KUALA LUMPUR (Aug 22): IOI Corp Bhd's net profit dropped 93.13% to RM37.2 million in its fourth quarter ended June 30, 2023 (4QFY2023), from RM541.8 million a year earlier, mainly due to lower contribution from both its plantation as well as resource-based manufacturing segments.

The lower net profit was also due to higher net foreign currency translation loss on foreign currency denominated borrowings which tripled to RM175.7 million from RM58.3 million previously.

Earnings per share fell to 0.6 sen from 8.72 sen in 4QFY2022, its bourse filing showed on Tuesday (Aug 22). Group revenue shrank 47.86% to RM1.95 billion from RM3.74 billion.

It declared a second interim dividend to be paid on Sept 22 of five sen per share, down from the eight sen it announced for the same quarter last year, bringing year-to-date dividend for FY2023 to 11 sen, versus FY2022's YTD of 14 sen.

According to the group, its plantation segment’s profit halved to RM250.1 million in 4QFY2023 from RM502.7 million in 4QFY2022, amid lower crude palm oil (CPO) and palm kernel (PK) prices, while production costs climbed. The average CPO price realised fell to RM3,906 per tonne from RM5,260, while PK price fell to RM2,099 per tonne from RM3,850.

"The lower segment profit reported was also due mainly to lower share of associates results of RM76.9 million (4QFY2022: RM126.9 million)," the group said.

As for its resource-based manufacturing segment, profit fell 83.8% to RM47.4 million from RM292.6 million, following a drop in the fair value gain on derivative financial instruments to RM12.6 million from RM103.6 million.

Excluding that, the resource-based manufacturing segment reported an underlying profit of RM34.8 million for 4QFY2023, 82% lower than the underlying profit of RM189.0 million for 4QFY2022, mainly due to lower margins from oleochemical and refining sub-segments, the group said.

For the full year FY2023, the group's net profit fell 35.42% to RM1.14 billion from RM1.73 billion in FY2022, as revenue dropped 25.64% to RM11.58 billion from RM15.58 billion.

Looking ahead, IOI Corp foresees CPO price to remain range-bound between RM3,500 and RM4,000 per tonne until the end of the year, before moving higher as a result of overall lower palm fruit production due to the effects of the El Nino weather phenomenon, which is expected to intensify in the coming months.

Nevertheless, the group itself is expecting a moderate increase fresh fruit bunch production for FY2024. “The growth would be achieved primarily through increased efficiency from our fully replenished new workers in Peninsular Malaysia and higher production from the young palm trees in our Indonesian plantations,” it added.

It also expects production cost to be considerably lower due to the higher palm fruits yield and a decline in fertiliser as well as diesel costs, compared to FY2023. “All things considered, we are optimistic of a satisfactory financial performance for the plantation segment in FY2024,” it said.

As for its refinery and commodity marketing sub-segment, the group expects to continue to face low or negative refining margins due to stiff competition from Indonesian refiners who benefit from their country’s CPO export duty policy.

Still, IOI Corp said its refineries’ efficient cost structure and capability in producing oil blends with low contaminants will give it a competitive advantage in the challenging operating environment.

Meanwhile, outlook for its oleochemical sub-segment remains subdued, in light of the weak global economic environment and rising geopolitical tensions that undermined global trade. “Despite these challenges, the expected better demand from China will help to alleviate some of the slowdown in global demand. Our new fatty acid and soap noodle plants will also help to lower our production cost and give us the flexibility to tailor our products to meet customer requirements,” it said.

For its specialty fats sub-segment under its associate company, Bunge Loders Croklaan, IOI Corp said the segment’s performance is less dependent on global economic growth as demand for food is more resilient. Hence, it anticipates an improved FY2024, driven by its newly acquired refinery facility in North America and the introduction of innovative product applications.

IOI Corp's share price closed one sen or 0.25% lower at RM4.05, giving the group a market capitalisation of RM25.46 billion.