Planters face earnings pressure from Budget 2027 wage rise
CIMB Securities forecasts larger earnings reductions than PublicInvest Research, while both expect palm oil prices to help cushion higher labour costs.
Budget 2027 will lift the monthly minimum wage from RM1,700 to RM2,000 effective June 2027, with plantation earnings expected to come under pressure. CIMB Securities projects that the additional wage costs could lower earnings by 0.2% to 4% in FY2027 and 2 to 7% in FY2028.
The RM300 increase, equivalent to 17.6%, will benefit more than four million workers. The exemption applies to micro, small and medium enterprises whose annual revenue falls below RM50 million.
CIMB Securities identified Johor Plantations Group Bhd, Ta Ann Holdings Bhd and Hap Seng Plantations as the most exposed companies. It estimated their respective FY28 earnings reductions at 4.3%, 6.1% and 6.7%, although improved productivity could soften the effect.
The firm said upstream operators with more general estate workers earning the minimum wage would face greater pressure. Harvesters would be less exposed because they generally earn above that threshold.
PublicInvest Research forecast a minimal earnings effect in 2027 and about 1% in 2028. Its channel checks suggested overall production costs could rise by 2% to 5%. Labour accounts for about 20% to 25% of those costs, behind only fertiliser.
Both firms expect stronger crude palm oil (CPO) prices to cushion wage costs. CIMB Securities anticipates tighter supply in 2027, while PublicInvest Research also cited higher palm kernel credit and forecasts a full-year CPO price of RM4,500 per tonne.
Both retained their ‘overweight’ sector ratings and expect faster mechanisation. PublicInvest Research said machinery handles less than 50% of general field activities in Malaysia and under 15% of harvesting. Some operators may outsource general work, it added.
