KLK’s 1QFY20 earnings down 33% on higher production costs


KUALA Lumpur Kepong Bhd’s (KLK) net profit plunged 33.4% to RM167.2 million in the first quarter ended Dec 31, 2019 (1QFY20), from RM250.92 million recorded a year ago as production costs rose.

Crude palm oil (CPO) production cost was higher due to a decline in fresh fruit bunches (FFB) production, which fell 11.5% to 977,963 metric tonnes (MT), the plantation company said in an exchange filing yesterday.

The group also recorded an unrealised loss of RM27.2 million during the quarter, compared to an unrealised gain of RM24.3 million in 1QFY19, arising from fair value changes on outstanding derivative contracts.

Revenue for the three months in focus was 0.2% lower at RM4.08 billion against RM4.09 billion the year prior.

Earnings per share fell to 15.7 sen in the last three months of 2019, from 23.6 sen registered a year ago.

Profit from the group’s plantation segment climbed 23.7% to RM157.7 million from RM127.5 million in 1QFY19, underpinned by favourable CPO selling price (ex-mill) of RM2,207/MT (1QFY19: RM1,840/MT) although selling price (ex-mill) of palm kernel (PK) was lower at RM1,247/MT (1QFY19: RM1,375/MT).

Plantation profit was also attributed to a fair value gain of RM11.7 million versus a loss of RM8.8 million in 1QFY19, on valuation of unharvested FFB.

In the manufacturing segment, profit slipped 18.4% to RM80 million in 1QFY20 from RM98 million the year before, while revenue decreased 12.8% to RM1.93 billion from RM2.21 billion, owing to lower selling prices.

Earnings from the oleochemical division fell to RM77.4 million from RM94.5 million due to unrealised loss arising from fair value changes on outstanding derivative contracts, while other manufacturing units’ profit decreased to RM2.6 million from RM3.5 million.

For the property business, profit rose 22% to RM13.6 million in the quarter under review from RM11.1 million previously, on the back of higher revenue of RM52.2 million compared to RM39.8 million the year prior.

Farming sector earnings plunged to RM8.1 million in 1QFY20 from RM56.5 million previously, due to a substantial drop in crop production as a result of lower yield — hit by the extremely dry season — and smaller cropped area.

Meanwhile, the shortfall in corporate income of RM13.2 million (1QFY19: RM51 million) was a result of lower foreign-exchange gain arising from translation of inter-company loans denominated in foreign currencies, as well as a lack of surplus from government acquisition of plantation land.

Moving forward, the company expects its plantation profit to be higher for the FY20 ending Sept 30, 2020.

“Prevailing CPO and PK prices have improved over those of the last financial year, supported by declining CPO inventories and production,” it said.

However, the oleochemical division is anticipated to have a challenging year, amid keen competition and higher raw material costs.

“Overall, the group expects profit to improve for FY20 subject to uncertainties arising from the global outbreak of Covid-19,” KLK added.