Weaker ringgit and CPO price affect IOI Corp

CIMB Equities Research said IOI Corporation Bhd 1QFY6/16 core net profit (excluding forex translation loss) accounted for 14% of its full-year forecast and 12% of consensus estimates

PETALING JAYA: The weaker ringgit and the lower price of crude palm oil (CPO) have taken a toll on IOI Corp Bhd, as the planter posted one of its worst quarterly losses.

The US dollar strengthened against the ringgit by 18% during the three months ended Sept 30, with the US dollar/ringgit exchange rate closing at a high of 4.4475 as of end-September 2015.

“The ringgit depreciation has resulted in a non-cash flow net foreign currency translation loss of RM853.9mil on our foreign currency-denominated borrowings,” IOI Corp explained in its filing with Bursa Malaysia yesterday.

This compares with a foreign exchange (forex) translation loss of RM52.2mil in the same quarter last year.

IOI Corp made a loss of RM719mil in its first quarter ended Sept 30, 2015, from a net profit of RM176.7mil in the corresponding period last year. The diversified conglomerate registered a loss per share of 11.38 sen, compared with an earnings per share (EPS) of 2.78 sen previously.

During the quarter in review, IOI Corp saw its revenue grow 3.1% to RM3.09bil from RM2.99bil in the previous corresponding period.

In its filing with Bursa Malaysia, IOI Corp said earnings from its plantation segment fell 8% to RM258mil from RM281mil previously due to lower CPO prices.

The group realised an average CPO price of RM2,119 per tonne in the three months ended September 2015, compared with RM2,258 per tonne in the corresponding period last year.

It noted that excluding the aforesaid net foreign currency translation loss and the fair value loss on derivative financial instruments of RM202.8mil, the underlying pre-tax profit of RM402.7mil for the quarter in review would be 22% higher than the underlying pre-tax profit of RM331.3mil for the corresponding quarter last year, which was attributed mainly to an improved performance from its resource-based manufacturing segment.

As for its resource-based manufacturing segment, the group said it expected its oleochemicals sub-segment to perform well, given the relatively low feedstock cost and higher glycerine price, while its specialty oils and fats sub-segment would also be expected to perform satisfactorily in view of the resilient demand from the food sector and the diversified locations of its production plants in the United States and Europe.

Meanwhile, the group’s property arm, IOI Properties Group Bhd (IOI Prop), saw a 14.3% increase in net profit to RM115.48mil for the first quarter ended Sept 30, 2015, from RM101mil in the previous corresponding period on higher revenue. During the quarter in review, IOI Prop’s revenue increased 58.5% to RM595.26mil from RM375.52mil previously, driven by growth in its property development and investment business; and leisure, hospitality and other operations. The group’s EPS, however, fell marginally to 3.07 sen from 3.08 sen previously.