SDG: Plantation Sector Navigates Mixed Q4 Landscape; Select Firms Anticipated to Outperform

The plantation sector is bracing for a diverse set of fourth-quarter (4Q25) earnings, with some major players poised to exceed expectations while others may fall short. Overall, the majority of companies are anticipated to report results largely in line with forecasts, driven by a combination of strong operational performance and shifting market dynamics.

Performance Review

For 4Q25, analysts expect most companies to report in-line earnings based on estimated Fresh Fruit Bunch (FFB) production levels. Notably, IOI Corp (IOI) and Johor Plantations Group (JPG) are projected to outperform their respective forecasts, signaling robust performance. Conversely, TSH Resources and PP London Sumatra Indonesia (LSIP) are anticipated to deliver results below estimates.

Malaysian-centric planters are expected to see an improvement in quarter-on-quarter (QoQ) earnings, primarily bolstered by strengthening output despite a slight decrease in average selling prices (ASPs) for crude palm oil (CPO) and palm kernel (PK). In contrast, Indonesia-centric planters are likely to experience flattish-to-slightly lower QoQ earnings, as the positive impact of higher output is largely offset by lower ASPs.

Looking at the full fiscal year 2025 (FY25), both Malaysian and Indonesian planters are set for strong year-on-year (YoY) earnings growth. This positive trend is attributed to higher CPO and PK prices, coupled with increased output throughout 2025. Malaysian downstream players are also expected to see stronger QoQ and YoY margins, benefiting from reduced competition from Indonesia. However, Indonesian downstream players may face weakening QoQ and YoY margins due to a narrower tax differential between upstream and downstream products.

CPO prices have recently witnessed a 5% uptick over the past few weeks. This increase is primarily driven by positive news surrounding US biofuel policy, ongoing land seizure developments in Indonesia, and escalating geopolitical risks between major global powers. Despite this, Malaysian palm oil inventory levels, while declining 7.7% month-on-month (MoM) to 2.81 million tonnes in January 2026, remain significantly above the 15-year historical average of 10%.

Future Outlook and Risks

The sector’s earnings are projected to moderate in 1Q26 on a QoQ basis, influenced by lower prices and seasonal output patterns. The investment bank maintains a “NEUTRAL” sector weighting. CPO price assumptions are set at MYR4,250/tonne for 2026 and MYR4,100/tonne for 2027.

Several positive factors could influence the sector’s trajectory. These include the finalization of US biofuel quotas by early March, potential benefits from escalating trade tensions that could shift demand towards CPO, and additional news flow regarding Indonesian landbank seizures, which could impact productivity and CPO prices positively. However, the sector faces significant downside risks, including a prolonged trade war, adverse changes in crude oil prices affecting biofuel mandates, extreme weather conditions leading to supply imbalances, shifts in demand for vegetable oils due to economic cycles, policy changes in key importing and exporting countries, revisions in Indonesia’s tax structure, and increasing environmental, social, and governance (ESG) concerns for listed companies.