IOI Corp sees improvement in quarterly net profit on firmer CPO prices

IOI has also taken a number of steps to improve sustainability practices, including obtaining third-party verification on its progress towards implementing sustainable policies.

PETALING JAYA: IOI Corp Bhd, which reported a weaker set of financial results for the second quarter ended Dec 31, expects a slight improvement in the third quarter, underpinned by firmer crude palm oil (CPO) prices and a decline in palm oil stocks.

Its net profit in the second quarter fell 68% to RM196mil from RM596mil a year ago due to lower operating profit and a net foreign currency translation loss on foreign currency-denominated borrowings and deposits.

It said in a statement yesterday that revenue fell 6.4% to RM1.88bil from RM2bil a year ago. Earnings per share was at 3.11 sen compared with 9.48 sen before. It has declared an interim dividend of 3.50 sen compared with 4.50 sen a year ago.

However, it said CPO prices have improved from the three-year low in November 2018 to the current RM2,200 to RM2,300 per tonne range.

“The current price is expected to be sustained with the possibility of a further price increase during the second quarter of 2019, when the palm oil stock is expected to decline to below three million tonnes,” it said.

For its plantation segment, fresh fruit bunch production is expected to decline in the third quarter in line with the seasonal trend, and after the substantial increase in the second quarter.

“However, with the increase in the CPO price as mentioned earlier, we foresee a slight improvement in the financial performance of the plantation segment during the third quarter of financial year 2019 (FY19),” it said. The underlying profit before tax of RM244mil for the second quarter was 34% lower compared with RM368.7mil a year ago.

It cited a lower contribution from the plantation segment, mitigated by a higher contribution from resource-based manufacturing. This was after excluding the total net foreign currency translation loss of RM22.8mil (compared with a gain of RM188.1mil a year ago) on foreign currency-denominated borrowings and deposits, as well as a lower fair-value gain on derivative financial instruments from the resource-based manufacturing segment of RM17.8mil (RM66.1mil in the previous corresponding quarter).

Its plantation segment profit for the second quarter fell 66% to RM117.3mil from RM340.9mil a year ago. The lower profit reported was due mainly to lower CPO and palm kernel (PK) prices realised.

The average CPO price realised for the second quarter was RM1,932 a tonne compared with RM2,644 a year ago, while the average PK price realised for the quarter was RM1,444 compared with RM2,621.