Tanah Makmur's 2Q earnings crimped as revenue weakens

KUALA LUMPUR (Aug 23): Tanah Makmur Bhd's net profit slid 9% to RM12.05 million in its second quarter ended June 30, 2016 (2QFY16) from RM13.2 million in the same period last year, due to lower contribution from its plantation and property development segments.

Revenue dropped 12.5% to RM88.7 million in 2QFY16 from RM101.4 million a year ago, its bourse filing today showed.

Revenue from the plantation segment decreased by 26.5% following lower fresh fruit bunch (FFB) production and lower FFB processed, despite higher average selling prices of crude palm oil (CPO) and palm kernel (PK) compared to 2QFY15.

Profit before tax for the segment, however, grew 17.2% to RM7.95 million due to higher average CPO and PK price per metric tonne by RM403 and RM853 respectively, and decrease in spending for upkeep and cultivation by RM1.78 million to RM5.97 million, compared to last year.

As for the property development segment, Tanah Makmur said it recorded a turnover of RM46.58 million or 5.7% more due to higher sales of affordable homes and trading/engineering support activities.

However, profit before tax slid 22.6% to RM12.84 million from 2QFY15 because more of the affordable homes it sold have lower margin, coupled with lower margin contribution from its trading/engineering support activities.

Meanwhile, its mineral extraction activity (bauxite — as part of property development segment) contributed lower revenue and profit in 2QFY16 compared to 2QFY15 as sales were only dependent on remaining inventory.

There has been no further mining activity due to the moratorium imposed by the federal government on bauxite mining since January this year, it said.

In its first half ended June 30, 2016 (1HFY16), Tanah Makmur's net profit fell 28% to RM19.02 million from RM26.4 million in 1HFY15, whereas revenue slipped 17.7% to RM150.67 million from RM183.2 million.

On outlook, it expects the performance of the plantations segment to be satisfactory following a slow but expected recovery in CPO prices, while its property development segment's revenue is expected to rise in tandem with the timing and anticipated positive response to its new launchings.

As for mining, it expects the contribution to significantly decline due to the ongoing moratorium.

As such, it expects results for its FY16 to be satisfactory.At market close today, the counter remained unchanged at RM1.70, valuing it at RM676.8 million. — theedgemarkets.com

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