“Plantation profit was lower due to the sharp decline in commodity prices and lower FFB (fresh fruit bunches) crop. Earnings from the manufacturing sector were lower and the retailing sector recorded a higher loss,” the company told Bursa Malaysia yesterday.

As a result, its earnings per share fell to 10.58 sen from 22.22 sen previously. The company declared a single-tier interim dividend of 10 sen per share, with an ex-date of July 14 and to be paid on Aug 10. Its 2Q revenue stood at RM1.44 billion, 24% lower compared with RM1.9 billion previously.

For the six months to March 31, KLK’s net profit plunged 66% to RM178.53 million from RM527.79 million in the previous corresponding period, mainly due to a 20.5% drop in plantation profit to RM489.6 million following weaker commodity prices and lower FFB crop. Six-month revenue was 9.6% lower at RM3.32 billion.

Commenting on its first-half results, KLK said the writedown of inventories in 1Q by its China plant had dragged down the overall profit in oleochemical operations to RM29.5 million from RM89 million last year, although the performance in Malaysia was satisfactory.

In addition, its nutraceutical plant in Singapore, Davos Life Science Pte Ltd’s loss had widened to RM24.6 million from RM11.3 million a year ago, while its retailing division incurred a loss of RM10.9 million, versus a profit of RM30.7 million last year, due to poor consumer demand amid the global economic recession.

There was also a writedown of RM142.2 million on the overseas quoted investment in Yule Catto & Co plc in 1Q, and realised loss of RM23.7 million on foreign exchange arising from repayment of inter-company loans by its Indonesian subsidiaries.

On the current year’s prospects, KLK said its core plantation business should continue to perform “reasonably well” with the group’s favourable forward sales of its palm products.

“However, manufacturing profits have come under severe pressure due to the global economic downturn. Furthermore, the retailing business has also been affected by significantly reduced consumer demand and (the) management is addressing this issue by re-structuring operations.

“The directors are of the opinion that the group’s profit for the current financial year will be much lower than that of the preceding year,” it added.

In a separate announcement, KLK said yesterday it had appointed Kwok Kian Hai, a 65-year-old Singaporean, as independent non-executive director. Kwok is also a director of Kuok Singapore Ltd. He was previously chairman of Palm Oil Refiners’ Association of Malaysia, and was a council member of the Malaysian Palm Oil Council for 15 years.

This article appeared in The Edge Financial Daily, May 28, 2009.