BATU Kawan Bhd reported a significant decline in net profit in the second quarter ended March 31, 2023 (2Q23), slipping from RM316.54 million to RM120.05 million compared to the same period the previous year.

The drop in profits was primarily attributed to lower earnings in both the manufacturing and plantation segments, it told Bursa Malaysia today.

Batu Kawan revealed that its plantation profit took a sharp 33.3% hit, plummeting to RM291.68 million.

The decline was largely influenced by several factors, including reduced selling prices of crude palm oil (CPO) and palm kernel (PK), higher production costs of CPO, and a fair value loss of RM15.76 million on unharvested fresh fruit bunches valuation.

Simultaneously, the manufacturing segment also witnessed a decline of 49.8% in profit, reaching RM219.59 million compared to the previous year.

Furthermore, the revenue generated by the manufacturing division experienced a dip of 3.8%, amounting to RM5.31 billion.

The decline in profits and revenue can be attributed to diminished contributions from the oleochemical division, refineries, and kernel-crushing operations.

The company’s overall revenue for the quarter contracted from RM6.65 billion to RM6.31 billion when compared year-on-year.

Looking ahead, Batu Kawan expressed concerns about the forthcoming performance of its plantation division due to anticipated weakness in CPO prices, driven by economic uncertainties in key consumer nations.

The group acknowledged the resumption of labor supply in Peninsular Malaysia and outlined its plans to focus on estate management and initiatives to enhance yield.

Furthermore, the company acknowledged the ongoing challenges facing its manufacturing segment, which is expected to be hampered by weakened demand for both oleochemicals and industrial chemicals.

Batu Kawan Bhd cautioned that its financial performance in the second half of the financial year ending Sept 30, 2023, is likely to be significantly weaker compared to the previous fiscal year.

Batu Kawan remains committed to addressing these challenges head-on, exploring strategies to mitigate the impact of adverse market conditions and maximise its long-term growth potential.

The stock fell 12 sen or 0.555 to end trade at RM21.68 today, while its market capitalisation stood at RM8.6 billion. – TMR