IOI Corp slumps on worries of possible net losses due to US dollar debt

KUALA LUMPUR: IOI Corporation’s share price fell to a low of RM4.12 on Friday, giving up its gains from the previous day on worries of possible net losses due to its exposure to the US dollar debt. 

At 3pm, the share price was down 19 sen to RM4.21. There were 5.19 million shares done at prices ranging from RM4.12 to RM4.25.

The FBM KLCI fell 4.28 points or 0.26% to 1,629.65. Turnover was 813.49 million shares valued at RM959.18mil. There were 317 gainers, 370 losers and 299 counters unchanged.

Maybank Investment Bank Research said while IOI Corp is a good proxy to a crude palm oil (CPO) price recovery in general, Thursday’s 8% surge in price was unsustainable.

“By our initial estimates, IOI Corp’s 1QFY6/16 results will be in the red and this could be the worst quarter for the group with a possible net loss of RM440mil (compared to a net profit in 1QFY6/15: RM177mil, and 4QFY6/15: RM160mil),” it said. 

Maybank Research expects this large swing to emanate predominantly from an estimated RM670mil in unrealised forex translation losses on its US dollar debt related exposure of RM6.25bil (as at June 30, 2015) following a 16.5% decline in the ringgit to 4.395 against the US dollar during 3QCY15.

It said operationally, it expects IOI Corp to post flattish on-year 1QFY6/16 core net profit of RM230mil (+20% on-quarter).

It cited lower upstream operating profits of RM221mil (-16% on-year, +4% on-quarter) on weak CPO price (-9% on-year, -6% on-quarter) and flattish on-year fresh fruit bunches (FFB) output (+9% on-quarter).

However, these would be offset by improved downstream operating profits of RM125mil (+19% on-year, +34% on-quarter) and IOI Corp benefited from the ringgit depreciation and low raw material cost.