IJM Corp’s 3Q net profit plunges 47% but IJM Plantations out of the red

The group records lower revenues from its property development, and manufacturing and quarrying divisions

By SHAHEERA AZNAM SHAH / Pic By www.ijm.com

IJM Corp Bhd’s net profit plunged 46.7% year-on-year (YoY) to RM49.77 million in its third quarter ended Dec 31, 2019 (3Q20), from RM93.42 million previously as all business segments except plantation recorded lower earnings.

Revenue for the quarter fell 4.6% to RM1.44 billion from RM1.51 billion a year ago on lower revenues from the group’s property development, and manufacturing and quarrying divisions, the company told Bursa Malaysia yesterday.

Its property segment saw revenue falling 32.3% to RM325 million while pretax profit slipped 2.6% to RM63.5 million.

The declines were mainly due to the completion of several development projects and the sale of commercial land in 2018, while new launches for the current quarter were being realigned due to pro- duct adjustments.

For the infrastructure division, pretax profit dived 56.6% to RM27.5 million while revenue was up 9.1% at RM202.7 million.

The higher revenue was contri- buted by the expansion of cargo throughput handled by the group’s port concession which grew by 14% and 40% in the current quarter and period respectively, as well as its toll concessions in Malaysia.

The group’s manufacturing and quarrying division recorded a drop in revenue by 12.2% to RM192.5 million, while pretax profit was 12.2% lower at RM13.1 million, mainly due to lower deliveries of piles and ready-mixed concrete.

For the remainder of the group’s financial year ending March 31, 2020 (FY20), it expects the construction division to experience challenges amid the subdued property market and the government’s reduction in infrastructure spending.

“With the reduced availability of new construction jobs in the local market and a more competitive tender environment, the division will remain vigilant and cautious to preserve its earnings, while focusing on the execution and timely completion of its existing outstanding orderbook of RM4.5 billion,” IJM said.

The property market is expected to remain challenging, with affordability issues, the glut in high-rise properties and the rising cost of living to continue dampening the group’s property division.

“With the potential conversion of unbilled sales of about RM1.9 billion, the division is expected to maintain satisfactory performance in the current financial year,” the firm said.

In a separate filing, IJM Plantations Bhd said it recorded a net profit of RM20.06 million in 3Q20 versus a net loss of RM1.99 million a year ago, attributed to favourable commodity prices and positive currency movements.

Revenue for the group rose 66.5% YoY to RM237.81 million from RM142.87 million a year ago on higher sales volume amid the rally in crude palm oil (CPO) prices.

“The overall fresh fruit bunches production of the group during the quarter improved as production in the Indonesian operations increased by 33.1% with the change in the cropping pattern.

“The CPO prices increased significantly during the quarter, thus resulting in fair value losses of RM24.4 million on the group’s CPO pricing swap contracts,” it said.

Foreign-exchange (forex) gains during the quarter also contributed to the group earnings, as the rupiah strengthened against the US dollar and the Japanese yen, resulting in net forex gains of RM13.39 million on foreign currency-denominated borrowings.

Going forward, crop production in the final quarter of FY20 is expected to reduce as the cropping pattern moves to the normal trough.

“Notwithstanding the group continuing to face cost pressures arising mainly from wage increases, the continuation of the prevailing commodity prices and forex rates particularly that of the rupiah against the US dollar and the Japanese yen are expected to contribute to an improved performance for FY20,” the company stated.

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