With a history that dates back two centuries, President Tan Sri Megat Najmuddin Megat Khas said the SDP has faced many crises and challenges.
“Looking forward, we expect the global supply of edible oils to be affected by several factors, ranging from adverse weather conditions to the Russian-Ukrainian conflict, which has led to supply disruptions.
“Against this backdrop, I am confident that SDP, with our strong track record spanning 200 years, is well positioned to achieve our long-term business and sustainability goals,” he said in the company’s 2021 annual report. , which was recently released. .
Rising Crude Palm Oil (CPO) and Palm Kernel (PK) prices helped push SDP’s net profit for the first quarter ended March 31, 2022 to RM718 million, an increase of 27.76 % compared to RM562 million in the previous corresponding period.
In a note on its first quarter results, the plantation group said revenue rose 19% year-on-year to RM4.38 billion as higher prices offset the negative impact stemming from a shortage. extended labor force in the Malaysian palm oil industry and standardization in Indonesia. production of fresh fruit bunches (FFB).
For the quarter, the group said the average realized prices of CPO and PK increased by 40% and 84% respectively year-on-year in the first quarter of 2022 to reach RM4,465 and RM4,105 the tonne.
Meanwhile, the group’s downstream business, Sime Darby Oils, recorded a 23% increase in earnings before interest and tax of RM132 million in the quarter under review compared to the prior corresponding period, thanks to higher margins in its Asia-Pacific bulk operations.
Hong Leong Investment Bank (HLIB) Research in a recent report said it was raising its base net profit forecast for SDP from 2022 to 2024 by 24%, 26.5% and 20.2% respectively.
According to the research house, the higher forecasts are supported by higher CPO price assumptions, higher CPO production cost assumptions on the upstream segment and a lower FFB production assumption in 2022.
“After revising our earnings forecast upwards and recalibrating our earnings model, we maintain our ‘buy’ rating on SDP with a higher target price of RM6.06 (vs. RM5.95 earlier) .
“SDP remains one of our top picks for the industry, due to its high operational leverage on the price of CPO. Additionally, its proactive steps to address US Customs and Border Protection interdiction issues (CBP) will likely pave the way for alleviating environmental and social governance issues.
On December 30, 2020, CBP issued a suspension order or import ban on palm oil produced by SDP in its Malaysian operations, due to allegations of forced labor.
On January 28, CBP issued a notice that certain SDP palm oil products were manufactured using convict, forced or contract labor.
To remedy the situation, Megat Najmuddin said SDP had appointed consultants to undertake large-scale independent reviews of labor practices in its Malaysian operations.
“I am convinced that SDP will emerge stronger from this episode. We have a long history of doing things the right way and we will continue to strive to do so.
“In our efforts to lead the way, we have embarked on continuous improvements to ensure we have internal controls and systems in place to support our workers and ensure their well-being,” he added. .