KUALA LUMPUR (Nov 16): Higher crude palm oil (CPO) and palm kernel (PK) prices and forex gains boosted IOI Corp Bhd’s earnings in the  first financial quarter ended Sept 30, 2020 (1QFY21).

Its net profit soared by 86.5% to RM277.9 million from RM149 million in the previous corresponding quarter.

In a bourse filing, the plantation giant said that earnings per share (EPS) swelled to 4.43 sen per share, from the 2.37 sen registered in 1QFY20.

Quarterly revenue grew by 39.5% at RM2.48 billion from RM1.78 billion a year prior.

The group noted that it had recorded a net forex gain of RM98.5 million in 1QFY21 from a forex loss of RM55.9 million.

As such, excluding the forex gains seen, IOI said its plantation segment was the main driver for the increase in its quarterly net profit

The segment’s profit before tax increased to RM273.6 million, up by 116% from the RM126.6 million in 1QFY20 following the higher CPO and PK prices, as well as fresh fruit (FFB) production rising to 878,701 tonnes from 801,548 tonnes in 1QFY20. Average CPO prices were RM2,579 a tonne in 1QFY21 from RM2,014 a tonne in 1QFY20, while PK prices were up at RM1,486 a tonne from RM1,126 a tonne in 1QFY20.

It also posted better earnings on a quarter-on-quarter (q-o-q) basis as its net profit was up by 16.62% from RM238.3 million in 4QFY20. Quarterly revenue was also up 21.6% from RM2.04 billion in the immediate preceding quarter. The better earnings were on account of better commodity prices.

On its prospects, IOI noted that strong palm oil prices would result in good financial performances in 2QFY21 and 3QFY21. However, a new wave of COVID-19 infections in both Malaysia and Europe has made operating conditions more difficult and has cast uncertainties over its performance in 4QFY21.

It noted that CPO prices have increased sharply, reaching an eight-year high in November, with prices expected to remain at more than RM3,000 a tonne until February 2021 on low palm oil inventory and low crop production until early next year.

The group pointed out that the narrowing price discount of CPO against other competing vegetable oils and the coming winter in the Northern Hemisphere will dampen its demand.

For its plantation segment, oil palm crop production is expected to decline until January or February 2021 due to the low production season. While plantation operations have not been directly impacted by the Conditional Movement Control Order (CMCO), the freeze on the new intake of foreign works by the government has resulted in a labour shortage that only stands to worsen as the months go by.

“Nevertheless, due to the strong palm oil price forecasted until February 2021, we expect good financial performance from our plantation segment at least for 2Q and 3Q of FY2021,” it said.

Shares in IOI finished four sen higher at RM4.51, valuing it at RM28.35 billion. It saw 769,200 shares traded.