Batu Kawan's 1Q net profit falls 10% on lower contribution from plantation, property segments

KUALA LUMPUR (Feb 12): Batu Kawan Bhd's first quarter net profit fell 9.94% to RM177.89 million, from RM197.54 million a year earlier, on lower contribution from the plantation and property development segments.

Earnings per share stood at 44.21 sen in the quarter ended Dec 31, 2017 (1QFY18) versus 48.77 sen in 1QFY17, Batu Kawan said in a filing with Bursa Malaysia.

Quarterly revenue slipped 5.12% to RM5.34 billion, from RM5.63 billion a year ago.

The group's quarterly plantation segment profit fell 35.8% to RM276.03 million from RM430.23 million previously, resulting from weaker average selling price of crude palm oil (CPO) and palm kernel realised.

The profit was further affected by lower CPO sales volume with net unrealised foreign exchange translation loss of RM29.7 million, as against a net gain of RM44.4 million in 1QFY17 on loans advanced and bank borrowings to Indonesian subsidiaries.

As for its property development segment, the profit fall was because of lower development profits recognised from the Bandar Seri Coalfields project.

In contrast, Batu Kawan's manufacturing and investment holdings segments posted 231% and 122.4% rise in profit, respectively. The manufacturing unit's profit rose as a result of higher capacity utilisation and operational efficiencies.

Within the manufacturing unit, the oleochemical division posted a sharp rise of 85.3% in profit to RM141.11 million while the chemicals division's profit inched down 0.2% to RM36.24 million.

Batu Kawan's plantation profit in 1QFY18 was affected by the decline in CPO prices due to the post-El-Nino weather condition where fresh fruit bunch production recovered, resulting in high CPO inventories.

However, the Malaysian authorities have taken various positive measures to limit any further CPO price erosion, the group noted,

As for the chemicals division, profit from the chlor-alkali business is expected to be satisfactory.

The sulphuric acid business is expected to remain profitable in view of the recent restructuring of plant capacity, though it continues to face challenges from imported smelter acid.

Overall, Batu Kawan anticipates satisfactory result for FY18.

Its shares closed up eight sen or 0.41% at RM19.48 today for a market capitalisation of RM7.84 billion. —

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