CPO price slump sparks lower plantation profits for Wilmar

Soybean yields began to drag down CPO prices.

Analysts are starting to witness a fall in CPO prices, marking the start of lower plantation profits for agribusiness group Wilmar.

According to RHB, good soybean yields reported in Brazil have begun to drag down CPO prices.

"We believe the downward pressure on CPO prices would persist as most companies are expecting solid improvements in FFB production this year," the firm said.

However, Wilmar is expected to replant 10,000ha of its plantation this year and is seeing only 5-10% increase in production levels.

Meanwhile, RHB said better processing margins will offset the lower plantation profits.

"Based on our 2017 house view on CPO price remaining at MYR2,500/tonne (USD564/tonne), we expect plantation profits to come off significantly. Nevertheless, we believe this would be more than offset by better processing margins due to lower feedstock costs," RHB explained.

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