KUALA LUMPUR (May 27): Plantation group Kretam Holdings Bhd (KHB) net profit in the first quarter ended March 31, 2022 (1QFY22) leapt 253.3% year-on-year (y-o-y) to RM45.7 million from RM12.9 million a year ago, with improvements in both segments led by the plantation and mill division.

Quarterly earnings per share came in at 1.97 sen, compared with 0.56 sen in 1QFY21.

Revenue increased by 59% y-o-y to RM246.5 million from RM154.9 million, again as both segments grew.

"The relative higher FFB yield and higher CPO (crude palm oil) prices have translated into better profit margins for the group," it said.

However on a quarter-on-quarter basis, Kretam’s earnings fell 45.29% to RM45.7 million in 4QFY21, coming off its record high of RM83.53 million due to absence of deferred tax, and lower fresh fruit bunches (FFB) production.

At profit before tax level, 1QFY22 results came in at RM60.53 million, down 17.75% q-o-q from RM73.6 million in 4QFY21. Revenue fell 12.93% q-o-q to RM246.5 million from RM283.12 million.

Looking ahead, the company said that it initially expected that palm oil commodity prices were due for a correction and would fall from an all-time high but several global events have provided "unexpected support" to the palm oil commodity price.

"Events such as adverse weather conditions both in Malaysia and South America, global edible oil disruptions and soaring crude oil prices due to the Russia-Ukraine Crisis have provided a perfect storm for higher palm oil commodity prices," it said.

It added that Indonesia's "rollercoaster" export ruling has also further created volatility in the palm oil commodity market.

On the home front, the company sees the acute labour shortage and the rise in production costs to be the biggest challenge for Malaysian planters.

"With the new minimum wage of RM1,500 being implemented, the soaring diesel prices and raw material, the cost of production is expected to rise for the Group," it said.

Despite these challenges, the group expects CPO prices to remain elevated in the near term due to higher demand as a result of the global economic recovery. It will also monitor and mitigate risks such as labour shortage and rising production costs.

Shares in Kretam settled up 1.5 sen or 2.46% at 62.5 sen, giving it a market capitalisation of RM 1.44 billion.