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IOI Corp Posts Pre-tax Profit of RM128m in Q2 FY17
20/02/2017The Star
KUALA LUMPUR: Plantation heavyweight IOI Corporation Bhd posted profit before tax (PBT) of RM128.80mil in the second quarter ended Dec 31, 2016, which was sharply lower than a year ago due to net foreign currency translation loss on foreign currency borrowings.

It said on Monday the PBT was down 84.7% from RM844.20mil a year ago. Its earnings were RM15.60mil compared with RM703.70mil a year ago.

IOI Corp explained the lower PBT was due mainly to the net foreign currency translation loss on foreign currency denominated borrowings of RM330mil for Q2 FY2017 as compared to the gain of RM227.3mil a year ago.

“Excluding the net foreign currency translation loss/gain, the underlying PBT of RM458.8mil for Q2 FY2017 is 26% lower than the underlying PBT of RM616.9milfor Q2 FY2016.

“The lower underlying PBT is due mainly to lower contribution from resource-based manufacturing segment which was partially cushioned by higher contribution from the plantation segment,” it said.

In the Q2, FY17, IOI Corp's revenue rose 23.4% to RM3.66bil from RM2.96bil. Earnings per share were 0.25 sen compared with 11.17 sen. It declared an interim dividend of 4.5 sen compared with 3.5 sen a year ago.

Plantation profit increased by 23% to RM357.9mil for Q2 FY2017 from RM292.1mil due mainly to higher crude palm oil (CPO) and palm kernel (PK) prices realised despite lower fresh fruit bunches (FFB) production.

The average CPO and PK prices realised for Q2 FY2017 were RM2,768 a tonne (Q2 FY2016 at RM2,144 a tonne) and RM2,882 a tonne (Q2 FY2016 at RM1,631) respectively.

IOI Corp's resource-based manufacturing segment reported lower profit of RM155.4mil for Q2 FY2017 versus RM368.6mil a year ago.

Excluding the fair value loss/gain on derivative financial instruments, the underlying profit for resource-based manufacturing segment of RM178.8mil for Q2 FY2017 was 59% above the underlying profit of RM112.2mil a year ago. This was mainly due to higher margin derived from refining sub-segment.

For the first half, IOI Corp's PBT was higher at RM318mil versus RM153.60mil in the previous corresponding period ended Dec 31, 2015.

The higher PBT was due mainly to higher contribution from plantation segment and lower net foreign currency translation loss on foreign currency denominated borrowings which was offset by lower contribution from resource-based manufacturing segment.

“Excluding the net foreign currency translation loss of RM502.0mil (H1 FY2016 – RM626.6mil) on foreign currency denominated borrowings, the underlying PBT of RM820mil for H1 FY17 is 5% higher than the underlying PBT of RM780.2mil for H1, FY16,” it explained.

It reported earnings of RM120.40mil compared with net loss of -RM40.70mil. Revenue rose 14.9% to RM6.957bil from RM6.055bil.

On the outlook, IOI Corp said CPO and PK prices were expected to remain firm in the current quarter due to the low stocks.

“Going into the last quarter of the financial year, we anticipate that prices will not be significantly impacted by the seasonal increase in production. The plantation segment is therefore expected to perform better than the previous financial year.

“The performance of the resource-based manufacturing segment is expected to be affected by the current firm palm oil and PK prices,” it said.

IOI Corp said the volatility of the US dollar Ringgit exchange rate would continue to affect the non-cash flow foreign exchange (forex) translation gain/loss arising mainly from its medium to long dated US Dollar-denominated borrowings, as well as the fair value gain/loss on derivative financial instruments which are primarily trade-related forex forward contracts.

IOI Corp also said it had refinanced/swapped some of its US Dollar loans into Euro-denominated loans to diversify its forex risks and reduce its borrowings cost.