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PETALING JAYA: Malaysia’s FGV Holdings Bhd expects its fourth quarter (Q4) production to be lower due to uncertainties in weather and the spread of Covid-19.
“We expect both fresh fruit bunch and crude palm oil (CPO) production in the fourth quarter of fiscal 2020 (fourth quarter of fiscal 2020) to be affected by weather uncertainties and the partial shutdown in Sabah.” said Haris Fadzilah Hassan, CEO of the FGV group, in a change presentation.
He added that as a result, the CPO price would remain strong until the end of the year.
According to a Reuters report, Malaysia’s benchmark rebounded 18% from July to September and the CPO is now trading at RM3,327 per tonne with lower-than-expected production and worse supply.
Haris did not elaborate on weather conditions, but heavy rains and flooding caused by a La Niña weather pattern have disrupted the harvest in Malaysia and Indonesia, two of the world’s top producers.
Movement restrictions were imposed in certain areas of Sabah, Malaysia’s largest palm oil producing state, following a spike in Covid-19 cases.
Border closures driven by this year’s pandemic have also compounded the shortage of workers to harvest the perishable palm fruit, further hurting production.
FGV, which said it was already dealing with a shortage of nearly 2,700 workers, added that it expected the fourth quarter shortage to worsen 4% from the previous one.
“We may face difficulties once the borders are opened and workers who have postponed their journey home decide to return,” Haris said at an online news conference.
FGV expects CPO prices to trade between RM2,500 and RM2,600 per tonne in the first half of 2021, but said its full-year outlook remains “very conservative.”
The group posted a third-quarter net profit of RM136.9 million, up from a loss of RM262.4 million a year ago, due to higher CPO prices and lower losses in its sugar business.
Revenue increased to RM3.99 billion.
FGV has completed the conditional purchase and sale agreement for two divestitures worth RM57.2 million, it added.
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