IOI Corp’s 2QFY24 earnings within estimates after better RBM

Plantation player IOI Corporation Bhd’s (IOI Corp) second quarter of financial year 2024 (2QFY24) core profit after tax and minority interest (PATAMI) of RM321.7 million is within the expectations of analysts after better earnings contribution from its resource based manufacturing (RBM) segment.

In a results review report on Feb 26, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that the group’s RBM segment has seen some rebound in the latest review as its 2QFY24 operating profit came in at RM33.2 million, more than doubling from the RM15.3 million recorded in the previous quarter.

The research said that this was “quite excellent compared to its peers that mostly have small to negative margin for Oleo and refinery.”

However, compared to the previous year, the group’s RBM segment still saw a hefty 86.6 per cent contraction as its 2QFY23 RBM operating profit was driven higher by strong customer demand caused by global supply chain disruptions and better margins from Indonesia’s policy to restrict CPO exports during that period. And looking ahead, MIDF Research believed that the group’s RBM profit volatility is not yet over and will continue to persist on slower recovery in demand for palm-based products.

On the bright side, the group’s upstream segment has shown substantial recovery in estate activity.

The group’s 2QFY24 plantation segment registered an operating profit of RM291.5 million, a 27.4 per cent q-o-q increase and a -10.3 per cent y-o-y contraction.

According to MIDF Research, this was a reasonable performance and was driven by an increase in the estates productivity that generally had boost the fresh fruit brunch (FFB) and crude palm oil (CPO) production. While IOI Corp’s total planted area had reduced by 2 per cent y-o-y to 172,760 due to replanting activities, circa 83 per cent of its harvestable area remained intact and its FFB and CPO production during the period under review had surged by 5.9 per cent and 11 per cent yo-y to 819,000 metric tonnes (MT) and 184,000 MT respectively.

“This was due to the strengthened oil extraction rate of 21.91 per cent and decent FFB yield of 5.7 tonne per mature hectare recorded,” said the research arm.