$SWKPLNT / 5135 (SARAWAK PLANTATION BERHAD) - 2Q24
Sarawak Plantation’s 2QFY24 core net earnings were reported at RM13.8m, reflecting a quarterly growth of 24.5% and a yearly growth of 15.8%. The year-on-year improvement was primarily due to reduced production costs from higher Fresh Fruit Bunches (FFB) production and lower fertilizer costs.

Core net profit for 1HFY24 stood at RM24.9m, which is considered within expectations, accounting for 34-36% of analysts' full-year estimates. The revenue for 2QFY24 increased by 3.3% quarter-on-quarter (QoQ) and 3.2% year-on-year (YoY), driven by higher selling prices of Crude Palm Oil (CPO), Palm Kernel (PK), and FFB.

Revenue and Earnings Growth: The company showed resilience with solid YoY and QoQ growth in core net earnings, supported by higher FFB production and better selling prices for CPO and PK. This indicates good operational management, particularly in cost control (e.g., lower fertilizer costs).

Industry Tailwinds: The broader industry context, with decreasing inventories and strong export demand, is favorable. This could support continued strong pricing for CPO in the near term, potentially boosting revenue further in 2H24.

Operational Hiccups: Despite the positive earnings, the decline in extraction rates and slight drop in CPO and PKO production could be red flags. If these issues persist, they could weigh on future profitability, particularly if CPO prices were to decline.

Conservative FFB Forecasts: Analysts have downgraded their FFB production forecasts due to weaker-than-expected output and challenging weather conditions. This conservative stance suggests there may be limited upside unless the company can overcome these operational hurdles.

Sarawak Plantation's recent results show some positive growth in earnings, driven by higher FFB production and better cost management. However, issues like lower extraction rates and revised production forecasts are concerning. While the company could see a boost in earnings in the second half of the year due to strong CPO prices and peak season, I'm cautious about the long-term outlook. I'd prefer to wait and see how the company handles