Looking ahead of the price slump of crude palm oil (CPO) this year, Boustead Plantations Bhd is implementing measures to enhance its operational efficiency. Its earnings in the upstream oil palm plantation company will reel in the effect of a lower CPO price from the third quarter of the year, Vice-chairman Tan Sri Lodin Wok Kamaruddin told New Straits Times.
While Lodin cited the quantum of the price drop as the challenge, he hopes that the various measures, taken by the group, would improve the efficiency in operations, production, and yield.
"We expect the CPO prices to float between RM2,400 and RM2,800 per ton until the third quarter of this year," he said, as reported.
Lodin, however, said healthy returns was recorded in the last five months, attributed to its plantation operation in that time frame. He also said despite a decline in earnings, the group expects their financial performance this year to be better than of last year.
Improvements in its operational costs would further mitigate some impacts on the expected lowering of CPO prices. "Efficiency in managing the estates are as important as higher production and better yields," he reiterated.
The group expects a larger CPO production from next month spanning to early next year with the group posting a surge in its revenue by 38.2% to RM189 million due to the buoyant palm oil product prices and better crop production in the first quarter ending March 31.
Expecting challenges in the second half of the year, Lodin said there could be a possibility of higher CPO production, resulting in a buildup of inventories whereas of April, its CPO inventory stood at 1.6 million tons.
In comparison to the 2.6 million last year, he said it was due to the demand growth in the last few months as consumers have stockpiled in prior to festivities like Hari Raya and Deepavali.
"Demand has been good for the past five months which prompted the prices to move up to about RM3,300 per ton," he said, adding that the ringgit fluctuation would bring adverse effect to its revenue contribution as its trading was conducted in US Dollars.