KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has slashed its full-year earnings forecast for Genting Plantations Bhd by 17.5 per cent after the company's net profit shrank by 71.1 per cent in the first half of 2023 (1H23).
HLIB said this is due to sharply lower realised palm product prices and higher crude oil production cost at upstream plantation segment, losses at downstream segment and lower joint venture contributions.
HLIB also cut Genting Plantations' core net profit forecasts for financial years 2024 (FY24) and 2025 by 0.7 per cent and 1.8 per cent.
The firm lowered its fresh fruit bunch (FFB) yield assumption which is closer to the guidance of Genting Plantations' management.
HLIB maintained its FFB output growth guidance for FY23 at 5.0 per cent.
This is after Genting Plantations posted FFB output growth of 4.9 per cent in the first seven months of 2023 alongside with the management's decision to maintain its FFB output growth guidance of 5.0 per cent for FY23.
This is on the back of the young age profile at its Indonesia estates, while growth at Malaysia estates will likely remain muted as the company has earmarked another 4,000 hectares for replanting.
On crude palm oil (CPO), HLIB said Genting Plantations expects the blended CPO production cost to soften down to RM2,500 per tonne in FY23 underpinned by higher productivity.
In the second quarter of 2023 (2Q23) Genting Plantations registered core net profit of RM65.4 million which came below the firm and consensus' full-year estimates which only accounted for only 32.5 per cent and 30. 3 per cent respectively.
The firm said the drop in the company's net profit is due to lower than expected FFB output.
HLIB said on a quarter-on-quarter basis, the company's net profit went up to RM65.4 million from RM25.3 million in the 1Q23.
This is driven by higher sales volume of upstream palm products and lower blended crude oil production cost which help to mitigate losses at the downstream segment.
The firm said for year-on-year, the 2Q23 net profit dropped by 70.0 per cent to RM65.4 million.
This is due to sharply lower realised palm product prices and higher crude oil production cost at upstream plantation segment, losses at downstream segment and lower joint venture contributions.
