KLK 3Q profit rises 25.9% on property, manufacturing ops

This article first appeared in The Edge Financial Daily, on August 15, 2018.
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KUALA LUMPUR: Kuala Lumpur Kepong Bhd’s (KLK) net profit for the third financial quarter ended June 30, 2018 (3QFY18) jumped 25.9% to RM141.9 million, from RM112.8 million a year earlier, on a better performance of its manufacturing and property development segments, which offset a decline in the plantation segment.

Earnings per share for 3QFY18 rose to 13.3 sen from 10.6 sen previously, the plantation giant said in a filing with Bursa Malaysia yesterday.

The higher earnings were achieved despite a decline of 11.1% in quarterly revenue to RM4.33 billion, from RM4.87 billion a year ago.

KLK said the plantation segment recorded a 43.6% reduction in pre-tax profit to RM127.8 million from RM226.6 million for 3QFY17.

It said that while the unrealised foreign exchange translation loss on loans advanced and bank borrowings to Indonesia subsidiaries was much lower at RM2.9 million, compared with RM25.7 million for the same quarter a year ago, the results of the segment were affected by drops in the selling prices of crude palm oil (CPO) and palm kernel (PK) as well as negative contributions from processing and trading operations.

CPO and PK prices saw a decline of 13.9% and 23.3% during the quarter to RM2,302 per tonne and RM1,695 per tonne respectively.

As for the manufacturing segment, it saw a pre-tax profit of RM83.5 million, compared to a loss of RM21.9 million for 3QFY17, on the back of a 4.2% increase in revenue.

“Favourable margins were achieved with lower raw material costs. However, the change in fair value on outstanding derivative contracts generated an unrealised loss of RM50.8 million [against an unrealised gain of RM454,000 previously], ” it said.

The group said its oleochemical division achieved a pre-tax profit of RM85.1 million for the current quarter under review, compared to a loss of RM26.1 million for 3QFY17, while other manufacturing units recorded a loss of RM1.6 million against a profit of RM4.2 million previously.

KLK also saw a sharp rise in quarterly pre-tax profit for its property development segment to RM8.3 million, from RM2.5 million previously, as revenue rose to RM50.6 million from RM14 million.

The group said its cumulative nine-month net profit for FY18 (9MFY18) fell 14.6% to RM651.8 million or 61.2 sen per share, from RM763 million or 71.6 sen per share for the previous year’s corresponding period.

Revenue for 3QFY18 also fell 10.3% to RM14.2 billion from RM15.8 billion previously.

On prospects, KLK said the plantation segment’s profit will be lower, with the current weak CPO prices.

It, however, noted that the decline in plantation profit will be mitigated by a better performance of the oleochemical operations, achieved through higher capacity utilisation and operational efficiencies, along with lower raw material prices.

“Overall, the group expects a lower profit for the current financial year,” it added.

Meanwhile, KLK’s 47.03%-parent Batu Kawan Bhd also released its results for the third financial quarter ended June 30, 2018 (3QFY18) yesterday, which showed a 31.95% increase in net profit to RM106.89 million from RM80.78 million the year before as all of its segments showed improvement except for plantations.

This was despite a 10.78% year-on-year decline in revenue for 3QFY18 to RM4.47 billion from RM5.01 billion a year ago.

For 9MFY18, Batu Kawan posted a 10.73% decline in net profit to RM1.08 billion, from RM1.2 billion a year ago, due to lower contributions from its plantation and property development segments.

Revenue for the period fell 9.87% to RM14.64 billion from RM16.25 million in the previous year’s corresponding period.

Shares in Batu Kawan closed up two sen or 0.12% at RM17.28 yesterday, leaving the group with a market capitalisation of RM7.53 billion. KLK’s share price rose 0.73% or 18 sen to RM24.86, giving it a market capitalisation of RM26.5 billion.