KUCHING: IOI Corporation Bhd (IOI Corp) has ended its financial year 2024 (FY24) with results that are largely within expectations, but analysts are expecting a brighter outlook for the plantation player in FY25.

During the period under review, IOI Corp saw its FY24 core net profit (CNP) declining by 12.4 per cent to RM1.1 billion after excluding an unrealised net forex loss of RM18.9 million.

The drop was largely due to a steep 52.3 per cent decline in manufacturing earnings from soft downstream performance and a fall in associate contributions in the fourth quarter of FY24 (4QFY24).

This was offset slightly by a 5 per cent rise in plantation earnings and a drop in effective tax rate from 26 per cent in FY23 to 20.2 per cent in FY24.

The growth in plantation earnings were caused by a 4.4 per cent improvement in fresh fruit bunch (FFB) though this was offset by lower crude palm oil (CPO) prices that fell by 6.4 per cent from RM4,118 per tonne in FY23 to RM3,856 per tonne in FY24.

According to Amlnvestment Bank Bhd (Amlnvestment Bank), the increase in FFB is the first increase in 5 years of declines and they attribute this recovery in FFB yields to higher number of estate workers.

IOI Corp also declared a final gross DPS of 5 sen for 4QFY24 which brought total gross FY24 DPS to 9.5 sen which implies a yield of 2.5 per cent.

Looking ahead in FY25, Public Investment Bank Bhd (PublicInvest Research) guides that IOI Corp's management is expecting a positive growth for its plantation segment in FY25 on the back of improved FFB production and lower CPO production cost.

"FFB production is projected to be higher, led by continuing labour productivity improvement in Peninsular Malaysia and increased production from the young area despite the accelerated replanting programme in Sabah," they commented.

In terms of CPO prices, analysts at Kenanga Investment Bank Bhd's research arm guided that they are expecting CPO prices to not see any drastic changes and average at RM3,800 per tonne for FY25 to 26 as global edible oil supply is not likely to outstrip demand as resultant inventory levels are still supportive for prevailing prices.

Meanwhile, the group's refining sub-segment is expected to remain subdued due to low refining margins as a result of overcapacity of refineries in Indonesia as well as the price advantage from the country's CPO export duty policy.

"Nevertheless, it expects its refining margin to improve going forward due to its capabilities in producing low contaminants oils and its focus on cost optimization," said PublicInvest Research.

Additionally, Amlnvestment Bank Bhd (Amlnvestment Bank) guides that the group's oleochemical sub-segment is also expected to see better performance in the first half of FY25 (1HFY25) as its management is expecting higher demand from the EU due to stocking up activities before the implementation of the EU Deforestation Regulation (EUDR) on Dec 30, 2024.

"However, outlook for the refining division remains subdued due to overcapacity in Indonesia," they added.

Besides this, Kenanga Research also notes that the group may see growth from the palm oil circular economy in FY25 from its previous 2023 launch of palm-based wood products and its 2024 tripartite joint venture (JV) to develop non-wood pulp instead from Empty Fruit Bunches (EFB).

"Nextgreen Global Bhd will be driving the overall project with Xiamen C&D Corp to focus on marketing and fund raising while IOI Corp will guide on upstream EFB supply chain support," the research arm reported.