Revenue jumped 39.52% YoY to RM2.4b in the quarter as its plantation segment posted RM274m profit in the quarter

by RAHIMI YUNUS / pic by TMR FILE

IOI Corp Bhd noted higher crude palm oil (CPO) prices enabled its earnings to surge 86.5% year-on-year (YoY) to RM277.9 million in the first quarter ended Sept 30, 2020 (1Q21).

Revenue jumped 39.52% YoY to RM2.4 billion in the quarter as its plantation segment posted RM273.6 million profit in the quarter, up 116% YoY, on the back of higher CPO and palm kernel prices realised, and higher fresh fruit bunches production.

The group’s resource-based manufacturing segment, however, saw profit in 1Q21 slipped 71% lower YoY to RM39.6 million due to lower contributions from the oleochemical and refining subsegments with lower margins.

For its plantation segment, oil palm crop production is expected to decline until January or February 2021 due to the low production season.

“Although the operations in the plantations are not directly affected by the Conditional Movement Control Order, the freeze on new intake of foreign workers by the government has resulted in labour shortage which has become more severe as months goby.

“Nevertheless, due to the strong palm oil price forecasted until February 2021, we expect good financial performance from our plantation segment at least for 2Q21 and 3Q21,” the group said in the bourse announcement.

CPO price has increased sharply, reaching an eight-year high in November this year which is expected to remain high, more than RM3,000 a tonne until February 2021.

Low palm oil inventory and seasonal low crop production are expected to hold the price high although other competing vegetable oils and the coming winter in the Northern Hemisphere will dampen its demand.

For the refinery and commodity marketing subsegment within the resource-based manufacturing segment, IOI stated refining and fractionation margins are expected to be negative or near breakeven due to high CPO prices and lower sales during the winter months in the Northern Hemisphere.

For the oleochemical subsegment, the group said the rapid rise in palm kernel oil and palm stearin prices recently will affect the product margins and profit.

IOI said sales volume is not expected to be materially affected due to the healthy demand from the soap and personal hygiene industries and the growth in China’s economy, although the new wave of the Covid-19 infection cases in Europe will affect the economy there.

In its speciality fats subsegment comprising its associate company Bunge Loders Croklaan, the group said high palm oil prices and the new wave of Covid-19 cases in Europe are expected to similarly affect its performance.

However, the demand for snack food consumed at home is expected to remain strong in the US and parts of Asia.