Weaker palm oil output hurts Kim Loong earnings

KUALA LUMPUR: Kim Loong Resources Bhd said slow production recovery at its oil palm estates and a fire incident that disrupted its mill operations in Johor contributed to the decline in earnings.

Net profit in the three months ended Oct 31 fell 18% to RM13.8mil compared with RM16.8mil a year ago.

Revenue declined 23% to RM175mil, the company said in a filing with Bursa Malaysia on Friday.

"For the financial year ending Jan 31, 2020 (FY20), we forecast the fresh fruit bunches (FFB) production to be in the region of 85% of the financial year 2019," Kim Loong said.

"The expected lower production is mainly due to the slower-than-expected recovery from low yield cycle and the on-going replanting programs for old palm areas,' it added.

Output from its estates, however, will benefit from rising yield as more trees reached production maturity.

The lower FFB production has also impacted its milling operations.

"The management expects the milling operations to achieve about 80% of processing quantity recorded in the financial year 2019," Kim Loong said.

The expected lower FFB quantity processed is mainly due to the lower-than-expected FFB supply in Sabah region in where the group’s two mills are located, as well as the fire incident in June at its Kota Tinggi mill in Johor.

The company also predicted that crude palm oil (CPO) prices will retreat next year from current levels.

"With the recent surge in CPO price since November to above RM2,900 per tonne, we are of the view that the average CPO price might retrace back to the level between RM2,600 - RM2,700 per tonne next year which is more sustainable in long term," it said.

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