Planters could see weak set of results for 4Q14

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KUCHING: Slowing output, poor refining margin and huge unrealised foreign exchange (forex) loss will be the key highlights of plantation players in this upcoming results season.

According to Maybank Investment Bank Bhd (Maybank IB Research), Malaysia’s fresh fruit bunch (FFB) output for 2014 peaked in the third quarter which was unlike 2013 which saw output peaking in the fourth.

To note, plantation companies are set to release their 4Q14 results before month end.

“By geography, only Sabah production bucked the trend where it peaked in 4Q14,” the research house said yesterday.

“Most of the Malaysian plantation companies under our coverage registered lower quarterly production in the period.”

Sarawakian planters posted the largest quarter on quarter decline in output, it highlighted, with Sarawak Oil Palms Bhd dropping 19 per cent, Ta Ann Holdings Bhd dipping 16 per cent and TH Plantations Bhd dropping 17 per cent.

Maybank IB Research said this was largely seasonal in nature.

Meanwhile, MPOB’s 4Q14 crude palm oil spot average selling price (ASP) was flattish q-o-q at RM2,194 per tonne (representing a drop of 13 per cent year on year) while palm kernel’s ASP was marginally down to RM1,451 per tonne.

“We observe that the industry’s FFB output has slowed quite considerably quarter on quarter in 4Q14.

“This reinforces our view that FFB output supply growth will be weak for the first nine months of 2015,” it explained.

“We believe there could possibly be downward revision to plantation companies’ growth guidance for 2015 at the upcoming analyst briefings.”

Meanwhile, Maybank IB Research also expects refining margins to be sequentially weaker with potential negative refining margins, largely due to zero CPO export duty in both Malaysia and Indonesia as well as over-capacity in the region.

“Conversely, we believe oleo-chemical players’ results will be mix, depending on their hedging strategies amidst volatile feedstock costs and falling crude mineral oil prices.”