04.05.2020 (The Edge Markets MY) - KUALA LUMPUR (May 4): The potential impact of Covid-19 on Sime Darby Plantation Bhd’s business has been limited at this point of time, said its chairman.
In its annual report for the financial year ended Dec 31, 2019 (FY19), chairman Tan Sri Abdul Ghani Othman said the group forecasts palm oil demand to continue as it is an important and essential ingredient of food and non-food products even during times of crisis.
“Based on preliminary assessment, the potential impact of Covid-19 on the group’s business and results has been limited at this juncture,” he said.
That said, the chairman noted that the pandemic had yet to reach its peak as many countries are struggling to contain the rapid increase in infection and mortality rates.
As such, a prolonged pandemic may impact global markets, disrupt supply chains and economies, while also triggering a global recession that could also impact the supply and demand of the edible oil worldwide.
Commenting on the group’s performance in FY19, Abdul Ghani noted that unfavourable weather conditions impacted its fresh fruit bunch (FFB) production, on top of lower crude palm oil (CPO) and palm kernel (PK) prices that were present for most of last year – with the US-China trade war to boot.
While he noted that the rebound in CPO prices at the end of 2019 did provide some respite, the diplomatic friction between Malaysia and India impacted demand from the latter.
The chairman noted that its diversification strategy, particularly through its downstream business – the new Sime Darby Oils brand – had helped it weather challenging market conditions.
“From differentiated products to alternative sectors such as renewables, the group’s integrated supply chain allowed us to leverage on our presence across the palm oil production value chain. In short, we were partially insulated against socio-economic, political, environmental and social influences due to our integrated approach to business,” he said.
Moving forward, Abdul Ghani said, the planter will continue to dedicate its resources to some of its most critical business activities such as replanting and outside crop programmes, human capital upskilling, digitalisation and supply chain engagement – particularly with smallholders and third-party traders.
Shares in Sime Darby Plantation were trading 3.64% or 18 sen lower at RM4.77 apiece at the noon market close today, giving it a market capitalisation of RM32.84 billion.