IOI Corp posts lower net profit for 1QFY2023 as plantation earnings fall 30%

IOI Corp posts lower net profit for 1QFY2023 as plantation earnings fall 30%
-A +A

KUALA LUMPUR (Nov 25): Plantation-based group IOI Corp Bhd reported a lower net profit by nearly 40% at RM167.5 million for the first quarter ended Sept 30, 2022 (1QFY2023), against RM277.6 million a year ago, in a Bursa Malaysia filing released.

The group's revenue was nearly flat at RM3.66 billion for 1QFY2023 compared with 1QFY2022's RM3.63 billion. Earnings per share contracted to 2.7 sen in 1QFY2023 from 4.45 sen a year ago.

IOI Corp's plantation profit for the quarter under review fell by 27.8% to RM351.8 million from RM487 million in 1QFY2022 due to lower fresh fruit bunch (FFB) production and higher cost of production, mitigated by higher crude palm oil (CPO) prices realised.

On a quarter-on-quarter comparison, the group's revenue fell marginally by 1.87% from RM3.73 billion in the immediate preceding quarter of 4QFY2022.

Its profit for plantation segment also came in lower by 30% against RM502.7 million in 4QFY2022, citing lower COP and palm kernel prices realised, higher cost of production and lower share of associate results from Bumitama Agri Ltd while mitigated by higher FFB production.

However, IOI Corp's resource-based manufacturing segment fared better. The segment's profit for 1QFY2023 was higher at RM128.5 million compared with RM46.1 million a year ago. The higher profit was due mainly to higher margins from oloechemical and refining sub-segments, partly offset by lower sales volume from sub-segments.

Its resource-based manufacturing segment profit for 1QFY2023 was lower by 56% when compared with the preceding quarter's RM292.6 million.

"For our plantation segment, our 2QFY2023 oil palm fruits production is expected to drop only slightly, against the seasonal downward trend, as our young palm trees are entering into a delayed peak production cycle and as more migrant workers are employed in our plantations," said IOI Corp.

With CPO prices holding firm, the group expects the financial performance of its plantation segment to be satisfactory in 2QFY2023.

Commenting on the prospects of its refinery and commodity marketing sub-segment, the plantation giant noted that the demand for palm oil is moderate during the winter months in the Northern Hemisphere and margins are volatile due to changes in Indonesia's palm oil export levy structure.

"Operating conditions in our oleochemical sub-segment are expected to be challenging with high energy costs and the economic slowdown in various parts of the world.

"On the other hand, raw material price in particular palm kernel oil price has been low and there is potential upside with China announcing plans indicating a relaxation in its strict Covid policies starting from 1QFY2023," added IOI Corp.

In relation to US dollar-denominated borrowings, IOI Corp said in the report that the highly volatile US dollar exchange rate resulted in its forex translation loss on US dollar-denominated borrowings, despite IOI Corp's borrowings having declined since June 2022.

"Going forward, the US dollar exchange rate is expected to be elevated and volatile, in line with the monetary policy tightening stance of the US Federal Reserve.

"Overall, the financial performance of the group for the remaining periods of FY2023 is expected to be satisfactory amidst challenging operating conditions, due to the anticipated firm CPO price during the next two quarters," said IOI Corp in its quarterly report.

At market close on Friday (Nov 25), IOI Corp's share price dropped two sen or 0.5% to RM3.98, with a market capitalisation of RM25.02 billion.

Kathy Fong