KUALA LUMPUR (Feb 21): IOI Corp Bhd’s net profit fell 98% year-on-year (y-o-y) to RM15.6 million in the second quarter ended Dec 31, 2016 (2QFY2017) from RM703.7 million, mainly due to some RM330 million net foreign currency translation loss on its foreign currency-denominated borrowings.

In comparison, it reported a net foreign currency translation gain of RM227.3 million in the same period last year, its bourse filing yesterday showed.

Excluding the impact of that, its profit before tax for 2QFY2017 would be RM458.8 million, down 26% y-o-y from RM616.9 million, mainly on lower contribution from its manufacturing segment.

Quarterly revenue, however, climbed 24% y-o-y to RM3.67 billion from RM2.97 billion. The group declared a first interim dividend of 4.5 sen for the quarter, payable on March 16.

For the cumulative six months, it posted a net profit of RM120.4 million compared to a net loss of RM40.7 million a year ago, as revenue grew 15% to RM6.96 billion from RM6.06 billion.

Moving ahead, IOI Corp warned that the volatility of the dollar-ringgit exchange rate will continue to affect its non-cash flow of foreign exchange translation gain/loss, due to its US dollar borrowings, besides the fair value gain/loss on its derivative financial instruments.

As such, it has refinanced or swapped some of its US dollar loans into euro-denominated loans to diversify its forex risks and reduce borrowings cost.

Meanwhile, it said crude palm oil and palm kernel prices are expected to remain firm in the current quarter due to low stocks, with little impact on prices despite season increase in production in the last quarter of FY2016.

Hence, it expects its plantation segment to perform better than FY2015, though its resource-based manufacturing segment may be affected by the same.

“Overall, the group expects its operating performance for FY2017 to be satisfactory.”

This article first appeared in The Edge Financial Daily, on Feb 21, 2017.

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