UPDATE 2-Malaysia's Sime Darby Plantation posts strong Q2, to cut foreign labour reliance

* Says “exploring all avenues available” to ease labour shortage

* Reports sharp spike in Q2 profit on stronger palm oil prices

* Q2 net profit at 378 mln ringgit, vs 27 mln ringgit year ago (Recasts with target to cut foreign labour dependency, adds details, quotes)

KUALA LUMPUR, Aug 27 (Reuters) - Malaysia’s Sime Darby Plantation reported sharply higher second-quarter profit on Thursday as stronger palm oil prices offset a global slump in demand, particularly in Europe, due to the coronavirus pandemic.

The world’s largest palm oil planter by land size, which has conducted a nationwide search for more local workers, also said it hopes to reduce its reliance on foreign labour by 5% as COVID-19 aggravates a labour crunch, but conceded it would be a “tall order”.

Global travel and movement curbs to contain the coronavirus have left Malaysia’s foreign labour-reliant palm plantations grappling with a shortage of 37,000 workers, nearly 10% of the total workforce.

Foreigners account for 75% of Sime Darby’s employees. The company loses about 2,000-3,000 tonnes of palm fruit bunches daily due to a shortage of over 2,000 workers to harvest the fruit, according to group managing director Mohamad Helmy Othman Basha.

“We are doing everything that we can to recruit locals, but the success rate is not that good,” Mohamad Helmy said at a media briefing. “Even if we can reduce our foreign worker dependency from 75% to 70%, we will consider that as a success.”

Malaysians typically shun plantation work as it is considered dirty and dangerous.

In a filing with the stock exchange, Sime said it was “exploring all avenues available” to ease the labour shortage, including mechanisation and digitalisation.

For April-June, Sime posted a net profit of 378 million ringgit ($91 million), versus 27 million ringgit a year earlier. Revenue rose 12% to 3.22 billion ringgit.

Sime forecast crude palm oil prices will trade between 2,500-2,600 ringgit ($599.38) this year. Malaysia’s benchmark crude palm oil contract rose to 2,689 ringgit ($644.69) a tonne on Thursday.

Demand from top buyers India and China has returned to pre-COVID levels, but is being curbed by rising prices, said Sime Darby Oils managing director Mohd Haris Mohd Arshad.

“We are starting to see that in India buyers have stocked up and are taking a wait-and-see attitude to see where the prices are going,” he added.

$1 = 4.1710 ringgit