IOI’s 2Q profit plunges 96% on unrealised forex losses

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KUALA LUMPUR (Feb 13): IOI Corp Bhd posted a sharp drop in earnings in the second quarter ended Dec 31, 2014 (2QFY15), with net profit falling 96% to RM19.6 million or 0.31 sen a share from RM487.1 million previously, due mainly to unrealised fair value loss in foreign currency (forex) forward exchange contracts arising from a weaker ringgit.

Revenue for the second quarter fell marginally to RM2.88 billion, from RM2.93 billion.

Segmentally, the group’s plantation profit fell 4% to RM297.3 million for the quarter under review, due to lower crude palm oil (CPO) and palm kernel prices realised, mitigated by higher CPO extraction rate.

For the resource-based manufacturing segment, profit came in 19% lower at RM215 million from RM265 million previously, due mainly to lower margin from the oleo-chemicals sub-segment.

For the six months ended Dec 31, 2014 IOI’s (fundamental: 1.7; valuation: 2.1) net profit also came in sharply lower at RM196.2 million, down 75% from RM788.9 million a year earlier due to unrealised forex losses.

Revenue, meanwhile, fell 4% to RM5.9 billion from RM6.2 billion previously.

On prospects, IOI expects CPO prices to hover within the range of RM2,150 to RM2,370 per tonne over the next two months, underpinned by the wet-weather induced lower production and lower stock levels, but capped by the record high soybean production.

"Going forward, our Indonesian plantation subsidiary is expected to increase its fresh fruit bunch production substantially due to the young age profile of its trees.

"In the resource-based manufacturing segment, the group expects its specialty oils and fats and oleo-chemicals sub-segments to perform satisfactorily given the resilient demand from both the food and oleo-chemicals sectors," it said in a Bursa Malaysia filing this evening.

IOI ended five sen or 1.05% higher at RM4.81, for a market capitalisation of RM30.41 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)