IOI Corp slips into the red in 1Q due to forex loss

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KUALA LUMPUR (Nov 16): IOI Corp Bhd plunged into the red for the first financial quarter ended Sept 30, 2015 (1QFY16) primarily due to foreign exchange (forex) loss of RM853.9 million on translation of its US dollar-denominated borrowings.

The group posted a net loss of RM719 million or 11.38 sen loss per share compared with a net profit of RM176.7 million or 2.78 sen per share in 1QFY15.

"Excluding the foreign currency translation loss and the fair value loss on derivative financial instruments of RM202.8 million, the underlying pre-tax profit of RM402.7 million for 1QFY16 is 22% higher than the underlying pre-tax profit of RM331.3 million for 1QFY15, which is attributed mainly to improved performance from our resource-based manufacturing segment," said IOI Corp in a filing with Bursa Malaysia today.

Revenue for 1QFY16 grew 3.1% to RM3.09 billion from RM2.99 billion in 1QFY15.

IOI Corp said during 1QFY16, the US dollar strengthened against the ringgit by 18% to 4.4475 as at Sept 30.

The group said it also saw its plantation profit fall 8% to RM258 million for 1QFY16 compared with RM281 million in 1QFY15, mainly due to lower crude palm oil (CPO) price realised of RM2,119 per tonnes compared with RM2,258 per tonnes a year ago.

However, its resource-based manufacturing segment results before fair value loss on derivative financial instruments was 59% higher at RM189.7 million in 1QFY16 from RM119.6 million in 1QFY15, mainly due to improved margin as well as higher sales volume from the oleochemicals and the refining sub-segments.

Despite the current challenging economic environment, IOI Corp expects its underlying operating performance for the remaining quarters to be satisfactory.

"Despite the current high inventory level, palm oil fundamentals are positive with CPO prices likely to sustain at the prevailing level and possibly moving higher during the low seasonal production months in first quarter of calendar year 2016.

"Overall, our plantation segment is expected to perform satisfactorily in the remaining quarters of this financial year," it said.

As for its resource-based manufacturing segment, the group expects its oleochemicals sub-segment to perform well given the relatively low feedstock costs and higher glycerine price.

"The volatility of the US dollar/ringgit exchange rate will continue to impact the non-cash flow forex translation gain/loss arising from our medium to long dated US dollar-denominated borrowings," it added.

IOI Corp closed three sen or 0.72% higher at RM4.17 today, for a market capitalisation of RM26.14 billion.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)