Firmer recovery, CPT benefits spell brighter 2026 for Sarawak Plantation

KUCHING: Analysts are turning more positive on Sarawak Plantation Bhd as the group moves into a firmer production recovery phase, benefits from better cost pass through, and heads toward a steadier earnings outlook in 2026.

Phillip Capital said earnings held up well despite softer year on year revenue in third quarter of 2025 (3Q25) and first nine months of 2025 (9M25) due to weaker sales volume and production.

It said that estate performances are showing clear improvement, with October 2025 seeing a record fresh fruit bunch (FFB) output of about 398,000 metric tonnes, while November sustained near peak levels at about 370,000 metric tonnes.

“Management has revised its 2025 FFB target to 355,000 to 363,000 metric tonnes (from 380,000 metric tonnes), yet continues to guide confidently for a meaningful rebound to 450,000 metric tonnes, supported by improving crop formation and maturing young palms,” it said in a sector update note on Wednesday.

To recap, the group posted a 3Q25 revenue decline from RM149 million to RM139.6 million as lower FFB production offset higher crude palm oil (CPO) product prices.

Core profit rose 12 per cent year on year from RM21.8 million to RM24.3 million, led by lower production costs on the back of stronger palm kernel credit.

Furthermore, the research house said management acknowledged inflationary pressures heading into 2026, including a 1 per cent rise in EPF contributions for foreign workers and a 3 per cent increase in labour expenses following minimum wage adjustments.

Fertiliser prices are also expected to rise by about 5 per cent year on year, though it noted that negotiations for first half of 2026 are still ongoing.

“Despite this, management remained confident that unit production cost per tonne should ease modestly in next year.

“It guided for RM2,600 to RM2,400 per metric tonne for 2025 and 2026 compared with RM2,700 per metric tonne in 2024.

“This is supported by higher internally produced FFB that dilute fixed costs, while selective third party purchases continue to limit margin and extraction leakage,” it said.