KLK sets ambitious FY22 FFB output guidance
KUCHING: Kuala Lumpur Kepong Bhd (KLK) has set a high freash fruit bunch (FFB) output growth target of 5.9 million tonnes in financial year 2022 (FY22).
This is supported mainly by FFB contribution from the acquisition of IJM Plantations Bhd (IJM Plant), which is expected to contribute to 20 per cent of the group’s FFB; an additional 8,000 to 10,000 hectares of harvesting area coming into maturity; and yield recovery.
However, Hong Leong Investment Bank Bhd (HLIB Research) believe it is unlikely for KLK to achieve such high FFB output in FY22, as abour shortage issue remains unresolved.
“Also, KLK’s FFB output only grew 28.4 per cent to 1.98 million tonnes during the first five months of FY22, which indicates that monthly FFB output would have to grow by about 70 per cent y-o-y for the remaining seven months of FY22,” it said in its notes.
“In our forecast, we are projecting FFB output of 4.75 million tonnes in FY22, which translates to an FFB output growth of 23.4 per cent.”
To note, KLK has locked in 60 per cent of its FFB output in Malaysia – equivalent to about 10 per cent of its group’s output – at above RM4,000 per metric tonne.
HLIB Research understood that KLK has recently secured majority of its fertiliser requirement for the second half of FY22 at sharply higher prices, which will result in its FY22 production cost rising by 20 to 25 per cent to RM1,800 to RM1,900 per tonne.
“The recently announced minimum wage hike in Malaysia, on the other hand, will have minor impact on its FY22 CPO production cost by about RM25 per tonne, based on our estimates,” it added.
“We understand that more meaningful cost synergies arising from the acquisition of IJM Plant could only be achieved over the longer term, as it takes time to rehabilitate brown field plantation land.”
Meanwhile, KLK’s manufacturing segment’s core profit before tax (PBT) more than doubled to RM274.7 million in 1QFY22 (from core PBT of RM107.2 million in 4QFY22), boosted mainly by improved performance at oleochemical sub-segment (which was in turn driven by higher sales volume).
“While high sales volume at oleochemical sub-segment will sustain into the near term, this will likely be moderated by weaker margins on the back of volatile feedstock prices and stiff competition.
“Property contribution to remain stable. Contribution from property development segment will remain stable (with earnings contribution of RM15 million to RM20 million a quarter), supported by property launches in small phases.”