KUALA LUMPUR (May 27): Foreign exchange losses of RM178 million reduced the net profit of Kuala Lumpur Kepong Bhd (KLK) by 80.5% to RM27.89 million in the second quarter ended March 31, from RM142.96 million a year ago.
Revenue was 3.5% lower year-on-year (y-o-y) to RM3.8 billion.
KLK has declared a first interim dividend of 15 sen per share, payable on Aug 4, 2020.
In an exchange filing, KLK said the RM178 million in unrealised forex losses were derived from two sources, the first of RM145.3 million from the translation of intercompany loans denominated in foreign currencies, the bulk of it due to the depreciation of the Indonesian rupiah vis-à-vis the US dollar.
A further RM33 million loss stemmed from the translation of a US dollar-denominated bank loan undertaken by an Indonesian subsidiary, following the depreciation of the rupiah against the greenback.
Excluding the impact of the forex losses, KLK said its second quarter pre-tax profit increased by 43.3% to RM280.7 million, from RM195.9 million a year prior.
Its plantation business profit increased by 44.4% y-o-y to RM145.7 million, owing to higher prices of crude palm oil (CPO) and palm kernel (PK).
Prices of CPO appreciated by 30.6% y-o-y to RM2,572 a tonne during the quarter, and PK by 18% to RM1,537 a tonne.
In addition, the segment’s earnings were also boosted by an unrealised gain of RM112 million from fair value changes, on outstanding derivatives contracts.
However, the production of fresh fruit bunches also declined by nearly a tenth to 890,872 tonnes, which pushed up CPO production costs.
Manufacturing segment profit rose by 4.4% y-o-y to RM97.4 million, on the back of a 13.5% fall in revenue to RM1.98 billion. The segment also had to contend with an unrealised loss of RM17.4 million on fair value changes on outstanding derivative contracts.
KLK said profits from its Malaysian operations had increased due to improved margins and higher selling prices. Its China operations managed to achieve higher profit and margins as well, while its European operations registered lower earnings, in line with a slowdown in sales volume.
The oleochemical division saw profit rise to RM96.3 million, from RM90.9 million last year.
For the six months ended March 31, net profit was halved to RM195.09 million, from RM393.87 million in the year-ago period. Cumulative revenue dipped 1.81% to RM7.88 billion, from RM8.03 billion last year.
On its prospects, the group noted that CPO prices are expected to remain under pressure for the rest of FY20 due to the Covid-19 pandemic.
“Nevertheless, plantation profit is expected to be satisfactory for the year, in view of this segment’s results and CPO prices achieved to date,” it said.
Amidst concerns of global economic uncertainties, it said its oleochemical division would focus on the recovery of major markets and but expects a challenging operating environment in FY2020.
“Overall, the Group anticipates satisfactory profits for financial year 2020, subject to uncertainties arising from the Covid-19 pandemic,” it added.
Shares in KLK finished 0.74% or 16 sen higher to RM21.84 today, valuing the company at RM23.61 billion. Some 1.23 million shares exchanged hands today.