Assessing the Sustainability of TH Plantations Berhad's Earnings Amid Unusual Items and Management Turbulence

TH Plantations Berhad’s Q2 2025 earnings report revealed a net profit of RM11.8 million, a 99% year-over-year increase, driven by higher crude palm oil (CPO) and palm kernel (PK) sales volumes and improved average prices [1]. However, this growth masks a critical issue: the company’s profit was artificially inflated by RM23 million in unusual items over the past year, a one-time boost that may not recur [2]. Such non-recurring gains, while beneficial in the short term, raise red flags about the sustainability of earnings. Investors must distinguish between operational performance and accounting anomalies to avoid overestimating the company’s long-term profitability [3].

The governance landscape further complicates this picture. In 2025, TH Plantations faced significant leadership upheaval. CEO Mohamed Zainurin was placed on garden leave and issued a show-cause letter over alleged unauthorized RM5.1 million payments to workers, while CFO Marliyana Omar resigned under similar scrutiny [2]. The interim leadership, led by the Board Executive Committee, lacks the strategic continuity needed to navigate volatile commodity markets. This instability could erode investor confidence and disrupt operational discipline, particularly in cost management and capital allocation [4].

Despite these challenges, the company’s Q2 2025 results showed a 5.4% profit margin, up from 3.0% in 2024, driven by higher CPO and PK prices [1]. Yet, the RM23 million boost from unusual items suggests that underlying earnings power may be weaker than reported. For example, if these gains were from asset sales or tax adjustments, they do not reflect core operational efficiency. Analysts warn that without recurring contributions from such items, future profits could contract, especially if commodity prices normalize [3].

The governance risks are equally concerning. TH Plantations’ 2024 Corporate Governance Report outlines robust policies, including board charters and remuneration frameworks [5]. However, the recent leadership turmoil indicates gaps in oversight. The interim CEO and CFO appointments, while temporary, highlight a lack of depth in executive talent. This could delay critical decisions, such as responding to environmental regulations or optimizing plantation yields, which are vital for long-term competitiveness [5].

Investors should also consider broader market trends. Malaysian plantation companies are increasingly under pressure to align with sustainability goals, with environmental disclosures becoming standard practice [6]. TH Plantations’ ability to balance profitability with ESG compliance will determine its resilience in a sector facing stricter regulatory scrutiny and shifting consumer preferences.

In conclusion, while TH Plantations Berhad’s Q2 2025 results appear promising, the reliance on non-recurring items and governance turbulence paint a mixed picture. Investors must scrutinize the quality of earnings and assess whether the company can stabilize its leadership and operational practices. Without addressing these issues, the sustainability of its financial performance remains uncertain.

Source:
[1] TH Plantations Berhad Second Quarter 2025 Earnings: EPS, [https://finance.yahoo.com/news/th-plantations-berhad-second-quarter-224117968.html]
[2] TH Plantations ends CEO Mohamed Zainurin's contract, [https://theedgemalaysia.com/node/768221]
[3] There May Be Underlying Issues With The Quality Of TH ..., [https://finance.yahoo.com/news/may-underlying-issues-quality-th-231353847.html]
[4] TH Plantations Berhad Announces Chief Financial Officer..., [https://www.marketscreener.com/news/th-plantations-berhad-announces-chief-financial-officer-changes-effective-july-18-2025-ce7c5cd2de8ef726]
[5] Corporate Governance, [https://www.thplantations.my/corporate_governance.php]
[6] Environmental Disclosure Trend Among Malaysian Plantation Companies, [https://www.researchgate.net/publication/379000587_Environmental_Disclosure_Trend_Among_Malaysian_Plantation_Companies]