IOI Corp expects CPO price to recover on higher exports

by SULHI KHALID/ pic by TMR GRAPHIC

IOI Corp Bhd expects crude palm oil prices (CPO) to recover gradually in the next quarter on increased exports to major consuming countries such as India and China, and higher demand from the biodiesel industry in Malaysia and Indonesia.

The CPO price is now trading at RM2,122 per metric tonne on the Bursa Malaysia Derivatives Exchange market.

IOI posted a 30% year-on-year (YoY) rise in earnings to RM46.6 million in the fourth quarter ended June 30, 2019, owed to lower net foreign currency translation loss.

Due to the lower contribution in its plantation segment, revenue for the period dropped to RM1.73 billion, a decrease of 3.5% YoY, its filing to Bursa Malaysia yesterday stated.

Its plantation segment reported a 52% decline in revenue for the quarter to RM483 million as product prices (CPO and palm kernel) remained low, while fresh fruit bunch (FFB) production fell.

Its resource-based manufacturing segment’s revenue increased to RM553 million mainly due to higher contribution from all sub-segments and higher share of associate results from its wholly owned specialty oils and fats manufacturing arm, Bunge Loders Croklaan Group BV.

Moving forward, IOI expects its FFB production to improve slightly with higher production from the young Indonesian plantings offsetting the temporary loss from the higher replanting rate in its Sabah plantations.

“For the resource-based manufacturing segment, we foresee the oleochemical sub-segment to continue to perform relatively well due to the moderately low feedstock cost,” it said in a statement.

Higher volume in the confectionary and human nutrition categories is expected to sustain growth for Bunge Loders as more commercial synergies materialise from the integration of the company into Bunge Loders’ edible oils business.

Following the quarterly result announcement, IOI has declared an interim dividend of 4.5 sen.

IOI shares closed three sen higher yesterday to RM4.23, valuing the company at RM26.5 billion.

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