IOI Corp 3Q net profit surges 6.7 times on forex, Loders disposal gains

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KUALA LUMPUR (May 16): IOI Corp Bhd's net profit surged 6.7 times to RM2.07 billion in the third financial quarter ended March 31, 2018 (3QFY18) from RM305.3 million a year ago, due mainly to foreign exchange (forex) gain of RM201.9 million and higher contribution from the resource-based manufacturing segment.

In a filing with Bursa Malaysia today, IOI said for 3QFY18, the group also reported a profit from the discontinued operations of RM1.72 billion compared with a loss of RM15.5 million in 3QFY17. The discontinued operations comprise the resource-based manufacturing businesses of Loders Croklaan Group BV where a gain of RM1.66 billion that arose from the divestment of a 70% stake in Loders in 3QFY18 was reported.

"Excluding the extraordinary gain, the group reported a lower profit from the discontinued operations of RM55.3 million for 3QFY18 due mainly to the higher margins achieved," it added.

The improved earnings resulted in its earnings per share rising to 32.92 sen in 3QFY18 from 4.86 sen in 3QFY18. This was despite quarterly revenue falling by a marginal 1.1% to RM2.31 billion from RM2.34 billion a year ago.

The strong quarterly results pushed the group's net profit for the cumulative nine months ended March 31, 2018 (9MFY18) to RM3.02 billion, up 7.1 times from RM425.7 million a year ago. Revenue, however, fell 3.6% to RM6.92 billion from RM7.17 billion.

IOI said the outlook for palm oil price is mixed, with the unfavourable factor of seasonal production increase being offset by China imposing a tariff on soybean imports from the US and the current strengthening of the US dollar.

"With the group's continuing trend of higher oil palm fruits production, the performance of its plantation segment is expected to be satisfactory in 4QFY18," it added.

IOI noted that the low to negative refining margins, however, continue to present challenges to its Malaysian refineries' financial performance.

Nevertheless, it expects its downstream manufacturing business, spearheaded by the oleochemical subsegment, to continue to perform well.

"Our 30%-owned associate Bunge Loders Croklaan is also expected to perform well with the good demand for its core products and the realisation of synergies with the larger Bunge Group.

"With the repayment of a substantial amount of its US dollar-denominated borrowings using the sale proceeds from the sale of shares in Loders Croklaan, the group's financial position has become much stronger. The retention of the balance of the Loders Croklaan share sale proceeds in US dollar will provide the group a natural hedge against the balance of its US dollar-denominated borrowings," it said.

"Overall, the group is expected to perform satisfactorily during the next quarter," said IOI.

IOI shares closed unchanged at RM4.75 today, with 3.29 million shares traded, bringing a market capitalisation of RM29.85 billion.