PETALING JAYA: IOI Corp Bhd
has slashed its fresh fruit bunch (FFB) growth guidance for the financial year ending June 30, 2025 (FY25) to just 1% to 2%, following heavy rainfall at its Sabah plantations.
The group had expected a growth of 5%.
In the first seven months of FY25, IOI’s FFB output declined by 2.9%, also partly due to the group’s accelerated replanting programme.
IOI Corp anticipated output recovery to start taking place from next month, said Hong Leong Investment Bank (HLIB) Research.
As such, the research house lowered its FY25 core net profit forecast by 2.8% to RM1.31bil.
Meanwhile, RHB Research noted that the weather conditions had normalised.
It said IOI Corp’s new FFB growth guidance is in line with its forecast of 1.3% for FY25.
IOI Corp planned to replant 9,000ha of land in FY25.
Despite lower FFB output and oil extraction rates, HLIB Research said crude palm oil (CPO) production cost went down marginally to RM2,100 per tonne in the first half of FY25 (1H25), mainly on the back of lower fertiliser cost.
“We understand that the impact from minimum wage hike and mandatory Employees Provident Fund contribution for foreign workers will be minimal at below 3% of production cost,” it said.
Over the next three months, HLIB Research forecast CPO prices to stay high at above RM4,200 per tonne.
This will be supported by lower CPO inventory level in both Malaysia and Indonesia, arising from adverse weather conditions and ongoing low-cropping cycle, inventory replenishing activities ahead of Ramadan and B40 biodiesel fuel implementation in Indonesia.
On the back of strong CPO prices, RHB Research said IOI Corp’s upstream earnings would continue doing well.
The downstream earnings should be supported by its specialty fats contributions at the associate level.
“Post-briefing with management, we remain upbeat on IOI Corp.
“Its 1H25 core earnings are within our and street expectations, at 50% to 52% of FY25 estimates, with core net profit rising 22% quarter-on-quarter or 15% year-on-year in the second quarter of FY25,” the research house added.
