IOI’s 4Q earnings down 60.8% on lower plantation contribution

by **Cals** Mon 24 Aug 2015, 23:28

IOI’s 4Q earnings down 60.8% on lower plantation contribution

KUALA LUMPUR (Aug 24): Lower contribution from the plantation segment has trimmed IOI Corp Bhd ([You must be registered and logged in to see this image.]Financial Dashboard)’s net profit in the fourth quarter ended June 30, 2015 (4QFY15), which fell 60.8% to RM159.7 million or 2.52 sen per share, from RM407.5 million or 6.42 sen per share in the same period a year ago.
Revenue for the quarter, however, was a marginal 3.9% higher at RM2.94 billion, compared with RM2.83 billion a year ago, its filing to Bursa Malaysia today showed.
Despite weaker earnings, the plantation group declared a second interim dividend of 4.5 sen per share for the financial year ending Dec 31, (FY15) payable on Sept 18, bringing its total dividend declared this year to 9 sen (FY14: 20 sen).
Its filing showed that plantation profit declined 26% to RM235.8 million for 4QFY15, compared with RM318.6 million last year, due to lower average CPO price of RM2,197 per million tonne (MT), as compared to RM2,661 per MT last year.
Its resource-based manufacturing segment also posted a 4% decline in profit to RM99.1 million, versus RM103.7 million last year.
For the cumulative 12 months, IOI Corp's net profit plunged 95% to RM168.1 million or 2.64 sen per share, from RM3.37 billion or 52.93 sen per share last year, primarily dragged by lower profits in its plantation segment — due to lower crude palm oil (CPO) prices — and resource-based manufacturing segment.
Additionally, there is a net foreign currency translation loss of RM735.3 million (FY14: loss of RM22 million).
Excluding the forex losses, IOI said its underlying pre-tax profit of RM1.19 billion for FY15 is 30% lower than the underlying pre-tax profit of RM1.69 billion for FY14.
Meanwhile, its revenue came in 2.4% weaker at RM11.62 billion, versus RM11.91 billion a year ago.
Looking forward, IOI expects the CPO price to stay mostly flat in the next three months.
However, it said the implementation of the B15 biodiesel programme in Indonesia and the likelihood of severe dry weather in the coming months, would help counter the current weak CPO sentiment caused by the soft soybean prices and the expectation of seasonally higher production of oil palm fruits.
“The group will continue to rely on its many years of experience to pursue cost efficiency and higher productivity in its plantation operations.
“It will leverage on its sustainability record and the synergy with its downstream operations, to extract higher value add for its CPO and palm kernel produce," it added.
In the resource-based manufacturing segment, the group expects its specialty oils and fats sub-segment to perform well, given the geographical spread of its operations, especially in the USA and Europe.
"Its oleochemicals sub-segment will also perform satisfactorily, with the lower palm kernel raw material cost and higher glycerine price," it added.
It said the volatility of foreign exchange (forex) rate between ringgit and US dollar will continue to impact the non-cash flow forex translation gain or loss arising from its long-dated US dollar-denominated borrowings.
Despite this, the group expects its overall operating performance to be satisfactory.
Shares in IOI (fundamental: 1.2; valuation: 0.5) closed seven sen or 1.75% lower at RM3.93 today, for a market capitalisation of RM24.86 billion.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)