PETALING JAYA: Kuala Lumpur Kepong Bhd (KLK) said the steep drop in the price of crude palm oil (CPO) at the end of last year resulted in a lower profit contribution from its core plantation business, but expects a rebound in prices to support its performance in the coming months.
KLK posted a year-on-year net profit growth of 6.6% to RM250.92mil for the first quarter ended Dec 31, boosted by a foreign currency exchange gain of RM38mil.
However, revenue for the quarter fell 21.1% to RM4.085bil as compared to the same quarter last year.
In a Bursa Malaysia filing yesterday, KLK said its plantation segment’s pre-tax profit saw a sharp decline of 58% to RM127.5mil, despite a 7.9% improvement in fresh fruit bunch (FFB) production to 1.1 million tonnes.
This was mainly due to the drop in the selling prices of CPO and palm kernel, which decreased 28.7% to RM1,840 and 44.7% to RM1,375, respectively, when compared to the previous corresponding period.
Meanwhile, pre-tax profit for the group’s manufacturing segment fell 28.8% to RM98mil as a result of decreasing selling prices.
Decline in profits from China and Europe operations had more than offset the improvement in profits from the Malaysian operations.
The oleochemical division’s pre-tax profit was lower at RM94.5mil, although profit from other manufacturing units had increased to RM3.5mil.
Apart from that, KLK’s property segment achieved a higher profit of RM11.1mil, compared to RM1.7mil previously, while the group’s farming sector saw an increase in crop production as a result of better yields and a larger cropped area, which led to a profit increase to RM56.5mil.
The group’s pre-tax profit for the quarter had also accounted for a foreign currency exchange gain of RM38mil, which arose from the translation of inter-company loans denominated in foreign currencies.
Additionally, there was a surplus of RM22.5mil arising from government acquisition of plantation land.
“Prevailing CPO prices have since recovered from the low levels of the preceding quarter.
“Should such recovery be sustained, we are optimistic that the prospects for plantation profits for the financial year 2019 (FY19) would be satisfactory.
“The oleochemical division is anticipated to sustain its performance through an increase in capacity utilisation and improvement in margins.
“Overall, the group expects a reasonably satisfactory profit for FY19,” said KLK.
KLK closed 0.2% lower at RM24.74, traded on a volume of 317,700 shares.