KUALA LUMPUR: Plantation heavyweight IOI CORPORATION BHD posted stroger earnings in the fourth quarter ended June 30, 2019 on lower net foreign currency translation loss on foreign currency denominated borrowings and deposits.
It said on Thursday its net profit rose by 30.1% to RM46.60mil from RM35.80mil a year ago. However, its revenue fell by 3.5% to RM1.738bil from RM1.802bil.
Earnings per share were 0.74 sen compared with 0.57 sen. It recommended a dividend of 4.5 sen a share, similar to a year ago.
Elaborating on its financial performance, IOI Corp said for Q4 FY2019, its profit before taxation (PBT) rose to RM73mil from RM67mil a year ago due mainly to lower net foreign currency translation loss on foreign currency denominated borrowings and deposits.
It said the underlying PBT of RM180.1mil for Q4 FY19 was 15% lower than the underlying PBT of RM212.4mil a year ago due mainly to lower contribution from plantation segment.
This was after excluding the total net foreign currency translation loss of RM75.4mil (Q4 FY2018: RM108.3mil on foreign currency denominated borrowings and deposits as well as fair value loss on derivative financial instruments from the resource-based manufacturing segment of RM31.7mil (Q4 FY18: RM37.1mil).
The plantation segment profit for Q4 FY19 fell by 33% to RM84.5mil from RM125.3mil a year ago due mainly to lower crude palm oil (CPO) and palm kernel (PK) prices realised.
IOI Corp said average CPO and PK prices realised for Q4 FY19 were RM1, 988 a tonne (Q4 FY18: RM2, 409) and RM1, 127 (Q4 FY18: RM1, 803) respectively.
The resource-based manufacturing segment profit for Q4 FY19 of RM88.3mil was higher than the profit for Q4 FY18 of RM85mil.
Excluding the fair value loss on derivative financial instruments, the underlying profit for this segment reported a profit of RM120mil for Q4 FY19 versus RM122.1mil a year ago.
The lower profit is due mainly to lower share of associate results from Bunge Loders Croklaan Group B.V. (Loders), mitigated by higher sales volume and margins from refining sub-segment.
FY June 2019
For the financial year ended June 30, 2019, its net profit was RM631.70mil compared with RM3.06bil a year ago. Its revenue dipped to RM7.385bil compared with RM7.417bil.
IOI Corp posted PBT of RM872.6mil compared with RM1.57bil a year ago. The lower PBT was due mainly to lower operating profit and total net foreign currency translation loss on foreign currency denominated borrowings and deposits.
It said excluding the total net foreign currency translation loss of RM102.1mil (Q4 FY18: gain of RM318.3mil) on foreign currency denominated borrowings and deposits as well as fair value gain on derivative financial instruments from the resource-based manufacturing segment of RM28.9mil (FY18: RM300, 000), the underlying PBT of RM945.8mil for FY19 was 24% lower than the underlying PBT of RM1.25bil in FY18.
The decline was due mainly to lower contribution from the plantation segment, mitigated by higher contribution from the resource-based manufacturing segment, it said.
On the outlook for the new financial year ending June 30, 2020, it anticipates palm oil price to recover gradually in the nas palm oil stocks decline from record high level in December 2018.
“The palm oil price will be supported by increased exports to major consuming countries such as India and China, higher demand from the biodiesel industry in Malaysia and Indonesia, and moderate production increase due to the dry weather.
“We expect our total fresh fruit bunches (FFB) production during FY2020 to improve slightly with the higher production from the young Indonesian plantings offsetting the temporary loss from the higher replanting rate in our Sabah plantations. Coupled with the anticipated improvement in crude palm oil price, we expect the plantation segment’s performance to improve in the coming financial year, ” it said.
As for the resource-based manufacturing segment, IOI Corp foresees the oleochemical sub-segment will continue to perform relatively well due to the moderately low feedstock cost.
“However, the operating environment will become increasingly challenging due to the global economic slowdown triggered by the worsening US-China trade war, ” ir said.
As for its 30%-owned specialty fats associate company, Bunge Loders Croklaan, IOI Corp anticipates it to sustain its performance in FY2020 with higher volume in the confectionary and human nutrition categories, coupled with more commercial synergies materialising from the integration of the company into Bunge’s edible oils business.
“The US dollar-ringgit exchange rate which affects the foreign exchange translation gain/loss arising from our mainly medium to long term US$-denominated borrowings will continue to be volatile in the short term, due to the ongoing escalated US-China trade war and the uncertainties faced by Asian currencies over US Federal Reserve interest rate policy.
“Overall, the group expects its operating performance for FY2020 to be satisfactory, ” it said.
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