IOI Corp ended FY24 with core profit of RM1.1bn after stripping out i) net foreign currency (FX) translation loss on foreign current denominated borrowings and deposits (RM18.9m), ii) net fair value gain on derivative financial instrument (RM34.3m), iii) FX loss (RM54.7m), iv) fair value loss on other investments (RM9.3m), v) net gain arising from changes in fair value of biological assets (RM8.2m) and MI (RM6.1m). The results were in line with our and the street full-year expectations, accounting for 102% and 98%%, respectively. Maintain Neutral with an unchanged SOP-based TP of RM4.08. A final DPS of 5sen was declared for the quarter, bringing the full-year DPS to 9.5sen (vs FY23: 11sen).

• 4QFY24 revenue (QoQ: +3.1%, YoY: +30.2%). Group revenue grew 30% YoY to RM2.2bn, led by stronger sales from both plantation (+32.2% YoY) and downstream manufacturing segments (+30.2% YoY). 4QFY24 Average CPO price climbed from RM3,906/mt to RM4,118/mt (FY24: RM3,856/mt, YoY: -6.4% YoY) while 4QFY24 FFB production gained 4.2% YoY to 644,987mt (FY24: 2.8m mt, +4.4%). FY24 oil extraction rate improved from 20.92% to 21.77% while FFB yield increased from 18.7mt/ha to 19.3mt/ha. Resource-based manufacturing sales rose from RM1.8bn to RM2.4bn, led by higher sales volume from refining subsegment, partially offset by weaker oleochemical sales volume recorded.

• 4QFY24 core profit rose 22.4% YoY to RM289m. Excluding the exceptional items, the Group posted higher core profit of RM289m, up 22.4% YoY on the back of stronger earnings contribution from both plantation and resource-based manufacturing segments. Plantation earnings rose 22.1% YoY to RM308.2m, attributed to lower production costs and better OER. Meanwhile, resource-based earnings advanced 30.2% YoY to RM2.4bn, contributed by higher margins from refining subsegment as well as higher share of profit from Bunge Loders Croklaan despite weaker margins from oleochemical sub-segments.

• Upbeat outlook. Management sees a positive growth for the plantation segment in FY25 on the back of improved FFB production and lower CPO production cost. FFB production is projected to be higher, led by continuing labour productivity improvement in Peninsular Malaysia and increased production from the young area despite the accelerated replanting programme in Sabah. Meanwhile, refining sub-segment is expected to remain subdued due to low refining margins as a result of overcapacity of refineries in Indonesia as well as the price advantage from the country’s CPO export duty policy. Nevertheless, it expects its refining margin to improve going forward due to its capabilities in producing low contaminants oils and its focus on cost optimization. Lastly, the oleochemical sub-segment is expected to see better performance in the 1HFY25 due to stock building by its European customers ahead of EUDR implementation.

Source: PublicInvest Research - 27 Aug 2024