y-o-y) respectively in 1HFY17, while cost of production of CPO and PK fell by 21.6% and 4.1% y-o-y respectively.

"On average, the CPO price for the group in the current period was 13% higher than the corresponding period whereas the average PK price was 66.1% higher in the same period," it added.

Going forward, United Plantations said it will continue to replant large areas of its older and less productive oil palm stands in Malaysia during 2017.

"Cost efficiencies and improved productivity will therefore continue as a vital part of sustaining our positive development.

"In view of the above and the current prevailing prices of palm oil and palm kernel oil in the market and with the prices contracted under our forward sales policy, coupled with large areas steadily coming into maturity from our replanted areas, the board of directors, while acknowledging the challenges ahead, expects that the results for 2017 will be satisfactory," it noted.

United Plantations shares were untraded today. It closed at RM27.80 last Friday, bringing it a market capitalisation of RM5.78 billion.

Link: The Edge Markets