KUALA LUMPUR: Sime Darby Bhd expects crude palm oil prices to trade rangebound between RM2,600 and RM2,700 per tonne,in the next few months as Indonesia continues to consume big amount of palm oil for its biodiesel mandate.
In the first quarter ended September 2017, Sime Darby sold its palm oil at an average RM2,693 per tonne, or four per cent higher than RM2,592 per tonne a year ago.
“In the next few months, we think palm oil would trade rangebound between RM2,600 and RM2,700 per tonne,” said group's plantation division chief executive officer Datuk Franki Anthony Dass.
“The Indonesian government’s continued push for B20 biodiesel mandate is set to consume very big amount of palm oil,” he told reporters at a briefing here today.
Indonesia's B20 mandate that was launched in 2016 would require a minimum 20 per cent blend of palm methyl ester with regular diesel. This palm methyl ester content is much higher than the 15 per cent (the B15 mandate) quota in 2015.
Sime Darby’s forecast is conservative when compared to vegetable oils analyst Dorab Mistry who thinks palm oil prices can rise as high as RM3,100 a tonne by January 2018.
Two weeks ago at the Indonesian Palm Oil and 2018 Price Outlook Conference in Bali, Dorab justified the bullish forecast on tight inventory levels and a weaker-than-expected production recovery in Malaysia and Indonesia.
Franki said in the current year ending June 2018, Sime Darby expects to harvest 2.89 million tonnes of palm oil, seven per cent more than last year’s 2.70 million tonnes.
“We have been replanting our trees aggressively for the past few years,” he said, adding that as more oil palm trees mature, the group aims to harvest seven to eight per cent more than last year's output.
Sime Darby is splitting its plantations and property businesses - both listed as discontinued operations in the quarterly earnings statement - for separate listings on Bursa Malaysia on November 30.
The group’s shares closed unchanged at RM9.00 today at 5pm.
Sime Darby chief financial officer Datuk Tong Poh Keow, at the briefing, revealed the indicative price of the three entities.
Upon its listing, Sime Darby Plantation shares are likely to be priced at around RM5.43 to RM6.15 with a market capitalisation of between RM36.93 billion and RM41.82 billion.
Sime Darby Property shares are likely to be priced at RM1.45 to RM1.72 with a market capitalisation ranging between RM9.85 billion and RM11.70 billion.
The smaller Sime Darby is likely to be around RM1.18 and RM2.17 with a market capitalisation of between RM8.00 billion and RM14.78 billion.