Profitable: Excluding the forex gain, IOI said the underlying pre-tax profit in Q2 was up 76% year-onyear at RM649.2mil on a 3.9% higher revenue of RM2.97bil.

Planter’s Q2 profit soars 2,700% on currency gain

IOI Corp Bhd’s quarterly results continued to be affected by foreign exchange (forex) fluctuations, with earnings in the second quarter (Q2) ended Dec 31, 2015 surging 2,700% to RM724.8mil, thanks mainly to a foreign translation currency gain.

This was a reversal from the first quarter, when IOI incurred a RM719mil loss due largely to a fair value loss on derivative financial instruments of RM451.1mil.

In a filing with Bursa Malaysia yesterday, the plantation heavyweight said it made a net foreign currency translation gain of RM227.3mil in Q2 on foreign currency-denominated borrowings versus a RM273.6mil translation loss a year earlier.

Excluding the forex gain, IOI said the underlying pre-tax profit was up 76% year-on-year at RM649.2mil on a 3.9% higher revenue of RM2.97bil. The company said its plantation segment had recorded a profit of RM582.4mil in Q2, marginally higher than the RM578.3mil achieved a year earlier. This was spurred by an improvement in the oil extraction rate to 21.90% from 21.54% previously, which was offset by a lower share of results of associates.

On the resource-based manufacturing segment’s profit, IOI said it rose 65% to RM359.8mil due mainly to a fair value gain on derivative financial instruments of RM57.9mil (Q2 FY15: loss of RM129.3mil).

Excluding the fair value gain/loss, the underlying profit for resource-based manufacturing fell 13% to RM301.9mil for the quarter under review. This was mainly due to the lower margin from the refining and the specialty oils and fats sub-segments, the company said.

For the six-month period to Dec 31, 2015, IOI posted earnings of RM5.8mil against RM196.2mil in the previous year’s corresponding period. Revenue, meanwhile, increased 3.5% to RM6.055bil.

On its prospects, IOI said the group expects its underlying performance for the remaining quarters to be “satisfactory.”

“With the effect of El Nino on oil palm fruit production and the lower palm oil stock, the palm oil price has been trending upward and is expected to remain firm. As such, we expect our plantation segment to perform satisfactorily in the remaining two quarters of this financial year,” it said.

As for its resource-based manufacturing segment, IOI expects the oleochemicals and specialty oils and fats sub-segments to achieve sustained satisfactory performance in this financial year, given their strong sales and distribution networks and the geographical spread of their customers across the globe. “The refining sub-segment remains challenging as the Malaysian refineries’ margins turn negative again from the small positive recorded earlier,” it said.

On the currency fluctuations, IOI said the volatility of the dollar/ringgit exchange rate has been impacting the non-cash flow forex translation gain/loss arising from its medium to long-dated US dollar-denominated borrowings.

“Since the fourth quarter of 2015, when the ringgit had weakened to RM4.40 against the US dollar, the ringgit has reversed the slide and gained strength in year 2016 to-date,” it noted. IOI has declared an interim dividend of 3.5 sen per unit versus 4.5 sen previously. IOI shares fell 15 sen to close at RM4.75, with 5.38 million shares changing hands.