Thursday April 1, 2010

Sime Darby may miss output target

KUALA LUMPUR: Sime Darby Bhd may miss its production target this year due to drier-than-usual weather conditions caused by El Nino, an executive said.

Output might fall by between 5% and 7% below forecast, Sime Darby Plantation Bhd managing director Datuk Azhar Abdul Hamid said in aBloomberg interview.

The company was targeting production of 2.4 million tonnes from its plantations in Malaysia and Indonesia, Azhar had said on March 9.

“It has a negative impact on us,” Azhar said. “Obviously production has been down.”

Lower output of the world’s most-consumed edible oil may help to extend a rally in prices, which rose 57% last year as the global economy moved out of recession. Palm oil may surge to RM3,200 a tonne in the second half as drier-than-usual weather caused by El Nino curbs yields in Indonesia and Malaysia, according to a forecast from Dorab Mistry, director of Godrej International Ltd, on March 9.

Palm oil for June delivery rose 0.6% to RM2,561 a tonne on the Malaysia Derivatives Exchange yesterday.

El Ninos involve a warming of the equatorial Pacific, bringing increased rain to South America and drought or reduced rainfall to Asia, hurting crops.

Meanwhile, in an interview with Reuters, Azhar said Sime Darby would spend RM3bil to RM5bil on its oil palm estates this year as global demand for the vegetable oil grows.

Sime Darby owns 530,000ha of estates planted with oil palms in Malaysia and Indonesia and has a further 300,000-400,000ha of concessions from Liberia. — Agencies

http://biz.thestar.com.my/news/story.asp?file=/2010/4/1/business/5973542&sec=business