Kim Loong’s 3Q earnings boosted by higher CPO prices

The better performance was mainly due to higher FFB and CPO prices by 31% and 29% respectively


KIM Loong Resources Bhd’s net profit jumped 109.22% year-on-year (YoY) to RM28.84 million for the third quarter ended Oct 31, 2020 (3Q20), on overall higher fresh fruit bunch (FFB) production and crude palm oil (CPO) prices.

According to a filing in Bursa Malaysia yesterday, the higher selling prices also meant revenue rose to RM278.6 million in the quarter from RM175.31 million it made in the same quarter last year.

For the period, FFB selling price had gone up by 45%, while the CPO higher average selling price increased by 40%.

For the year-to-date (YTD) period, Kim Loong’s net profit jumped from RM38.71 million to RM84.90 million in the nine months of 2019, while revenue rose significantly to RM717.94 million from RM498.59 million in 9M19.

“The better performance was mainly due to higher FFB and CPO prices by 31% and 29% respectively. In addition, FFB and CPO production were also higher by 6% and 17% respectively,” the plantation company stated in its exchange filing yesterday.

It also said the FFB production for the YTD period increased by 6% partly due to the ongoing replanting programme, the FFB yield per hectare (ha) has improved by 15% versus last year’s corresponding period.

“For the YTD, the quantity of CPO sold had also increased by 10%,” it said.

The group noted that despite the implementation of the Movement Control Order, the plantations and palm oil milling operations have been running largely as per usual as the group’s activities are classified as essential.

Moving forward, the company is expecting four of its separate conditional sale and purchase agreements — namely with Greenfingers Sdn Bhd, R&H Sdn Bhd, Bakti Perusahaan Sdn Bhd and Sri Handal Sdn Bhd — to acquire oil palm plantation lands by the end of the 1Q21.

The acquisitions comprise a total gross land area of 2,862 acres (1,158.21ha), for a total cash purchase consideration of RM92.54 million.

“Therefore, the management forecasts the FFB production for the financial year ending Jan 31, 2021, to be about 8% higher than the quantity achieved in the financial  year 2020 after taking into consideration the impact of ongoing replanting programme.

“The management expects the milling operations to achieve a total processing quantity of about 1.33 million metric tonnes (MT) of FFB which is 17% higher as compared to the financial year 2020,” it said.

Kim Loong added the performance of the milling operations will also be supplemented by revenue of about RM5 million from supplying power to the grid.

“With the recent unexpected sharp increase in CPO commodity price to the current level of above RM3,600 per MT, the management is of the view the group’s plantation operations will continue to benefit significantly from high CPO price despite a gradual drop in FFB production is expected in the fourth quarter due to seasonal factor on cropping trend.

“However, CPO price is generally susceptible to fluctuation of currency exchange rate, demand and supply of commodity and import policies of major importing countries,” it said.

The company has declared a special single-tier dividend of three sen per share in respect of the financial year ending Jan 31, 2021, summing up to a total of seven sen single-tier per share for the current financial year.