CEO Morning Brief

IOI Corp Posts 52% Decline in 3Q Net Profit on Lower Plantation Contribution, Sees Flat Results in 4Q

Publish date: Wed, 31 May 2023, 08:44 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (May 30): IOI Corp Bhd's net profit declined 52% to RM197.40 million for the third quarter ended March 31, 2023 (3QFY2023), from RM411.20 million a year earlier, mainly due to lower contribution from its plantation segment. Earnings per share dropped to 3.18 sen from 6.62 sen.

Quarterly revenue fell 35.08% to RM2.66 billion, from RM4.10 billion in 3QFY2022, the group said in a bourse filing.

The plantation segment's profit for RM221.2 million was 57% lower than its 3QFY2022 profit of RM518.5 million, mainly due to lower crude palm oil (CPO) and palm kernel (PK) prices realised and higher cost of production, mitigated by higher fresh fruit bunch (FFB) production.

Average CPO price realised for 3QFY2023 was RM3,928 per tonnne (Q3FY2022: RM5,064) while PK price came in at RM2,153 per tonne (3QFY2022: RM4,588).

"The lower segment profit reported was also due mainly to lower share of associates results of RM41.1 million (Q3FY2022: RM84.9 million)," the group said.

For 4QFY2023, IOI Corp expects its financial performance to be flat with a downside bias in 4QFY2023 amid a challenging operating environment.

The spot CPO price dropped significantly in May to around the RM3,500- and RM3,700-level due to the expected seasonal increase in palm fruits production as well as the larger-than-expected soybean harvest, although Malaysian palm oil stock declined further at end April to its lowest in 13 months.

“During the next three months, CPO price is expected to stay around this level, before the looming El Nino phenomenon affects palm fruits production probably in 4Q of this year,” the group said.

As for the refinery and commodity marketing sub-segment, IOI Corp said refining and fractionation margins have been squeezed at a negative level, due to the high CPO export duty in Indonesia as well as the near price parity of palm oil against soybean oil in major destination markets.

The group also said that its oleochemical sub-segment's performance is expected to decline in 4QFY2023, dragged by confluent factors such as downbeat economic outlook in the US and most European countries and geopolitical tensions between the US and China, coupled with the substantial spike in Malaysia’s electricity cost for large manufacturers.

For the first nine months of FY2023, IOI Corp's net profit fell 9% to RM1.08 billion, from RM1.18 billion in the previous corresponding period, as revenue shrank 18.66% to RM9.63 billion from RM11.84 billion.

The lower 9MFY2023 net profit was also due to lower profit contribution from the plantation segment, which fell 43% to RM901.2 million from RM1.58 billion previously, hit by higher cost of production and lower CPO and PK prices.

Meanwhile, its share of associates' results was lower at RM108.9 million compared with RM207.7 million previously.

IOI Corp's share price finished four sen or 1.01% lower at RM3.91 on Tuesday (May 30), giving the group a market capitalisation of RM24.58 billion.

Source: TheEdge - 31 May 2023

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