KLK’s 3Q earnings plunge on weaker CPO price


THE weak crude palm oil (CPO) and palm kernel (PK) prices are expected to lower Kuala Lumpur Kepong Bhd’s (KLK) earnings for the year as the European Union continues to exert pressure by limiting palm oil trade.

The Perak-based integrated group posted a 66% year-on-year (YoY) fall in net profit to RM48.6 million for the third quarter ended June 30, 2019 (3Q19), due to widening loss in its corporate segment.

In a filing exchange yesterday, KLK’s revenue dropped 14.5% YoY to RM3.74 billion on the back of lower revenue contribution from its plantation segment.

The group’s plantation segment revenue was reduced by 67.9% to RM39.8 million as commodities prices (CPO and PK) continue to put a damper on this segment’s growth.

The average CPO price for the quarter was RM1,973 per metric tonne (MT), while average PK price, RM1,085/MT.

Its manufacturing segment revenue rose 16.2% to RM99 million supported by better margins and increased sales volume in its oleochemical division.

KLK’s property segment revenue climbed 33.4% to RM11 million from RM8.3 million registered in 3Q18.

Moving forward, the group expects its oleochemicals division’s performance to be satisfactory due to better margins from lower raw material prices.

“Overall, the group anticipates a reduced profit for the financial year 2019,” it said in a statement to Bursa Malaysia.

The company’s shares closed four sen higher yesterday at RM23.82, with a market capitalisation of RM25 billion. KLK is a multinational company with a core business in plantation (oil palm and rubber).

The company has plantations that cover more than 250,000ha in Malaysia (peninsula and Sabah) and Indonesia (Belitung, Sumatra and Kalimantan).

Last week, IOI Corp Bhd’s plantation division stated its 4Q revenue dropped 3.5% to RM1.73 billion as commodity prices remained low for the period.

IOI, however, posted a 30% YoY rise in earnings to RM46.6 million in the 4Q19 ended June 30, owed to lower net foreign currency translation loss.

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

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