Update: Property and downstream boost IOI Corp’s profit

KUALA LUMPUR: IOI Corp Bhd has reported a 3% rise in its third quarter (3Q) earnings from a year ago, buoyed by a net gain in the revaluation of properties as part of the group’s proposed demerger.

Net profit for 3Q ended March of 2013 financial year (3QFY13) stood at RM567.8 million, higher than the RM552 million recorded in 3QFY12. Revenue fell to RM3.2 billion from RM3.58 million a year ago.

“Property investment profit of RM72.8 million for 3QFY13 increased by 428% from RM13.8 million reported in 3QFY12, due mainly to net fair value gain on revaluation of investment properties amounting to RM56.8 million,” the company said in a filing with Bursa Malaysia yesterday.

The revaluation, which placed a fair value of RM1.71 billion on IOI Corp’s investment properties, was carried out pursuant to the proposed re-listing of the group’s property arm, IOI Properties Bhd.

For the nine-month period, IOI Corp recorded a higher net profit of RM1.7 billion from RM1.39 billion previously. Revenue fell to RM10.16 billion against RM11.89 billion in the previous year.

The plantation segment reported a lower profit of RM913.8 million for the nine months, compared with RM1.32 billion a year ago on lower crude palm oil (CPO) and palm kernel prices which averaged RM2,470 per tonne against RM3,107 per tonne in 2012. This is despite higher fresh fruit bunch production of 2.711 million tonnes.

However, the lower average CPO price helped IOI Corp’s downstream plantation operations, which turned in a significantly higher profit of RM474.1 million from RM246.5 million a year ago. The increase was mainly due to higher margins achieved from all sub-segments as well as increase in sales volume from the refinery and speciality fats sub-segments.

IOI Corp said both its property development and investment segments performed better in the first nine months. Profit for the property development segment increased 21% to RM434 million against RM359.2 million previously.

Property investment profit surged 148% from RM42.1 million to RM104.3 million, mainly due to net fair value gain on revaluation of investment properties amounting to RM56.8 million and improvement in occupancy rates and rental yields.

IOI Corp said the market is positive, especially the landed property and mid-range condominium sectors.

“The group will launch its first condominium project in Xiamen, China, during the first quarter of the next financial year and is expecting overall stronger property sales in the next 12 months,” it said.

The company said the performance for the remaining quarter of FY13 is expected to be satisfactory.

“The plantation segment continues to face challenges on manpower shortage and higher labour cost. The prevailing CPO price is still relatively low; however, CPO fundamentals are getting stronger with lower inventory level of 1.93 million tonnes in Malaysia.

“With the expected recovery of palm oil prices due to lower palm oil stocks and the resilient demand for palm oil, this segment is expected to perform better going forward.”

IOI Corp said its resource-based manufacturing segment, especially its oleochemical business, is expected to continue to perform well due to relatively low feed stock prices. The refinery and speciality fats businesses are also projected to perform satisfactorily due to a better competitive position as a result of the country’s export duty structure.

This article first appeared in The Edge Financial Daily, on May 20, 2013.


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