Challenging quarters ahead for IOI — Analysts

KUALA LUMPUR: IOI Corporation Bhd’s (IOI) performance in the quarters ahead will likely be challenging as the Coronavirus Disease 2019 (Covid-19) pandemic is expected to have an adverse impact on supply, demand and prices of palm-oil products, analysts observed.

In a report, the research team at Affin Hwang Investment Bank Bhd (Affin Hwang) said: “We expect the coming quarters will be more unpredictable due to the Covid-19 pandemic and volatile crude-oil prices.”

It noted that IOI’s first nine months of the financial year 2020 (9MFY20) revenue was slightly higher by 2.1 per cent year-on-year (y-o-y) at RM5.8 billion, due to an increase in contributions from the plantation (external revenue only) and resource-based manufacturing divisions.

For 9MFY20, IOI’s crude palm oil (CPO) average selling price (ASP) was higher at RM2,294 per MT (9MFY19 CPO ASP: RM2,039 per MT), but this was partially offset by lower fresh fruit bunches (FFB) production at 2.2 million MT, down 14 per cent y-o-y due to the delayed effects of dry weather and the Movement Control Order (MCO) that affected harvesting.

“However, IOI’s headline PBT (which is inclusive of net foreigncurrency translation loss on foreign-currency denominated borrowings, net inventories written back and fair-value gains on put and call options) declined by 34.9 per cent y-o-y to RM520.5 million.

“After excluding one-off items, IOI’s 9MFY20 core net profit declined by 14.5 per cent y-o-y to RM461.8 million,” it said.

Sequentially, it noted that IOI’s 3QFY20 revenue was higher at RM2.03 billion (up four per cent quarter-on-quarter), but profit before tax (PBT) plunged by 80.5 per cent q-o-q to RM52.6 million.