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PETALING JAYA: Planters with oil palm estates and mills in Tawau, Lahad Datu and Kinabatangan in Sabah became the first casualty of a Covid-19 lockdown within the plantation sector in the country, say analysts.

As a result of some plantation workers being tested positive for the coronavirus, the state government has decided to temporarily suspend the upstream operation in the districts for seven days starting March 25.

It will also temporarily suspend the mills operation in the affected areas for five days starting March 27.

An industry expert told StarBiz that the affected districts constitute about 60% of total CPO production in Sabah.

For an efficient estate, the ratio is 1:24 ha for harvesters, he noted.

Sabah has about 1.54 million ha of total oil palm planted area as at end-December 2019.

CGS-CIMB Research described the temporary lockdown of estates and mills in the three districts as negative for planters with estates there.

This include Hap Seng Plantations Bhd, FGV Holdings Bhd and IOI Corp Bhd .

Based on its rough assessment on the location of plantation company estates based on publicly available figures and pending clarification from management, CGS-CIMB said the initial take is that “it will affect Hap Seng Plantations the most, followed by IOI Corp and FGV.

“However, we do not expect the impact on earnings to be material if the suspension is only for seven days, or about 2% of total estimated working days for the year.

“(Given the seven-day suspension) there is also potential for the estates to recover back some of the unharvested fruits when the harvesters resume work, ” added the research unit.

But, there are no available official statistics on the total palm oil output from these affected districts of Sabah.

“Our rough estimate is based on distribution industrial crops from the planted estates in Sabah.

“Potentially up to 50% of the oil palm area may be affected by the suspension, ” said CGS-CIMB.

The research unit has also forecast that Malaysia’s CPO output for March could grow by 10% month-on-month to 1.4 million tonnes.

“With this new development, our rough estimate is that it could potentially crimp our March production figure by 2.8% or 39,500 tonnes and this could help reduce the palm oil inventory figure for end-March.
The Malaysian Palm Oil Board is expected to release the latest March palm oil statistics on April 10.

CGS-CIMB said: “Should planters which operated in these districts be allowed to resume work from April 1, then they will be able to recover some of the unharvested fruits which could flow into production.”
This development could also be slightly positive for CPO prices in the near term.

Hence, the research unit will continue to maintain its average CPO price forecast of RM2,300 per tonne for 2020.

Meanwhile, AmInvestment Bank Bhd in its latest report estimated that the impact of the suspension on the fresh fruit bunch (FFB) production of the plantation companies under its coverage to be between 0.2% and 1.3%.

In its stock universe, IOI Corp has the largest exposure to Sabah with an estimated 68.9% or 121,419ha of IOI Corp’s planted areas in Sabah.

Sime Darby Plantation Bhd, meanwhile, has the least exposure to Sabah in AmInvest’s stock universe with an estimated 9% or 53,676ha of the group’s planted areas being in Sabah.

Sumber: thestar.com.my | By HANIM ADNAN