KLK expects decline in plantation profit to continue
But planter says oleochemicals will support bottom line in Q4
PETALING JAYA: Kuala Lumpur Kepong Bhd (KLK) expects its plantation profit to remain lower in the fourth quarter (Q4) of its financial year (FY) ending Sept 30, 2018, due to weak crude palm oil (CPO) price.
However, the planter said the expected decline in its plantation profit would be mitigated by the better performance of oleochemicals operations, achieved through higher capacity utilisation and operational efficiency, along with lower raw material prices.
KLK reported a net profit increase of 25.9% to RM141.93mil for Q3FY18 from RM112.76mil, thanks to higher contributions from its oleochemicals division that offset the substantial decline in its plantation earnings.
During the quarter in review, KLK’s plantation earnings fell 43.6% to RM127.8mil due to a drop in the selling prices of CPO and palm kernel (PK), as well as negative contribution from processing and trading operations.
Its manufacturing segment, however, drove the group’s overall earnings, after achieving a profit of RM83.5mil, which represented a reversal from a loss of RM21.9mil previously. Of the profit achieved by its manufacturing segment during the quarter in review, RM85.1mil came from the oleochemical division.
Meanwhile, KLK saw earnings from its property development segment more than triple to RM8.3mil from RM2.5mil previously.
For the quarter in review, KLK’s revenue fell 11.1% to RM4.33bil from RM4.87bil previously. The group’s earnings per share (EPS) rose to 13.30 sen from 10.60 sen.
The group saw its average CPO price fell 13.9% year-on-year (y-o-y) to RM2,302 per tonne, while the average PK price was down 23.3% y-o-y at RM1,695 per tonne during the quarter in review.
For the nine months (9M) to June 2018, KLK’s net profit was down 14.6% to RM651.83mil from RM763.01mil a year ago, resulting in its EPS falling to 61.20 sen from 71.60 sen previously.
Its revenue was down 10.3% to RM14.23bil in 9M18, compared with RM15.84bil previously.
The group’s plantation profit fell substantially by 42.8% y-o-y to RM574.5mil due in part to foreign exchange translation loss as well as lower CPO and PK average prices, whereby the average CPO price fell 13.1% to RM2,428 per metric tonne, while the average PK price fell 21.4% to RM2,094 per metric tonne, in 9M18.
For the cumulative period, KLK’s manufacturing segment rose six-fold to RM336.2mil, with the oleochemicals division posting a profit of RM338mil, while the other manufacturing units incurred a loss of RM1.8mil.
Profit from properties, on the other hand, was 15.2% y-o-y lower at RM16.6mil, although revenue had increased 9.3% y-o-y to RM106.1mil, with the recognition of development profits from a particular phase with lower gross margin.
Following its year-to-date results, KLK said overall its net profit for FY18 should come in lower, compared with the preceding year.
KLK’s shares rose 18 sen to close at RM24.86 yesterday.