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This article first appeared in The Edge Financial Daily on September 28, 2018

KUALA LUMPUR: Kim Loong Resources Bhd announced net profit more than halved to RM12.01 million in the second quarter ended July 31, 2018 (2QFY19), from RM26.26 million in the corresponding quarter last year, due to lower fresh fruit bunches (FFB) production and palm oil prices.

Revenue fell 19% to RM210.29 million, from RM260.46 million a year ago, the group’s stock exchange filing yesterday showed.

As such, the company’s net profit for the first half of the financial year (1HFY19) fell 36% to RM32.14 million from RM49.99 million a year ago, while revenue contracted 13% to RM446.78 million from RM516.11 million.

Kim Loong declared an interim single-tier dividend of three sen per share, payable on Nov 22.

The plantation company said its weaker performance during the quarter under review and the first half of the year was mainly due to the 36% drop in FFB production, coupled with a 20% lower average selling price.

The lower production was especially seen across its estates in Sabah, especially the Keningau region, due to a high-base effect from last year.

Its milling operations, meanwhile, showed weaker earnings due to the drop in crude palm oil (CPO) selling price and processing margin, it said, despite recording higher sales of quantity.

Despite the weaker 2Q results, Kim Loong said it foresees the group performing satisfactorily for its current financial year ending Jan 31, 2019.

“We forecast the FFB production to be in the region of 85% of FY18, mainly due to upcoming replanting programmes for old palm areas but with expectation of increasing yield from young mature areas to cushion the impact.

“For the milling operations, the group has achieved a record high processing quantity of 1.5 million tonnes of FFB in the financial year 2018. The management is optimistic that the three mills in the group could continue to maintain high utilisation rate of processing capacity in the next financial year,” it said in the filing.

Shares in Kim Loong were unchanged at RM1.31 at yesterday’s close, valuing it at RM1.23 billion. At the time of writing, the benchmark palm oil third-month contract for the month of December fell RM2 lower to RM2,188.

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