El Nino Threatens Industries, from CPO to Pharmacy

The El Nino phenomenon is almost certain to hit Indonesia which can affect the stock and operational performance of several issuers, including the plantation and CPO, pharmaceutical, and consumer goods sectors.

Asteria Desi Kartikasari

29 Mei 2023 - 19.32
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El Nino Threatens Industries, from CPO to Pharmacy

Forest fires and community oil palm plantations occurred in a number of places in Bukit Kerikil Bengkalis Village and Gurun Panjang Village in Dumai, Dumai Riau, Monday (2/25/2019)./Bisnis/Photo credit: Antara

Bisnis, JAKARTA  El Niño is almost certain to hit Indonesia. The phenomenon would affect various companies' operational and share performances, including those in the plantation, CPO, pharmacy, and consumer goods sectors.

El Niño climate phenomenon is indicated by prolonged drought, which has significantly affected issuer performances in many sectors. Natalia Sutanto, Hasan Barakawan, and Ismail Fakhri Suweleh, analysts at BRI Danareksa Sekuritas, said in their research that El Niño will affect the palm plantation sector the most as it can lead to stagnating production.

Moreover, El Niño-related drought will hinder the development of palm oil fruits and lower the production of fresh fruit bunches (FFB). BRI Danareksa Sekuritas analysts also deemed that the three preceding El Niño phenomena in 2002, 2004, and 2015 have caused an increase of CPO by an average of 5.5 percent and 16 percent within the next 12 months.

“We estimate to see a similar trend with price increases for the second semester of 2024. As for 2023, we believe the demand is still low due to exports declining, while prices of other vegetable oils are dropping,” they wrote.

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