PETALING JAYA: Kuala Lumpur Kepong Bhd
(KLK) expects palm oil prices to remain volatile in the second half of this year as the industry enters its peak production cycle, with Malaysian output plateauing and slower growth in Indonesia.
The plantation group said firmer biodiesel demand in Indonesia, better palm oil competitiveness, and tighter global soybean supplies are expected to support prices in the coming months.
KLK noted that palm oil prices briefly hit RM4,500 per tonne in the second quarter of this year before easing to RM3,800 in late April on a seasonal rebound in Malaysian output.
Prices recovered in June, lifted by a US biofuel mandate proposal and rising geopolitical tensions in the Middle East.
In the quarter ended June 30, KLK’s net profit surged 44.3% to RM346.6mil, or 31.10 sen per share, from RM240.2mil and 21.90 sen a year earlier.
Quarterly revenue climbed 16.9% to RM6.43bil against RM5.5bil previously.
For the nine months to June 30, KLK posted a net profit of RM721.3mil, up 23.5% from RM584.2mil a year ago, while revenue rose 12.8% to RM18.7bil from RM16.6bil.
KLK said its plantation segment remained a key earnings driver, with year-to-date pre-tax profit climbing 51% to RM1.65bil from RM1.09bil a year earlier, supported by higher average selling prices for crude palm oil (CPO) and palm kernel, as well as improved CPO sales volumes.
The group added that ongoing efforts to boost fresh fruit bunch yield and productivity have begun to show results, helping the segment sustain its strong contribution.
In its manufacturing segment, refining margins are expected to stay tight due to competitive prices and volatile feedstock costs. Oleochemicals are projected to recover gradually from a trough, supported by selective markets and new capacities, though the pace remains uncertain.
The group said it will leverage the softer market to strengthen processes, streamline operations and optimise resources, while management increases focus on turning around loss-making businesses.
KLK said it will continue to monitor its investment in UK-listed speciality chemicals company Synthomer plc, whose performance remains under pressure despite signs of improvement in some segments.
Synthomer’s cost-saving measures have provided some support, but KLK booked equity losses of RM64mil for the nine months to June 30, compared with RM87mil a year earlier.
These non-cash losses may prompt the group to assess potential impairment of its investment at the end of its current financial year ending Sept 30 (FY25).
Overall, the group expects to deliver a stronger performance for FY25, compared with FY24.
“The major capital expenditure cycle has been completed with key investment already in place, and capital spending has since normalised. With cash generation remaining robust, the group will continue to adopt a prudent and disciplined approach in navigating the remainder of FY25 considering the challenging macroeconomic landscape,” KLK said.
Separately, KLK’s major shareholder Batu Kawan Bhd posted a 39.6% rise in net profit for the quarter to RM182.9mil or 46.90 sen per share, lifting nine-month profit 21.6% to RM398.4mil and RM1.02.
Quarterly revenue grew 16.3% to RM6.6bil, while nine-month revenue rose 12% to RM19.2bil.
