KUALA LUMPUR (June 28): United Malacca Bhd, who revealed that its net profit shrank 43% in its financial year ended April 30, 2018 (FY18), has warned that its FY19's earnings will be "significantly lower" due to adoption of the new accounting standards, the Malaysian Financial Reporting Standards, which will require the value of bearer plants to be amortised.

These bearer plants were previously classified as biological assets, the group said when releasing its FY18 results in a Bursa Malaysia filing today.

Notwithstanding the group's expectation of higher fresh fruit bunches production due to improved FFB yield from matured palms, and an additional 1,015 hectares coming into maturity, the additional amortisation of bearer plants would result in lower profit for FY19, assuming crude palm oil prices remain at current levels, the group said.

In its fourth quarter ended April 30 for FY18, the group's net profit sank 71% to RM8.52 million from RM29 million previously, on lower revenue, higher cost of sales and lower investment income incurred. Quarterly earnings per share (EPS) more than halved to 4.06 sen, from 13.86 sen a year ago.

The group proposed a second interim dividend of 6 sen per share — down from 15 sen in 4QFY17 — with ex- and entitlement date scheduled on July 26 and July 30 respectively.

United Malacca said the big drop in quarterly earnings was mainly due to average prices of crude palm oil (CPO) and palm kernel (PK) declining on-year by 20% and 29% respectively in the quarter.

Also contributing to the decline was the impact of 4,640 hectares of newly-matured palms that came into harvesting, with low FFB yield and high unit cost of production, the filing said. In addition, it's investment profit fell to RM180,000, from RM3.03 million a year ago.

The group blamed the same factors for decline in its full FY18 net profit, which slumpted to RM47.83 million, from RM84.55 million the year before, despite revenue growing a marginal 1% to RM277.73 million, from RM274.71 million.

Full-FY18 FFB production grew 13% on-year, it said — but CPO and PK average prices slipped 7% and 18% respectively for the period. Investment profit also fell 64% to RM3.27 million, from RM9.01 million.

Shares of United Malacca Bhd rose 2 sen or 0.33% to RM6.08 today, giving the group a market capitalisation of RM1.27 billion.