First Resources, Bumitama Set for Stronger Q2 as Palm Oil Prices Climb
Singapore-listed palm oil firms expect robust second-quarter earnings, driven by increased crude palm oil prices, though rising input costs present a nuanced outlook for integrated groups.
Strong Q2 for Upstream Producers
Singapore-listed palm oil companies anticipate stronger second-quarter earnings, primarily due to elevated crude palm oil (CPO) prices. Upstream-focused producers, including First Resources and Bumitama Agri, stand to benefit most from this market rally. Conversely, integrated groups like Wilmar and Golden Agri-Resources may see gains partially offset by increased feedstock costs for their downstream operations. Palm oil futures have climbed approximately 17% in the year to date, reflecting the positive pricing environment, according to The Business Times Singapore.
Drivers Behind Price Surge
Several factors underpin the CPO price surge. These include tighter supply expectations from the El Nino weather phenomenon, Indonesia's B50 energy mandate, and renewed concerns that Red Sea shipping disruptions could elevate crude oil prices, increasing demand for palm oil-based biodiesel. CPO futures rose 14.8% to RM4,749 per tonne between March 2 and April 3. Prices then retreated 2.3% to RM4,640 per tonne as of August 3. The Malaysia Palm Oil Board (MPOB) projects CPO will stay above RM4,000 per tonne short-term, averaging RM4,300-RM4,500 in 2026. Aletheia Capital expects SGX-listed planters to outperform Bloomberg's Q2 earnings before interest, taxes, depreciation and amortisation (EBITDA) estimates by about 10%.
Cost Pressures Create Nuance
Despite higher CPO prices, rising input costs introduce complexities. Supply chain disruptions, particularly those linked to the Gulf crisis, drive up prices for essential plantation inputs like fertiliser and diesel. Bumitama Agri, for instance, secured most of its full-year fertiliser needs but projects a 5-10% cost increase. Similarly, Wilmar's Q2 EBITDA could surpass last year's, bolstered by higher soybean crush volumes and improved oil palm plantation earnings. However, Bloomberg Intelligence notes that increased fertiliser costs, potentially 13% above December 2025 levels, will likely mitigate some of these gains. Golden Agri-Resources also forecasts higher fertiliser costs for its FY2026.
Outlook and Implications
The positive earnings momentum for palm oil producers should extend into the second half of the year. Aletheia Capital forecasts CPO at US$1,240 per tonne for FY26/27, translating to an operating margin around 60%. This outlook particularly favours companies with younger estates and high oil extraction rates, such as Bumitama Agri and First Resources. Indofood Agri Resources may also gain from stronger downstream refining spreads. While the MPOB believes current catalysts are largely priced into 2026, it anticipates another CPO price spike in 2027 as lower production fully impacts the market. This suggests continued volatility and opportunities for well-positioned Asian agribusinesses.
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