The plantation segment profit jumped 69% YoY to RM576m mainly due to higher realised CPO and PK prices

by NURUL SUHAIDI / graphic by MZUKRI MOHAMAD

IOI Corp Bhd posted a net profit of RM494.7 million in the second quarter ended Dec 31, 2021 (2QFY22) compared to RM355.7 million posted a year ago, driven by higher crude palm oil (CPO) prices.

Revenue for the period rose to RM4.11 billion from RM2.45 billion in 2QFY21, the group said in a filing to Bursa Malaysia yesterday.

IOI said the plantation segment profit jumped 69% year-on-year (YoY) to RM576.0 million mainly due to higher realised CPO and palm kernel (PK) prices.

Average realised CPO and PK prices in 2Q were stronger at RM4,565 per tonne and RM3,678 per tonne respectively.

The resource-based manufacturing segment’s profit increased to RM152.8 million from RM21.2 million in the 2Q.

The higher profit was due mainly to higher contribution from the oleochemical sub-segment with improvement in margins offset by lower contribution from the refining sub-segment.

The CPO price is moving close to the RM6,000 per tonne mark, following news of India’s import duty cut, as well as Indonesia’s new palm oil export restriction rules.

The group expects CPO price to remain strong until at least the middle of this year, supported by the global edible oil supply tightness as well as the growth in the global economy.

“For our plantation segment, the fresh fruit bunches (FFB) production for the remaining periods of FY22 is expected to be impacted by the seasonal effects, labour shortage and other operational disruptions due to the recent Omicron outbreak.

“Nevertheless, with the strong palm oil price and intensified mechanisation initiatives in our estates, the plantation segment is expected to perform well during the rest of the current financial year,” IOI stated in its filing yesterday.

It added palm refining and kernel crushing margins in Malaysia continue to be affected by the high CPO and kernel prices, as well as export duty regulations in Indonesia.

“However, we expect the performance of our refinery and commodity marketing sub-segment to remain resilient due to our efficient business model in respect of the Sabah refinery,” the group stated.

For the oleochemical sub-segment, IOI expects product margins to be affected by the sharp rise in PK oil feedstock price since December 2021, although the pent-up demand for its products remain strong due to the earlier supply chain bottlenecks and in line with the growth in global economy.

“We expect this subsegment to perform satisfactorily for the remaining periods of FY22.

“For the remaining periods of FY22, we foresee an improvement in the ope-rating performance of the specialty fats sub-segment comprising our associate company Bunge Loders Croklaan with the continued growth in the global economy, although the operating environment still presents challenges such as high freight cost and rising energy cost,” it noted.

The group expects its performance during the remaining periods of FY22 to be good on the back of strong performance from its plantation segment.