KUALA LUMPUR (Feb 21): IOI Corp Bhd posted an 8% drop in second quarter net profit from second quarter a year ago as lower crude palm oil (CPO) prices and higher wages dampened performance of its upstream PLANTATION operations.

In a statement to the exchange today, IOI said net profit stood at RM531 million in the second quarter ended December 31, 2012 (2QFY13) versus RM577.7 million previously as revenue declined 14% to RM3.59 billion from RM4.17 billion.

"The decrease is due mainly to lower profit contributions from plantation segment, which is mitigated by better performance from the manufacturing segment," IOI said. Although it netted higher fresh fruit bunch output during the quarter, the firm had registered CPO prices of RM2,292 a tonne compared to RM3,032 a year earlier, said IOI which is also a a property developer.

Cumulative first-half net profit, however, rose 36% to RM1.14 billion from RM835.8 million a year earlier although revenue fell 16% to RM6.96 billion from RM8.31 billion.

IOI said its outlook for the remaining months of FY13 is unlikely to be rosy. The firm said its upstream plantation division may still have to contend with lower CPO prices, besides higher wages amid manpower constraints.

However, the segment is anticipated to do well in the medium term on firm demand for CPO, and a recovery in prices of the commodity.

Downstream, IOI said its refineries and specialty-fats business are exhibiting recovery signs on cheaper palm oil amid a new export-duty for CPO in the country.

"The oleochemical business is expected to perform well in this financial year due to the lower feed stock prices," IOI said.

The firm's property segment will also be closely watched. While Malaysian operations may generate higher sales in tandem with more real estate launches in FY13, the Singapore unit may encounter headwinds in the high-end market due to cooling measures introduced by Singapore lawmakers.

As such, IOI is pinning its hopes on the mass-market home buyers across the causeway to sustain the overall performance of the group's property operations.

"In summary, the group is optimistic that its overall performance will be satisfactory despite the lower palm oil prices beginning in fourth quarter of 2012 and the weak global economy," IOI said.