As widely expected, IOI Corp recognised the decline in the value of its property investment in Singapore. Its joint-venture (JV) partner, Ho Bee Investment Ltd, had written down S$53.9 million (RM131.77 million) on The Pinnacle Collection in Sentosa Cove in its 2QFY09 results last week.

IOI Corp and Ho Bee have a 65:35 stake in the JV, which acquired the land in 2008 at S$1,822 psf.

“Excluding the impairment loss, the group’s pre-tax profit is RM855.5 million, which is about the same level as 4QFY08 results,” IOI Corp said in a statement to Bursa Malaysia yesterday.

Meanwhile, it said revenue declined 31.58% y-o-y to RM3.12 billion in 4QFY09. Earnings per share declined to 8.21 sen from 9.91 sen. It declared a third interim single-tier dividend of two sen per share, non-taxable in the hands of shareholders, payable on Oct 8. This brings the total dividends for FY2009 to eight sen per share.

It also said its lower profit was further caused by lower contributions from its plantation and manufacturing segments.

It said operating profit at its plantation segment declined 50% y-o-y to RM259.3 million in 4QFY09, mainly due to a reduction in fresh fruit bunches production and lower crude palm oil (CPO) prices realised. Average CPO prices realised for 4QFY09 were RM2,455 per tonne compared to RM3,361 per tonne for 4QFY08.

Its resource-based manufacturing segment’s operating profit fell 6% in 4QFY09 from 4QFY08, to RM187.8 million, as its oleochemical division made lower margins due to unfavourable market conditions.

The property segment, however, recorded a 13% y-o-y increase in operating profit to RM266.6 million in 4QFY09, despite lower fair value gains on investment properties of RM110.8 million, as it sold more higher-end products.

Quarter-on-quarter (q-o-q), the group reported a 334% higher pre-tax profit of RM612.8 million, on the back of overall improvements in operating profits, which was boosted by its RM110.8 million fair value gain on investment properties, and an unrealised foreign currency translation gain on US dollar-denominated borrowings of RM166.6 million. In the previous quarter, it recorded a forex translation loss of RM232.4 million.

Its q-o-q growth was, however, offset by its impairment loss on the Singapore property.

For the full year to June 30, 2009, IOI Corp said net profit plunged 55.93% to RM983.52 million compared to a year earlier, while revenue remained largely flat at RM14.6 billion versus RM14.67 billion made in FY08.

Earnings per share fell to 16.62 sen from 36.85 sen.

It said its lower profit was due to smaller profit contributions from its major segments in tandem with the global economic slowdown, while its impairment charges for the Singapore property project amounted to RM258.6 million for the fiscal year.

Its full-year profit was also affected by unrealised translation losses on its US dollar borrowings of RM315.3 million. It had made a RM134.9 million forex gain in FY08.

The average CPO price realised during the 12-month period was RM2,831 compared with RM2,865 in FY2008.

The group was cautious on its prospects, saying that while the global economic slowdown had shown signs of stabilising, the environment would continue to make the new financial year a challenging period.

However, it is optimistic it will perform better in FY2010 should the economy improve next year as widely anticipated.

This article appeared in The Edge Financial Daily, August 27, 2009.