Tan Sri Abdul Halim Ali said for FY19 IJM's plantation division would face a challenging year due to the volatility of the commodity prices, foreign exchange rates particularly that of the Indonesian rupiah against the US Dollar and higher borrowing costs.
KUALA LUMPUR: IJM Corporation Bhd
's net profit fell by 80.8% to RM21.92mil in the second quarter ended Sept 30, 2018 mainly due to weaker earnings posted by all its major divisions compared with RM114.23mil a year ago and expects the challenging year to continue.
IJM Corp said on Monday the group’s construction, property development, manufacturing and quarrying, plantations and infrastructure divisions posted weaker earnings in the quarter.
“It was further exacerbated by an increase in net unrealised foreign exchange losses of RM33.5mil in the current quarter as opposed to a loss of RM400,000 in the corresponding quarter of the preceding year,” it said.
Its revenue fell by 18.1%to RM1.31bil from RM1.59bil a year ago. Its earnings per shares were 0.6 sen compared with 3.15 sen. It declared an interim dividend of two sen a share compared with three sen.
For the first half, its net profit fell by 64% to RM84.64mil from RM235.39mil in the previous corresponding period. The lower profit was mainly due to an increase in net unrealised foreign exchange (forex) losses of RM104.6mil in the current compared with a loss of RM4mil a year ago. IJM was affected by lower contributions from the construction, manufacturing and quarrying, plantation and Infrastructure divisions.
The revenue for the group fell by 10% to RM2.75bil from RM3.06bil.
Construction
Construction revenue for the current quarter declined by 21.5% and in the first half by 12.5% as newer projects have yet to reach optimal construction phase.
Pre-tax profit fell by 45.8% in Q2 and by 38.5% H1 mainly due to lower construction margins as well as an increase in unrealised foreign exchange losses to RM6.7 million in Q2 and RM30.7mil in H1.
Property development
Property development’s revenue and pre-tax profit in Q2 fell by 5.3% and 32.4% respectively from a year ago mainly due to lower sales coupled with lower margins achieved in Q2 from a year ago.
However, for H1, revenue and pre-tax profit rose by 4.9% and 18.3% from a year ago mainly due to the completion of certain development projects as well as lower operating expenses.
Manufacturing
IJM's manufacturing and quarrying recorded a 26.4% decline in revenue and 41.4% slump in pre-tax profit. For H1, revenue and pre-tax profit fell by 21.3% and 41.4% mainly due to lower sales volumes and margins in the piles
and quarrying sectors.
Plantations
Also impacted was its plantations business where revenue for Q2 and H1 fell by 28.7% and 15.2% respectivelymainly due to lower CPO sales volume and commodity prices.
“The pre-tax losses of RM31.7mil for Q2 and RM58mil for H1 were mainly attributable to the lower commodity prices and higher production costs from the increase in young mature areas in the Indonesian operations incurring full fixed plantation maintenance and overhead costs set against the start-up crop yield,” it explained.
IJM said this was further compounded by the net unrealised foreign exchange losses of RM22.6mil and RM53.5mil on the US Dollar denominated borrowings for Q2 and H1 versus unrealised forex losses of RM8.5mil and RM9.3mil a year ago.
Infrastructure
Revenue for the infrastrucutre segment rose by 3/5% in Q2 but slipped 1.1% in H1. Ppre-tax profit for Q2 fell to RM8.5mil from RM35.7mil a year ago.
IJM said this was mainly due to the losses being accrued for the disposal of the remaining 30% equity interests in Swarna Tollway Private Limited in Q2. The losses were mitigated by higher contribution from the group’s local tolls as well as toll concession investment in Argentina.
Pre-tax profit for Q2 fell to RM8.5mil from RM35.7mil while for H1 pre-tax profit fell to RM33.4mil from RM100.4mil.
Outlook
IJM said the group’s construction division expects continued growth based on an outstanding order book of RM8.8bil, supported by on-going domestic projects.
However, it expects the local property market to remain challenging, with the key issues of price affordability, the overhang of high priced properties, rising costs of living and tight financing continue to have a dampening effect.
IJM said the property development division remains steadfast to grow its business in view of the strategic locations of its properties and the brand premium that it has established.
“With unbilled sales of about RM2bil, the division is expected to maintain a satisfactory performance in the current financial year,” it said.
IJM said due to the difficult operating environment both domestically and overseas, its industry division expects a lower performance for the current financial year.
Its plantation division also expects a challenging year due to the weakening of the commodity prices, volatile foreign exchange rates particularly that of the Indonesian Rupiah against the US Dollar and higher borrowing costs.
It also pointed out that notwithstanding the anticipated recovery of crop production from the effects of the prolonged dry weather and increased young mature areas, the division continues to be affected by the start-up yields whilst incurring full plantation maintenance costs and overheads.
However, the group’s toll and port operations continue to provide recurrent revenue streams as existing concessions mature.
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