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Malaysia's Sime Darby Plantation quarterly profit slumps on weaker palm prices
[KUALA LUMPUR] Sime Darby Plantation Berhad, the world's largest oil palm planter by land holdings, said on Friday its first-quarter profit slumped 89 per cent due to lower palm prices and reduced margins.
Profit for the July-September period fell to RM115 million (S0$37.6 million) from RM1.02 billion a year earlier. Revenue declined 14 per cent to RM3.04 billion.
Earnings were hurt by a decline in both crude palm oil (CPO) and palm kernel prices, the company said.
"The business environment remains challenging," managing director Mohd Bakke Salleh said in a statement.
The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange was trading near a three-year low on Friday.
CPO prices are expected to remain under pressure, mainly due to the seasonal rise in production, higher inventories and sluggish export demand, the company said.
Barring any extreme weather conditions, Sime Darby Plantation expects fresh fruit bunch production to improve in the six months ending December from the corresponding period last year.
"However, the ongoing US-China trade war and a weaker ringgit could improve demand and lend support to CPO prices," it added.
Inventories in Indonesia and Malaysia, the top producers of the tropical oil, are expected to rise in the next two months because demand from key buyers typically slows in winter months as palm oil solidifies.
Sime Darby Plantation is a spin-off from Sime Darby Berhad . Last year, the group announced split into three stand-alone businesses that could each focus on their core activities.