KUALA LUMPUR (Reuters) – Malaysia’s Sime Darby Plantation Berhad reported a 28% jump in its first-quarter net profit on Friday, lifted by higher palm oil prices but warned that production is set to decline this year due to a prolonged labour crunch.
Profit for the January-March period rose to 718 million ringgit ($163.55 million) from 562 million ringgit a year earlier, while revenue rose 19% to 4.38 billion ringgit.
“The group has started the financial year with a solid set of results on the back of continuing high commodity prices caused by ongoing supply chain disruptions,” its chairman Megat Najmuddin Megat Khas said in an exchange filing.
Crude palm oil prices have scaled to record peaks after Russia’s invasion of Ukraine disrupted sunflower oil shipments and Indonesia’s restriction on palm oil exports further tightened global supply.
Sime Darby said realised crude palm oil prices during the first quarter jumped 40% from a year ago, which helped offset lower production due to a pandemic-induced labour shortage that remains unresolved.
Output is expected to decline this year as a batch of migrant workers hired for the plantation sector are only expected to arrive in the second half of the year, the firm said.
“The group believes that while palm oil demand may be impacted by current elevated prices, this will be mitigated by the tight supply and availability of alternative vegetable oils as well as supply chain disruptions caused by the ongoing Russia-Ukraine conflict,” it said.
Global palm oil buyers including commodities trading giant Cargill have in recent months suspended purchases from Sime Darby over labour concerns, following a 2020 decision by the U.S. Customs and Border Protection (CBP) to ban imports due to the presence “forced labour indicators”.
Group Managing Director Mohamad Helmy Othman Basha said the company had on April 26 submitted a report to the CBP to address the labour issues and will continue to engage with the agency to lift the ban.
($1 = 4.3900 ringgit)
(Reporting by Mei Mei Chu; Editing by Ed Davies)
