KLK and Batu Kawan report lower earnings in 1QFY24, dragged by downstream activities

• KLK’s property segment profit improved by a third to RM11.9 million supported by higher revenue at RM70.3 million in the same period last year. 

KUALA LUMPUR (Feb 20): Batu Kawan Bhd and its 47.74%-owned Kuala Lumpur Kepong Bhd (KLK) has reported lower earnings for the first quarter of financial year 2024 (1QFY2024), dragged by the losses incurred in the manufacturing and farming segments. 

KLK’s net profit dropped 49% year-on-year to RM226.94 million or 21 sen per share in 1QFY2024, compared to RM443.04 million or 41.1 sen per share a year ago, the plantation group said in a bourse filing. 

Quarterly revenue contracted 16% to RM5.64 billion from RM6.71 billion.

KLK’s manufacturing profit fell sharply by 90.1% to RM25.3 million for the quarter while revenue declined by nearly 19% to RM4.477 billion. This was due to losses incurred by its oleochemicals division as a result of eroded profit margin and lower profit contribution from its refineries and kernel crushing operations. 

Revenue contribution from its non-core investment holdings also slipped to losses of RM39.4 million from a profit of RM26.5 million in 1QFY2023, on the back of lower profit from its farming sector as sales volume slowed due to adverse weather conditions.

Nonetheless, its plantation segment achieved 11% growth on profit amounting to RM370.4 million driven by higher crude palm oil (CPO) and palm kernel sales volume, lower cost of production, and a net gain of RM1 million from fair value changes on outstanding derivative contracts.

KLK’s property segment profit improved by a third to RM11.9 million supported by higher revenue at RM70.3 million in the same period last year. 

On its outlook, KLK anticipated that tightening stocks during the Ramadan season may likely keep CPO prices above RM3,800/mt, which would reflect better earnings for the group, despite the dissipation of the El-Nino premium and lower demand. 

The plantation group remains focused on improving its production yields via implementation of site-specific strategies to overcome main yield limitations in certain regions.

Meanwhile, its parent Batu Kawan reported a bigger drop in net profit of 53% to RM111.74 million for the 1QFY2024 from RM235.3 million in the previous corresponding quarter, following revenue declining 17% to RM5.83 billion from RM6.99 billion. 

Likewise, despite stronger plantation and property development earnings, its manufacturing and investment holdings weighed on its earnings. 

Batu Kawan’s manufacturing's profit dipped 86.3% to RM40.29 million from RM294.36 million on the back of 19.3% lower revenue at RM4.65 billion. 

Both Batu Kawan and KLK did not declare any dividend for the quarter under review.

Shares in Batu Kawan settled two sen higher at RM20.02, giving it a market capitalisation of RM8 billion. KLK, on the other hand, gained eight sen to RM22.60, valuing the plantation firm at RM24.37 billion.

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