Ever wondered how Malaysia’s plantation giants are faring amidst fluctuating commodity prices? Today, we’re diving into the latest financial performance of TH Plantations Berhad (THP), a significant player in the Malaysian palm oil sector, as revealed in their first-quarter report for the period ended 31 March 2025.
The report paints a picture of resilience, with the Group demonstrating a strong increase in revenue, primarily driven by higher commodity prices. While a closer look at the Profit Before Tax (PBT) reveals some non-operational headwinds, THP’s core business performance shows encouraging strength. Let’s unpack the details and understand what this means for the company’s future.
Revenue Soars on Higher CPO Prices
THP kicked off the financial year with a notable surge in revenue, showcasing the direct impact of favourable commodity prices. For the first quarter ended 31 March 2025, the Group reported a revenue of RM179.1 million.
Q1 FY2025 Revenue
RM179.1 million
Compared to Q1 FY2024
14% Increase
This impressive 14% increase compared to the corresponding period last year was primarily fuelled by higher average realised prices for Crude Palm Oil (CPO), Palm Kernel (PK), and Fresh Fruit Bunches (FFB). It’s worth noting that this growth occurred despite lower sales volumes across these key products, underscoring the significant influence of market prices on THP’s top line as a pure upstream player.
Navigating Profitability: A Closer Look at PBT
While revenue showed robust growth, the Group’s Profit Before Tax (PBT) for the quarter saw a slight decline to RM25.5 million.
Q1 FY2025 PBT
RM25.5 million
Compared to Q1 FY2024
7.6% Decline
This 7.6% decline compared to the same quarter last year was mainly attributed to factors outside of core operations, including lower fair value gains on biological assets and unrealised foreign exchange losses. The report also highlighted a shortage of skilled harvesters as a contributing factor.
However, it’s crucial to look beyond these non-operational elements. When excluding the effects of fair value gains on biological assets and unrealised foreign exchange losses, THP’s operational PBT actually rose by a significant 37% compared to the same quarter last year. This indicates a stronger core performance and suggests that the underlying business is healthy and efficient.
Gazing Ahead: Risks, Strategies, and the Road Forward
The palm oil industry is dynamic, and THP, as a pure upstream player, is particularly sensitive to market fluctuations. The report acknowledges that while supply conditions have recently improved, CPO prices have started to fall to their lowest level recorded this year.
In response to these market dynamics and to mitigate the uncertainty and softening of CPO prices, THP has taken a forward position. According to En Mohamed Zainurin Mohamed Zain, THP’s Chief Executive Officer, the Group is committed to strengthening its operational resilience through its “AL-Falah 22/22 – our 5 Years Strategic Business Plan.”
Key strategies include:
- Focusing on yield enhancement and mechanisation to improve productivity.
- Implementing cost optimisation initiatives across operations.
- Expanding replanting activities with higher-yielding materials to boost future output.
- Accelerating digitalisation efforts to enhance efficiency.
- Enhancing ESG (Environmental, Social, and Governance) compliance in line with global sustainability standards, which is increasingly important for market access and investor confidence.
THP remains cautiously optimistic about the industry’s outlook, underpinned by steady demand for palm oil. The Group anticipates a satisfactory financial performance for the Financial Year Ending 31 December 2025, expressing optimism in the abilities of its current strategies and initiatives to address ongoing issues and challenges effectively.
Summary and
TH Plantations Berhad’s Q1 FY2025 report demonstrates a robust top-line performance, driven by favourable commodity prices. While the reported Profit Before Tax was impacted by non-operational factors like fair value adjustments and foreign exchange movements, the significant increase in operational PBT highlights the underlying strength and efficiency of the Group’s core plantation business.
The company is clearly aware of the volatile nature of CPO prices and is proactively implementing a strategic business plan, “AL-Falah 22/22,” to enhance operational resilience through yield improvement, mechanisation, cost control, and digitalisation. Their commitment to ESG compliance also positions them well for long-term sustainable growth.
However, potential retail investors should be mindful of the following key points:
- **Commodity Price Volatility:** As a pure upstream player, THP’s financial performance remains highly sensitive to fluctuations in CPO prices. The recent softening of prices could impact future quarters.
- **Non-Operational Impacts:** Fair value gains on biological assets and unrealised foreign exchange losses can introduce volatility to reported PBT, even if core operations are strong.
- **Operational Challenges:** The reported shortage of skilled harvesters indicates ongoing labour challenges within the sector, which could affect productivity and costs.
Overall, THP appears to be navigating a challenging market with strategic foresight, focusing on internal efficiencies and long-term sustainability. The management’s optimistic outlook for the full financial year, backed by proactive measures, suggests a company committed to delivering value to its stakeholders.
TH Plantations Berhad’s Q1 FY2025 results underscore the dynamic nature of the plantation sector. Despite external headwinds from fluctuating CPO prices and non-operational accounting impacts, the company’s core business performance remains strong, supported by strategic initiatives aimed at long-term resilience and sustainability. The focus on yield enhancement, mechanisation, and ESG compliance positions THP to face future challenges and opportunities.
Do you believe THP’s strategic initiatives, especially in mechanisation and ESG, will effectively cushion the impact of fluctuating CPO prices and lead to sustained long-term growth? Share your thoughts in the comment section below!
