Sri Lanka’s Carson says palm oil market seems promising despite crude oil price drop


July 28, 2015 (LBO) – The palm oil industry looks promising and demand should grow in future despite the price drop of crude oil and maturing trees, according to Sri Lanka’s Carson Cumberbatch group with plantations in Malaysia and Indonesia.

However in spite of positive expectations, Carson’s palm oil prices experienced much volatility during the first half of the financial year 14/15, trading below par, driven by factors such as lower soy oil prices led by bumper soya bean crop, strong production growth in sunflower oil and the decline in global crude oil prices which affects CPO prices mainly due to the impact on the demand for palm oil based bio diesel.

Carson’s head says, plants maturing in the future will help the company to boost sales.

“Considering the maturity profile of our plantations, where a significant portion will only reach maturity in the upcoming years, the future appears to be promising,” Tilak de Zoysa, chairman of Carson Cumberbatch PLC, told shareholders in 2014/2015 company annual report.

“However, factors such as low CPO trading prices, adverse weather conditions and an unfavorable movement in exchange rates could have a negative impact on sector performance.”

About 22.4 percent of the company’s plants are in immature stage which is below four years while 25.7 percent plants are young (4-6 years). 33 percent of plants are in peak production age and about 18.9 percent plants are above 12 years.

Oil palm trees have an average life of 22 years, with the first three years as immature and remaining years as mature.

Carson has oil palm plantations spread across 68,099 hectares in Indonesia and 1,387 hectares in Malaysia.

The group’s plantation business has also developed new land areas, during the financial year concluded in March 2015 and stood approximately 3,700 hectares, in different operating locations in Indonesia.

Nevertheless, the report shows that Carson’s oil palms sector net profit was down 40.7 percent to 3.1 billion rupees during the twelve months under consideration, as against a profit of 5.3 billion recorded during the previous financial year.

The loss was partly due to foreign exchange losses raised due to the depreciation of the Indonesian Rupiah and change in fair value of biological assets.

Carson’s palm oil production for the year increased by 33,243 MT to 234,270 MT on the back of higher Fresh Fruit Bunches (FFB) volumes produced during the period.

The group’s palm oil business is handled by Good Hope, a subsidiary of Carson.

In a separate release, Good Hope says that it expects the cropping pattern to recover in the coming year as majority of the Company’s plantations are still within the peak production period.

“We expect the Palm Oil prices to trade at around current levels and stabilize towards the end of the year, in line with forecasts made by industry analysts,” Good Hope said.

“We have also been able to manage the cost of production through stringent cost management initiatives and through focus on improving the field management practices.”