KUALA LUMPUR (May 21): Plantation giant IOI Corp Bhd expects crude palm oil (CPO) price to stay strong for at least the next few months, despite the upcoming high production season.
"Although palm oil stock is expected to increase due to seasonal production increase, the current large price premium of competing vegetable oils against palm oil will underpin this strong palm oil price trend over the next few months.
“For our plantation segment, in line with the seasonal trend, our crop production is expected to recover in 4QFY21. Coupled with the expectation of CPO price to remain strong in 4QFY21, we foresee that the plantation segment will perform well in 4QFY21,” said IOI Corp in its quarterly earnings announcement.
It commented that CPO prices have been rallying over recent months and have remained high above the RM4,000 level on the back of the tight supply situation and strong demand in some key importing countries.
The group announced a stellar set of quarterly results. It posted a net profit of RM401.3 million in the third financial quarter ended March 31, 2021 (3QFY21), from RM100,000 in the corresponding financial quarter last year. Its net profit was lifted by a one-off divestment gain of RM267.9 million from the sale of its refinery located in Rotterdam.
Its quarterly revenue grew by 41% to RM2.86 billion, from RM2.03 billion last year.
The group did not declare any dividends for the quarter under review.
Strong CPO price is a double-edged sword to IOI Corp.
The group warns that high palm prices have impacted its refinery and commodity marketing sub-segment, as well as the difference in CPO export duty and CPO levy in Malaysia and Indonesia.
That said, it expects its Sandakan refinery to perform satisfactorily in this challenging operating environment due to its efficient cost structure.
While high commodity prices are also expected to impact the oleochemical sub-segment’s sales margin, IOI Corp said it expects the sub-segment to continue to benefit from the good demand from the personal hygiene sector as well as the recovery of the global economy with the ongoing Covid-19 vaccination worldwide
It augured that its speciality fats associate company Bunge Loders Croklaan is expected to perform better in 4QFY21 with the continued strong performance from the North American region and improvement in the European economy as Covid-19 vaccination gains momentum there.
However, the availability of international shipping freight and its high cost remain a concern in Asia, as well as for the oleochemical sub-segment, which relies on extensive exports, said IOI Corp.
"Overall, the group anticipates its overall financial performance for 4QFY21 to remain good, supported by high CPO price and increase in crop production from the plantation segment as well as the expected demand improvement in the resource-based manufacturing segment as the global economy recovers gradually,” it said.
For the nine-month period ended March 31, the group's cumulative net profit surged by 185% year-on-year (y-o-y) to RM1.03 billion from RM362.6 billion. Cumulative revenue expanded by 35% y-o-y at RM7.79 billion from RM5.76 billion.
Shares in IOI went up three sen to close at RM4.10, valuing it at RM25.77 billion.