Higher palm oil prices boost IOI Corp

by S BIRRUNTHA / graphic by MZUKRI MOHAMAD

IOI Corp Bhd posted a 50.8% year-on-year (YoY) increase in its net profit to RM359.4 million for the fourth quarter ended June 30, 2021 (4Q21), mainly driven by higher palm oil prices.

Quarterly revenue grew 69.7% YoY to RM3.46 billion, according to the group’s exchange filing on Bursa Malaysia yesterday.

Earnings per share for the quarter was 5.74 sen. The company declared a second interim dividend of six sen, payable on Oct 5, its exchange filing noted.

For the full year, IOI Corp’s net profit surged 132% to RM1.39 billion, while revenue climbed 44% to RM11.25 billion partly due to the higher product prices.

The group’s plantation segment reported a profit of RM409.8 million in the final quarter, or 75% higher from the RM234.2 million profit it made a year ago.

This was achieved mainly due to higher average crude palm oil (CPO) price of RM3,648 a tonne (4QFY20: RM2,370) and palm kernel price at RM2,656 a tonne (4QFY20; RM1,349). The gains were offset by lower fresh fruit bunch (FFB) production.

IOI’s resource-based manufacturing segment registered a profit of RM165 million in 4Q21, which was 66% higher than the profit of RM99.6 million in 4Q20.

The company stated that the higher profit is mainly due to a higher share of results from its specialty fats associate.

The refining sub-segment reported a decrease in contribution with lower margins, this was, however, cushioned by higher contribution from oleochemical sub-segment.

CPO remains high and hovers between RM4,300 and RM4,500 per metric tonne (MT) (third month forward) in August 2021 as the end-July Malaysian palm stock fell to 1.5 million MT, mainly due to weaker than expected FFB production.

The production weakness is largely attributed to workers shortage and restrictive measures contained in the pandemic-related standard operating procedures (SOPs).

“We anticipate this challenging operating environment will continue for the near term, thus indirectly lending support to the strong CPO price trend at least for the next few months,” it noted in a statement.

For its plantation segment, IOI Corp added that FFB production is expected to be stable in the new financial year 2022 (FY22) as the higher production from young palm trees in its Indonesian plantations will offset the production loss from its accelerated replanting programme in Sabah.

The group has accelerated its mechanisation programme in various field operations to alleviate the workers shortage challenge in its estates.

The group anticipates the plantation segment to continue to perform well in the new financial year.

IOI Corp expects the manufacturing division to post satisfactory results in FY22.

It noted the volatile CPO price will have an impact on refining profitability, while its oleochemical business would see thinner margins due to higher feed-stock prices.

“The group expects overall financial performance in the new financial year to be better than the previous year, underpinned by the strong performance from our plantation segment,” IOI forecast.

IOI Corp share price closed 14 sen or 3.73% higher at RM3.89 yesterday, valuing the group at RM24.45 billion.