CEO Morning Brief

IOI Corp 1Q Profit Up 82% Y-o-y, Revenue Reverses Declining Trend

Publish date: Wed, 29 Nov 2023, 08:46 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 28): IOI Corp Bhd's net profit jumped 81.48% to RM304 million for the first quarter ended Sept 30, 2023 (1QFY2024), from RM167.5 million a year before, lifted by lower tax expenses, higher share of results of associates and a joint venture.

Lower tax expenses of RM62 million for 1QFY2024, down by 56% from RM142.1 million previously, share of results of associates rose 57% to RM125.5 million, from RM79.7 million previously, and share of results of a joint venture increased to RM1.3 million, from RM200,000 previously.

The better quarterly earnings were also helped by a net foreign currency translation gain of RM7.9 million, against a translation loss of RM147.3 million previously, the oil palm company's bourse filing showed.

As a result, its earnings per share stood at 4.9 sen for 1QFY2024, higher than 2.7 sen for 1QFY2023.

Quarterly revenue fell 39.92% year-on-year (y-o-y) to RM2.2 billion, from RM3.67 billion, mainly due to lower contributions from both its plantation as well as resource-based manufacturing segments.

Its plantation segment profit was down by 6% to RM330.8 million in 1QFY2024, from RM351.8 million a year ago, due mainly to lower crude palm oil (CPO) and palm kernel (PK) prices, offset by higher fresh fruit bunches (FFB) production and higher share of associates’ results.

Its average CPO price realised fell to RM3,789 per tonne from RM4,496 previously, while the PK price fell to RM2,100 per tonne from RM2,524.

As for its resource-based manufacturing segment, profit fell 55% to RM57.7 million from RM128.5 million, mainly on lower margins and volume, mitigated by the higher share of results from vegetable oil producer associate Bunge Loders Croklaan Group BV (BLC).

The latest results signal a rebound in performance as quarterly revenue ended a declining trend seen since 2022, with a 13% increase quarter-on-quarter (q-o-q) from RM1.95 billion in 4QFY2023, while net profit rose eight-fold from RM37.2 million, on higher contribution from all segments, including plantation as FFB production grew q-o-q.

Going forward, IOI Corp expects CPO price to range at RM3,750 to RM4,050 per tonne in the next two months before moving higher, as the monsoon season may disrupt harvesting and cause a drop in palm oil stock in 1Q2024.

It anticipates moderate increase in FFB production for FY2024 compared with FY2023 despite the ongoing accelerated replanting programme in Sabah, on availability of workers and higher production from the young palm trees in Indonesia and West Malaysia.

Concurrently, it sees lower production cost, due to the higher palm fruits yield and decline in fertiliser and diesel costs compared to FY2023.

“We continue to hold a positive outlook on the financial performance of the plantation segment for the remaining financial quarters,” it added.

On the refinery and commodity marketing sub-segment, it expects pressure on margins to remain, largely due to stiff competition from Indonesian refiners who benefit from their country’s CPO export duty policy.

Outlook for its oleochemical sub-segment remains subdued in light of the weak global economic environment and rising geopolitical tensions that undermined global trade, it added.

“Our new fatty acid and soap noodle plants have reduced our production cost and at the same time give us the flexibility to tailor our products to meet customer requirements,” it explained.

For Bunge Loders Croklaan, IOI Corp said its performance is less dependent on global economic growth as demand for food is more resilient. Its performance will be driven by the North America business and introduction of innovative product applications, it said.

IOI Corp share price closed four sen or 1.01% higher at RM3.99, giving the group a market capitalisation of RM25.08 billion.

Source: TheEdge - 29 Nov 2023

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