FGV Holdings expects Q4 palm oil output to worsen

 

FGV, however, says the price of CPO would remain strong until the end of the year. (Bloomberg pic)

PETALING JAYA: Malaysia’s FGV Holdings Bhd expects its fourth quarter (Q4) output to be lower due to uncertainties in the weather and the spread of Covid-19.

“We expect both fresh fruit bunches and crude palm oil (CPO) production in 4Q FY2020 (fourth quarter of the financial year 2020) to be impacted by weather uncertainties and partial lockdown in Sabah,” Haris Fadzilah Hassan, FGV’s group CEO, said in an exchange filing.

He added that, as a result, the price of CPO would remain strong until the end of the year.

According to a Reuters report, the Malaysian benchmark rallied 18% from July to September and CPO is now trading at RM3,327 ringgit per tonne on lower-than-expected production and worsened supply.

Haris Fadzilah did not elaborate on the weather conditions, but heavy rain and floods caused by a La Nina weather pattern have disrupted harvesting in Malaysia and Indonesia, two of the world’s top producers.

Movement restrictions were imposed in certain areas of Sabah, Malaysia’s largest palm oil producing state, after a surge in Covid-19 cases.

Pandemic-driven border closures this year have also worsened a shortage of workers to harvest the perishable palm fruit, further hurting output.

FGV, which said it was already dealing with a shortage of nearly 2,700 workers, added that it expected Q4 shortage to worsen by 4% from the last.

“We may face difficulties once borders open and workers who have been postponing their trip back home decide to go back,” Haris Fadzilah said at an online media briefing.

FGV expects CPO prices to trade between RM2,500 and RM2,600 per tonne in the first half of 2021, but said its full-year outlook remained “very conservative”.

The group posted a Q3 net profit of RM136.9 million, versus a loss of RM262.4 million a year ago, due to higher CPO prices and lower losses in its sugar business.

Revenue rose to RM3.99 billion.

FGV has completed the conditional sale and purchase agreement for two divestments worth RM57.2 million, it added. - FMT