PETALING JAYA: Kuala Lumpur Kepong Bhd
’s (KLK) is expected to record weaker results for the second quarter ended March 31 of financial year 2025 (2Q26) on softer seasonal fresh fruit bunch (FFB) output, but is likely to see earnings rebound thereafter.
UOB Kay Hian (UOBKH) Research forecast KLK’s quarterly core net profit to be within RM290mil to RM310mil, a 19% to 24% decrease quarter-on-quarter (q-o-q) .
It said the weaker earnings expectations were due to softer seasonal FFB output, which saw a 15.4% decline from 1Q26.
“FFB output was down 6%, 17%, and 2% over January to March 2026, indicating that production started to trough around February and began to stabilise in March,” it said.
“We expect production to pick up from April onwards, as the group kickstarts the next production cycle which would likely see FFB volume rise for the next six to seven months.”
The research house added that year-to-date, KLK’s FFB output had a year-on-year (y-o-y) increase of 6.4%, tracking with management’s growth target.
Average selling prices (ASP) are also expected to remain similar or marginally lower q-o-q, with spot prices of crude palm oil (CPO) hovering around RM4,140 per tonne during the quarter.
Separately, it said that the plantation segment’s operating cost base is likely to stay relatively stable for the financial year 2026 (FY26), as fertiliser costs are largely locked in for the year.
Meanwhile, UOBKH expects KLK’s downstream segment to meaningfully recover from its FY25’s pre-tax losses of RM174mil after right-sizing some of its operations while incurring up-front overhead costs for new capacity additions.
“We expect its processing margins to return to positive territory, supported by incremental contribution from its newly-commissioned downstream complex in East Kalimantan, Indonesia.”
The research house noted that downstream earnings contribution may stay volatile in the short term amid stiff competition and fluctuations in palm oil tax measures between Malaysia and Indonesia.
However, it said the segment’s earnings should remain positive relative to the losses made during previous quarters.
For FY26, UOBKH Research forecast a 56% y-o-y core profit rebound, driven by anticipated recovery in downstream profitability, and estimated CPO prices for the year to average RM4,500 per tonne.
“We expect earnings in the subsequent quarters to be well-supported by elevated ASPs, with CPO prices expected to be boosted by the roll-out of regional biofuel policies,” said the research house.
It maintained its “buy” call on the stock with an unchanged target price of RM24.65. It said it continues to like KLK as a laggard sector play, underpinned by its estates’ positive production growth profile.
