KUALA LUMPUR (Aug 24): Kuala Lumpur Kepong Bhd's (KLK) net profit plummetted 84.9% to RM84.10 million in the third quarter ended June 30, 2023 (3QFY2023) from RM558.27 million a year ago, due to weaker average selling prices of crude palm oil (CPO), palm kernel and higher CPO production cost.

The weaker quarterly performance was also attributed to a net loss of RM8.7 million, from a net gain of RM96.9 million in 3QFY2022, from fair value changes on outstanding derivative contracts.

Quarterly revenue fell 26.5% to RM5.11 billion from RM6.96 billion, dragging earnings per share to 7.80 sen from 51.80 sen a year prior, the palm oil giant said in its filing on Thursday (Aug 24).

KLK’s manufacturing segment reported a loss of RM73.7 million due to a drop in revenue to RM4.32 billion and a loss incurred by the oleochemical division, which was impacted by eroded demand and profit margin.

However, its property segment's profit increased to RM19.3 million, aided by higher revenue at RM61.6 million, while its investment segment’s loss narrowed to RM36.8 million from RM54.4 million a year ago, mainly attributable to lower interest expenses arising from a drop in borrowings.

For the nine months ended June 30, 2023 (9MFY2023), KLK's net profit fell 57.9% to RM717.95 million from RM1.70 billion recorded in the same period last year.

Revenue for the period fell 11.4% to RM 17.87 billion versus RM20.17 billion a year earlier.

On prospects, the group expects both fresh fruit bunch and CPO yields to be marginally better than a year ago, as a result of recovering momentum.

“However, this year’s production costs are high mainly due to elevated prices of inputs including fertilisers, chemicals and energy; nevertheless, these have recently softened,” the group said.

It added its manufacturing segment, particularly the oleochemical sub-segment, was not spared from the negative consumer and business environment, mainly in Europe and China.

“In fact, the main bulk of the losses are from Europe due to high energy costs and sluggish demand. However, management is undergoing aggressive restructuring in Europe to contain the worrying losses. Demand in Europe will remain dampened in coming quarters while the Asian market recovery is expected to be slightly ahead,” KLK said.

Overall, the group expects its financial performance for FY2023 to be significantly lower compared to the previous financial year.

However, it also expects to fare better in its fourth quarter.

KLK's shares were down 10 sen or 0.44% to RM22.40 sen, valuing the group at RM24.21 billion.