KUALA LUMPUR: IOI Corporation Bhd’s earnings fell sharply to RM19.60mil in the second quarter ended Dec 31, 2014 from RM487.10mil a year ago due to net foreign exchange (forex) losses.

The plantation heavyweight said on Friday it sustained a net foreign currency translation loss on foreign currency borrowings totaling RM273.60mil, a sharp contrast from the losses of only RM7.5mil a year ago. This saw its pre-tax profit for Q2 FY2015 slump to RM94.6mil from RM487.3mil a year ago.

“Excluding the net foreign currency translation loss of RM273.6mil on foreign currency denominated borrowings, the underlying pre-tax profit of RM368.2mil for Q2 FY2015 was 26% lower than the underlying pre-tax profit of RM494.8mil for Q2 FY2014, which is due mainly to lower segmental profit,” it said.

IOI Corp's segmental profit fell 26% to RM431.2mil from RM581mil a year ago due to the forex losses arising from weaker ringgit from the resource-based manufacturing segment of RM105.4mil (Q2 FY2014 – loss of RM5.2mil).

“Excluding the unrealised fair value loss in foreign currency forward exchange contracts for both Q2 FY2015 and Q2 FY2014, the underlying segmental profit of RM536.6mil for Q2 FY2015 is 8% lower than the underlying profit of RM586.2mil for Q2 FY2014,” it said.

Its revenue slipped 1.9% to RM2.881bil from RM2.939bil. Earnings per share were 0.31 sen compared with 7.62 sen. It declared an interim dividend of 4.5 sen compared with eight sen a year ago.

Commenting on the financial performance, it said the plantation profit fell 4% to RM297.3mil compared to RM310.2mil a year ago. The lower profit was due mainly to lower crude palm oil (CPO) and palm kernel (PK) prices realised, mitigated by higher CPO extraction rate.

IOI Corp said average CPO price realised for Q2 FY2015 was RM2,187 a tonne as compared to RM2,424 a year ago.

As for the resource-based manufacturing, excluding the unrealised fair value loss in foreign currency forward exchange contracts for both Q2 FY2015 and Q2 FY2014, the underlying profit for resource-based manufacturing segment slipped 19% to RM215mil from the underlying profit of RM265mil.

“The lower resource-based manufacturing underlying profit is mainly due to lower margin from oleochemicals sub-segment,” it explained.

For the first half ended Dec 31, 2014, it earnings slumped 75.1% to RM196.20mil from RM788.90mil in the previous corresponding period.

Pre-tax profit fell 53% to RM362.9mil from RM777.8mil due to net foreign currency translation loss on foreign currency denominated borrowings amounting to RM325.8mil. Revenue fell 277% to RM5.9bil from RM6.18bil.

IOI Corp reported segmental profit of RM848.3mi from its continuing operations, 20% lower than the segmental profit of RM1.0637bil.

The decline was mainly due to unrealised fair value loss in foreign currency forward exchange contracts arising from weaker Ringgit from the resource-based manufacturing segment amounting to RM123.8mi (Q2 YTD FY2014 – gain of RM6.5mil).

“Excluding the unrealized fair value loss in foreign currency forward exchange contracts for both Q2 YTD FY2015 and Q2 YTD FY2014, the underlying segmental profit of RM972.1 million for Q2 YTD FY2015 is 8% lower than the underlying profit of RM1.0572bil for Q2 YTD FY2014,” it explained.

The plantation profit of RM578.3mil was 3% higher than RM560.3mil in the previous corresponding period due mainly to higher fresh fruit bunches (FFB) production, better CPO extraction rate, and lower operating costs incurred, offset by lower CPO price realised.

As for resource-based manufacturing, excluding the unrealised fair value loss in foreign currency forward exchange contracts for both periods, the underlying profit for the segment was RM342.2mil in Q2 YTD FY2015 compared with the underlying profit of RM471.9mil a year ago. This is mainly due to lower margin from both the refinery and oleochemicals subsegments.