KUCHING: Ta Ann Holdings Bhd (Ta Ann) is expecting the palm oil commodity prices to be negatively affected by a slowdown of the market demand in the short and possibly medium term.
According to executive chairman Datuk Amar Abdul Hamed Sepawi in Ta Ann’s Annual Report 2019, last year presented itself as a challenging one for Ta Ann in view of the unfavourable market conditions for the commodity prices.
“Soft market conditions prevailed during the year as weaker average selling prices were registered for the export logs, plywood products, fresh fruit bunch (FFB) and crude palm oil (CPO) by 29 per cent, four per cent, nine per cent, and eight per cent respectively compared to the previous year,” Abdul Hamed said in the annual report.
“Despite the lower timber and CPO prices, the group continued to deliver a respectable performance amidst facing similar challenging markets that are faced by other timber and plantation companies.”
To note, Ta Ann posted a revenue of RM945.69 million and a net profit of RM70.26 million in financial year 2019 (FY19) against FY18’s RM967.23 million and RM88.23 million respectively.
“This result was made possible mainly attributable to an increase in the export logs quota granted under the forest certification mechanism as regulated by the state government as well as the progress made in our continual proactive cost-saving measures and efforts in raising our operation productivity in enhancing our profitability.”
Oil palm division had remained the prime net profit driver for Ta Ann. This was attributable to the stable FFB production and the commencement of operation of Ta Ann’s third palm oil mill, TBS oil mill, which raised the group’s total capacity to 255 metric tonnes (mt) per hour during the year.
“The Global Covid-19 pandemic has severely affected the general global economy since March 2020 and will continue to affect the worldwide economy, both the regional and domestic economies. As such, our group is expecting the palm oil commodity prices to be negatively affected by a slowdown of the market demand in the short and possibly medium term.
“The recent historic low world crude oil prices had led to a drastic drop in the demand for biodiesel which will consequently affect the CPO consumption inevitably. Therefore, it is anticipated that the recovery of the CPO price will take a longer time.”
That said, Abdul Hamed noted CPO being a commodity that is being used heavily for consumer products, energy as well as the industrial sectors, its prices shall recover progressively in tandem with the gradual recovery of the regional economy.
“Notwithstanding the challenging short-term economic outlooks as a direct result of the onslaught of the Covid-19 pandemic, we remain resilient to external variable factors, and will continue to move forward towards achieving growth in our business and corporate values.”