SDG: Plantation Sector Posts Strong 3Q25 Earnings, Positive Outlook Maintained

The plantation sector has demonstrated robust financial performance in the third quarter of 2025 (3Q25), with a significant number of companies surpassing earnings expectations. Out of the surveyed planters, seven recorded results above forecasts, six met predictions, and only one underperformed. This strong showing indicates resilience within the sector despite varying market conditions.

Performance Review

The better-than-expected earnings were primarily driven by diligent cost management and higher output from key Indonesian players. Companies like SDG, JPG, and TSH Resources benefited from lower-than-expected unit costs, while First Resources, Golden Agri, Wilmar, and Nusantara Sawit Sejahtera saw stronger performance due to higher output. However, Kuala Lumpur Kepong’s net profit was slightly below estimates due to losses in its downstream division. Despite these varied outcomes, CPO price assumptions for 2025 and 2026 remain steady at MYR4,350 and MYR4,250 per tonne, respectively, reflecting a stable pricing environment.

Malaysia’s FFB (Fresh Fruit Bunch) output saw a notable increase of 12.5% quarter-on-quarter (QoQ) or 0.7% year-on-year (YoY) in 3Q25. Spot prices for CPO rose 5% QoQ to MYR4,280 per tonne, and for PK, they climbed 2% QoQ to MYR3,460 per tonne. Nevertheless, Malaysian planters anticipate a moderation in 4Q25F output QoQ, with October being the peak month, as most maintain their mid-single-digit FFB growth forecasts for the year.

Conversely, Indonesia’s FFB output is projected to rise QoQ in 4Q25. The 3Q25 period witnessed an average 5.3% QoQ or 6.2% YoY output growth across covered companies, bringing 9M25 growth to 7.7% YoY. This strong recovery in Indonesia is attributed to improvements following the impact of El Nino in 9M24, coupled with a mini output peak recorded in July. Indonesian players expect 4Q25 to be the peak quarter for the year, targeting mid-to-high single-digit growth for 2025F. CPO prices in Indonesia, net of taxes, also saw gains of 5% QoQ or 0.7% YoY, with PK prices up 4% QoQ or 34% YoY, further boosting revenue prospects.

Challenges and Outlook

While downstream margins remained soft in 3Q25, particularly in Malaysia due to competition from Indonesia, there are signs of improvement for downstream products. For Indonesian planters with downstream operations, margins weakened QoQ due to a narrower tax differential between upstream and downstream products, but notably improved YoY. Planters are anticipating tight refining margins going forward, yet foresee volume improvements for further downstream products in Europe, suggesting potential for margin recovery.

Overall, the investment bank maintains a NEUTRAL weighting on the plantation sector, acknowledging both the recent strong performance and lingering challenges. The top picks remain Johor Plantations Group (JPG), Sarawak Oil Palms (SOP), SD Guthrie (SDG), IOI Corp (IOI), First Resources (FR) and London Sumatra Indonesia (LSIP), indicating continued confidence in these key players within the sector.