Sarawak Plantation set for stronger FY26

KUCHING (Dec 23): Sarawak Plantation Bhd (Sarawak Plantation) is set for a stronger financial year 2026 (FY26) supported by an expanding harvestable area of nearly 1,000 hectares and a declining cost of production, as scale and operational efficiencies improve.

Analysts with MBSB Investment Bank Bhd (MBSB Research) in its analysis noted that the group’s earnings visibility remains stable despite recent short-lived wet weather disruptions.

It said that production prospects remain firm, with FY25 output guided at about 360,000 tonnes and a further 20 to 25 per cent growth expected in FY26.

This will be supported by newly matured hectarage of about 900 hectares in FY26, following an estimated 1,000 hectares from mid-2025.

Yield performance has also shown structural improvement, rising from 16 tonnes per hectare in 2023 to an estimated more than 18 tonnes per hectare by FY26.

Meanwhile, the oil extraction rate (OER) averaged 19.37 per cent in the first nine months of FY25, already above the Sarawak average, and is projected to increase to 19.6 per cent by FY26.

Management also expects external FFB expects external fresh fruit bunch (FFB) purchases to rise modestly in absolute terms but decline as a proportion of total intake, from below 50 per cent currently to under 40 per cent in FY26 as internal production increases.

“This is a strategic game rather than a demand issue. Greater reliance on internal FFB improves quality control, harvesting timing and OER, while reducing margin volatility.

“Management highlighted the wide margin gap between estate operations at about 35% and mill-based activities at around 4 per cent, reinforcing this approach,” it said.

Additionally, cost pressures are expected to remain manageable despite fertiliser prices averaging RM1,400 per tonne in FY25 and may rise by 5 to 10 per cent next year.

However, the house said this is likely to be partly offset by a firmer ringgit.

The cost of crude palm oil (CPO) production is estimated at below RM2,700 per tonne in FY25, with a further reduction to under RM2,400 per tonne in FY26 as volumes scale and fixed costs are diluted.

Encouragingly, labour availability has also largely normalised, alleviating a key operational bottleneck.

MBSB Research added that management has also tightened its operational focus, with stronger field supervision, improved road maintenance and better pest management helping to stabilise yields and OER.

“The continuous monthly on-site operational and costing reviews have improved decision-making speed and accountability, reducing execution slippage.

“Overall, emphasis remains on consistent harvesting efficiency, cost discipline and estate-level productivity rather than aggressive expansion or mergers and acquisitions,” it said.

On weather conditions in Sarawak, MBSB Research noted that the impact has been limited as rainfall has been largely confined to afternoons, allowing harvesting to proceed in the mornings.

While January remains a higher-risk period for flooding, it noted that no major issues have emerged so far.

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