KUALA LUMPUR (Feb 19): Exceptional items, namely foreign exchange gain and fair value gain on derivative financial instrument, have propelled IOI Corp Bhd’s net profit to RM724.8 million for the second financial quarter ended Dec 31, 2016 (2QFY16) — nearly 37 times of the RM19.6 million achieved in the previous corresponding quarter, in which it suffered large exceptional losses.
The group’s earnings per share (EPS) jumped to 11.51 sen, from 0.31 sen previously. It declared an interim dividend of 3.5 sen per share, with an EX-date on Mar 4, 2016.
IOI Corp recorded a foreign currency gain of RM227.3 million in 2QFY16, against a foreign exchange (forex) loss of RM273.6 million in 2QFY15.
Furthermore, the Group has booked in fair value gain on derivative financial instruments of RM256.4 million in 2QFY16, against a loss of RM118.6 million in previous corresponding quarter.
Quarterly revenue rose marginally by 3.9% to RM2.97 billion in 2QFY16, from RM2.86 billion a year ago.
IOI Corp said its plantation division's profit rose by 9% to RM324.4 million in 2QFY16, from RM297.3 million in the previous corresponding quarter.
“The higher profit reported is due mainly to improved performance of the Indonesia plantation business, as well as higher palm kernel (PK) price realised, which is offset by lower fresh fruit bunches (FFB) production,” the group disclosed.
For the first half of FY16 (1HFY16), IOI Corp’s net profit shrunk 97% to RM5.8 million, from RM196.2 million in previous corresponding period, despite revenue having risen by 3.5% to RM6.06 billion, from RM5.85 billion for 1HFY15.
EPS contracted to 0.09 sen per share, from 3.09 sen previously.
The Group said the drastic fall in net profit was due to net foreign currency translation loss of RM626.6 million during 1HFY16, which was an increment of 92.33% from RM325.8 million in 1HFY15.
IOI Corp said the volatility of the US dollar-to-ringgit exchange rate has been impacting its non-cash flow forex translation, from the Group’s medium to long term US dollar denominated borrowings.
“Since the fourth quarter of year 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,” the Group noted.
Moving forward, IOI Corp said due to the El Nino effect on oil palm fruits production and the lower palm oil stock, 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 the Group’s resource-based manufacturing segment, IOI Corp 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 added.
Overall, the Group expects its underlying operating performance for the remaining quarters of FY16 to be satisfactory.
IOI Corp's share price retreated from its recent peak of RM4.90 to end the week at RM4.75 today, for a market capitalisation of RM29.93 billion. The plantation stock has rebounded from the two-year low of RM3.82 in late September last year.