KLK’s 1Q net profit shrinks as plantation, property earnings weaken

KUALA LUMPUR (Feb 13): Kuala Lumpur Kepong Bhd (KLK)’s net profit fell 11% to RM320.63 million in its first quarter ended Dec 31, 2017 (1QFY18) from RM360.68 million a year ago, as both its plantation and property segments registered weaker earnings.

Revenue for the quarter declined 6% to RM5.19 billion from RM5.5 billion, its Bursa Malaysia filing yesterday showed.

Its plantation profit fell 37% year-on-year to RM266.4 million in the current quarter from RM419.4 million, while its property development profit slumped 89% y-o-y to RM1.7 million from RM15.9 million.

Its plantation performance was impacted by weaker average selling prices of crude palm oil (CPO) and palm kernel (PK), lower sales volume of CPO, and a net unrealised foreign exchange translation loss of RM29.7 million — compared to a net gain of RM44.4 million a year ago — on loans advanced and bank borrowings to its Indonesian subsidiaries.

In 1QFY18, its CPO average selling price was RM2,581 per tonne, while PK's was at RM2,488 compared with RM2,720 and RM2,648, respectively, in 1QFY17.

As for its property segment, the weaker profit was in line with the 70% drop in revenue to RM17.9 million during the quarter, from RM60.2 million in 1QFY17.

Its segment for investment holdings and other sectors also saw a 19% decline in profit to RM26.21 million from RM32.43 million in 1QFY17, despite higher wheat selling price, due to lower crop production and lower yield.

Of its four business segments, only its manufacturing segment reported stronger earnings. The segment's profit jumped 473% y-o-y to RM141.82 million from RM24.74 million, aided by the unrealised gain of RM25.9 million arising from fair value changes on outstanding derivative contracts, compared to an unrealised loss of RM29 million, besides stronger revenue and profit margin.

KLK also noted that its 1QFY18 results had included a RM13.6 million surplus arising from the government’s acquisition of land.

KLK said the decline in CPO prices during the period under review was due to post El-Nino fresh fruit bunch (FFB) production recovery, resulting in high CPO inventories.

“Our plantation profit was correspondingly affected but this will be partly compensated by our oleochemical operations, which have benefited from higher capacities utilisation and operational efficiencies as reflected in the current quarter’s higher profit,” it said.

Moving forward, it anticipates to post a satisfactory result for FY18.

KLK shares edged 0.08% or 2 sen higher to close at RM25.24 yesterday, giving it market capitalisation of RM26.9 billion. —

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