number of harvesters. (File pic by IOI Corporation).
THE team at Amlnvestment Bank Bhd (Amlnvestment Bank) believe that IOI Corporation Bhd's (IOI) fresh fruit bunch (FFB) production growth would be positive for the first time in FY24 since the increase of 11.4 per cent in FY18.
To recap, IOI's FFB production fell by an average of five per cent per year from FY19 to FY23. This was mainly due to the drought in 3Q2019 and labour shortage from FY21 to FY23.
"We think that IOI's FFB output would expand by seven per cent in FY24 compared with a decline of 1.5 per cent in FY23," it said in a note yesterday.
"We have assumed an average FFB yield of 19.5 tonnes per hectare (ha) in FY24 versus 18.7 tonnes per ha in FY23."
Amlnvestment Bank said IOI's recovery in FY24 FFB yields is expected to be underpinned by a higher number of harvesters. Recall that foreign workers started arriving in Malaysia from end-2022 to mid-2023.
The impact of El Nino is not envisaged to be severe as rainfall was sufficient in Sabah and Peninsular Malaysia last year. IOI's exposure to Indonesia is small.
"On the back of a higher volume of CPO production and lower fertiliser costs, we believe that IOI's cost of production (EBIT level) would ease to RM2,500 per tonne in FY24 from RM2,709 in FY23.”
According to Bloomberg, the average price of US corn belt granular potash was US$394 per tonne in 2H23, 42.6 per cent lower than the average of US$687 per tonne in 2H22.
As for the manufacturing division (refining and oleochemicals), the research firm believed that global demand for oleochemical products would improve in 2H24 as interest rates plateau or decline.
"Hence, we forecast IOI's manufacturing EBIT to recover by six per cent in FY25 after plummeting by 37.4 per cent in FY24.
“IOI commissioned its new oleochemical plant in Penang in July 2023. The plant, which has a production capacity of 110,000 tonnes per year, is more efficient than IOI's older plants.
"The plant produces mainly basic fatty acids and caters to companies in Asia Pacific and Europe. Average utilisation rate of IOI's oleochemical division is 60 per cent."