IOI Corp first quarter earnings 60% lower

PETALING JAYA: IOI Corp Bhd’s net profit for the first quarter ended Sept 30, 2018 fell 60% to RM143.8 million from RM360 million a year ago due mainly to lower operating profit and total net foreign currency translation loss on foreign currency denominated borrowings and deposits.

Excluding the total net foreign currency translation loss of RM61.1 million on foreign currency denominated borrowings and deposits as well as fair value gain on derivative financial instruments from the resource-based manufacturing segment of RM20.2 million, the underlying pretax profit of RM236.1 million for Q1 FY2019 is 41% lower than the underlying pretax profit of RM403.5 million for Q1 FY2018, with lower contribution from all segments.

Its revenue was up 0.5% to RM1.88 billion compared with RM1.87 billion in the previous year’s corresponding quarter.

With lower exports during the end of the year period, the current high palm oil inventories is expected to persist in the near future. The prevailing trade war between China and US will provide greater opportunity for Malaysia to increase its exports of palm oil to China during the first quarter of next year when China’s soya beans stocks is drawn down.

The current discount of palm oil price over mineral oil price resulting in greater demand for palm biodiesel is also a positive factor which will underpin palm oil price.

“Overall, we expect CPO (crude palm oil) price to be supported at between RM2,000 and RM2,250 per tonne until the beginning of year 2019,” IOI Corp said.

The current strength of the US dollar against the ringgit will result in further noncash foreign exchange translation loss on its medium to long term US dollar-denominated borrowings.

Overall, the group expects its financial performance for the next quarter to be satisfactory, albeit slightly lower than the previous quarter due to the lower CPO price.