Lang
KUALA LUMPUR – Wilmar International is projected to experience significant production shortfalls in 2027-2028, in contrast to the latter half of 2026, as persistent dry weather conditions in Indonesia pose a threat to its extensive plantation operations. This outlook emerges from CIMB Securities' analysis following Wilmar's first-half 2026 (1H2026) briefing.
The international agribusiness giant revealed that deteriorating rainfall in Kalimantan, Indonesia, observed since July, could severely impact its crude palm oil (CPO) production yields. CIMB Securities highlighted this concern in a note issued on Friday after an analyst briefing, stating: 'With 70% to 80% of Wilmar’s Indonesian estates located in Kalimantan, prolonged dry conditions could affect yields with a lag, leaving production more exposed in 2027-2028 than in 2H2026.'
Despite these looming challenges, Wilmar's fresh fruit bunch (FFB) yield saw a 6% year-on-year decline to 1.92 million tonnes in 1H2026. However, this plantation weakness was largely counterbalanced by robust group performance, including high sales volumes and strong earnings growth for the period. The company reported a substantial 13% year-on-year rise in pre-tax profit, reaching US$1.06 billion, against a revenue of US$38.6 billion.
CIMB Securities further noted that a tightening of palm oil export supply from Indonesia could create additional upsides for Malaysian palm oil producers. Weather patterns are also identified as a critical pricing catalyst; for instance, the 2023-2024 El Niño phenomenon previously led to a 1% decline in the group's FFB yields in 2025 and a 5% drop in 1H2026.
Consequently, CIMB has reaffirmed its 'overweight' recommendation on Malaysia's plantation sector, maintaining CPO price forecasts of RM4,450 per tonne for 2026 and RM4,550 per tonne for 2027. The research house named IOI Corporation Bhd (KL: IOICORP) and Kuala Lumpur Kepong Bhd (KL: KLK) as its top picks, assigning 'buy' calls with target prices of RM4.54 and RM23.66 respectively. While SD Guthrie Bhd (KL: SDG) was also mentioned, CIMB retained its 'hold' rating on the stock, with a target price of RM6.86 per share.
Currently, CPO futures contracts are trading at RM4,725 per tonne on Bursa Malaysia’s derivatives market, reflecting a 4.58% increase since last year.
Source: KLSE Screener