Greetings, fellow investors and market enthusiasts! Today, we’re diving deep into the latest financial report from TSH Resources Berhad, a prominent player in Malaysia’s palm oil sector. The first quarter of 2025 has certainly delivered some impressive numbers, showcasing the company’s resilience and strategic positioning in a dynamic market.

At a glance, TSH Resources has posted a remarkable surge in profitability, with its profit for the period soaring by a staggering 130% compared to the same period last year. This strong performance, coupled with a healthy net cash position, paints a promising picture, even as the broader CPO market faces new headwinds. Let’s unwrap the details and see what’s driving these results and what lies ahead.

Core Data Highlights: A Quarter of Robust Growth

TSH Resources’ Q1 2025 results demonstrate a significant leap in financial performance across key metrics. The company reported a substantial increase in both revenue and profitability, primarily driven by its dominant Palm Products segment.

Overall Financial Performance

The consolidated statement of comprehensive income reveals a strong upward trajectory:

This translates to a remarkable 14% increase in revenue, a 42% jump in gross profit, and an impressive 104% surge in operating profit. The core profit before taxation saw a 122% increase, culminating in a 125% rise in profit before taxation and a 130% increase in profit for the period compared to the same period last year. For shareholders, this means a significant boost in basic earnings per share, from 1.45 sen to 3.56 sen.

Business Unit Performance

Let’s break down the performance by segment:

Palm Products Segment: The Main Driver

The Palm Products segment continues to be the bedrock of TSH Resources’ success, with revenue increasing by 13% to RM262.4 million compared to RM231.8 million in the same period last year. Its operating profit surged by 78% to RM82.4 million (from RM46.2 million).

This stellar performance was primarily due to a significant rise in average selling prices for Crude Palm Oil (CPO) and Palm Kernel (PK):

While CPO and PK sales volumes saw a marginal decrease, the substantial price increases more than compensated, driving revenue growth. Additionally, the segment benefited from lower upkeep and maintenance expenditures, particularly reduced fertiliser costs. It’s worth noting that this improvement was achieved despite a significant increase in Indonesia Export Levy and Duty on CPO, which rose by 78% to RM36.2 million from RM20.3 million in the previous year.

Others Segment: Improving Contributions

The “Others” segment, which includes rubber and wood products, also showed positive signs. Revenue for this segment grew by 22% to RM13.0 million from RM10.6 million. More importantly, its operating loss reduced by a significant 55%, from RM3.8 million to RM1.7 million. This improvement was attributed to higher rubber sales from Industrial Tree Planting and lower production and maintenance expenses for the bio-mass power plant.

Financial Health: A Strong Balance Sheet and Cash Flow

TSH Resources continues to maintain a robust financial position. As at 31 March 2025, the company’s cash and bank balances increased to RM288.7 million, up from RM263.4 million at the end of December 2024. The total loans and borrowings have also seen a decrease, settling at RM245.0 million from RM273.5 million previously, reinforcing the company’s net cash position.

From a cash flow perspective, the company generated strong net cash from operating activities, reaching RM103.9 million, a significant increase from RM47.4 million in the same period last year. This strong operational cash generation supports the company’s investments and strategic initiatives, even after accounting for the repurchase of treasury shares amounting to RM34.3 million during the quarter.

Risk and Prospect Analysis: Navigating the Market Landscape

While TSH Resources delivered a stellar Q1 2025, the broader market outlook for CPO has shifted since the start of the second quarter. CPO prices have declined by over 20% and are currently hovering around RM3,800 per metric ton. This downturn is influenced by several factors:

• Increased Production: Higher output from major producers like Malaysia and Indonesia, aided by favorable weather conditions.
• Global Supply of Alternative Oils: A surge in soybean oil supply from the U.S. and Brazil.
• Geopolitical Tensions: Newly imposed U.S. tariffs and ongoing U.S.-China trade tensions contributing to market uncertainty.

However, it’s not all headwinds. The recent decline in CPO prices has turned its premium over soybean oil into a discount, which is a positive development. This improved competitiveness could potentially stimulate stronger demand for CPO, helping to cushion the impact of increased supply.

Despite these external challenges, TSH Resources maintains a positive outlook on its growth prospects. The company is backed by its strong cash flow and a solid balance sheet, reinforcing its ability to weather market fluctuations. Crucially, TSH has embarked on a new planting program, aiming to expand its planted hectarage over the coming years. This strategic move is geared towards enhancing long-term shareholder value by increasing future production capacity.

The Group remains confident in delivering a satisfactory performance for the full year 2025, despite the prevailing global economic uncertainties.