Downstream palm oil margins diverge: Malaysia strengthens, Indonesia tightens

The sector’s quarter three 2025 (3Q25) earnings were largely above expectations. RHB expects net profit to moderate quarter-on-quarter (QoQ) in 4Q25, from lower crude palm oil (CPO) and palm kernel (PK) prices, as well as lower QoQ output in Malaysia, albeit offset by higher QoQ output in Indonesia.

“We maintain a NEUTRAL weighting on the sector,” said RHB. In Malaysia, for companies under coverage, FFB output rose 12.5% QoQ or 0.7% year-on-year (YoY).

Malaysian planters expect 4Q25F output to moderate QoQ, with the peak month being October, with most maintaining their midsingle-digit FFB growth forecasts for 2025.

For Indonesia, RHB saw an average 5.3% QoQ or 6.2% YoY output growth in 3Q25 for the companies we cover, bringing the nine months 2025 (9M25) growth to 7.7% YoY.

The strong YoY recovery in Indonesia was due to improvements following the impact of El Nino, which affected output in 9M24, while the QoQ growth stemmed from a mini output peak recorded in Indonesia in July.

Going forward, most Indonesian players expect to see QoQ output growth in 4Q25. This is anticipated to be the peak quarter for the year, and are keeping their mid- to high-single-digit growth for 2025.

In Indonesia, the price of CPO rose 5% QoQ or 0.7% YoY, while PK prices rose 4% QoQ or 34% YoY. For Indonesia planters with downstream operations, margins weakened QoQ from a narrower tax differential between upstream and downstream products of USD76 per tonne.

“YoY, however, we saw margins improve as the tax differential widened by 23% YoY from USD62 per tonne in 3Q24,” said RHB.

In Malaysia, RHB saw mostly all downstream players recording wider QoQ margins, due to competition from Indonesia.

Going forward, most planters are guiding for refining margins to remain tight, while there are volume improvements for further downstream products in Europe.

Tags: palm kernel, Indonesia, prices, Crude palm oil, Malaysia, profit, output