KUALA LUMPUR: Plantation companies have performed disappointingly in the second quarter, as core net earnings were weaker year-on-year, mainly due to higher cost of production.
This was despite stronger revenue yoy due to higher fresh fruti bunch and crude palm oil production, Affin Hwang Capital said.
The firm said the results for Kuala Lumpur Kepong Bhd, Felda Global Ventures Holdings Bhd, IJM Plantations Bhd, IOI Corp Bhd, Genting Plantations Bhd, Jaya Tiasa Holdings Bhd and WTK Holdings Bhd were below its expectations.
Hap Seng Plantations Holdings Bhd and Tan Ann Holdings Bhd were within, while Sime Darby Bhd came in above expectations, Affin Hwang Capital added.
“For 2Q17, earnings for the plantation sector were a disappointment, partly due to higher-than-expected cost of production that affected some plantation companies’ earnings.
“Notably, given the rising earnings contribution from the plantation division offsetting the deterioration in the timber earnings, we are placing Ta Ann, Jaya Tiasa and WTK under the plantation sector, going forward (previously under the timber sector),” it said in a report today.
Affin Hwang Capital recently lowered its sector earnings forecasts for 2017 and 2018 by 4.0-8.0 per cent after taking into account the second quarter results.
It also also downgraded its ratings on KLK, IOI Corp, IJM Plantations, Jaya Tiasa and WTK, and maintained “neutral” on the sector with Genting Plantations as its top pick.