KLK posts higher 2Q net profit despite sharp fall in plantation earnings

This article first appeared in The Edge Financial Daily, on May 16, 2019.
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KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK) reported a 34.7% jump in net profit for the second quarter ended March 31, 2019 (2QFY19) to RM142.96 million from RM106.15 million a year ago, despite a sharp fall in plantation earnings, thanks to lower taxes.

While it recorded a 15.9% fall in quarterly revenue to RM3.94 billion from RM4.69 billion a year ago, taxation for the quarter halved to RM42.6 million from RM87.76 million previously.

Notably, KLK’s plantation segment recorded a substantially lower profit for 2QFY19, down 55.8% year-on-year (y-o-y) to RM100.9 million from RM228.4 million, due to weaker selling prices of crude palm oil (CPO) and palm kernel (PK).

Its manufacturing segment also recorded an 18.5% y-o-y fall in profit to RM93.3 million from RM114.5 million, though its property development segment saw a slightly higher profit of RM7.1 million versus RM6.6 million previously.

KLK declared a single-tier interim dividend of 15 sen in respect of FY19 — comparable to the year-ago quarter — payable on Aug 6.

For the six-month period ended March 31, 2019 (1HFY19), the group posted a 15.33% increase in net profit to RM393.87 million from RM341.51 million — again due to lower taxation — while revenue declined 18.6% to RM8.03 billion from RM9.86 billion.

KLK expects its operational profits, overall, to be lower for FY19, citing lower CPO and PK prices currently, which would drag down profit of its plantation segment. Its plantation profit fell 57.1% to RM228.4 million for 1HFY19, from RM532 million for 1HFY18.

“For the oleochemical business, profit for the first half was lower as compared to the same period last year. Going forward, margins are volatile but reasonable profit is expected in view of capacity utilisation,” it added.

Meanwhile, KLK’s parent, Batu Kawan Bhd, recorded a 41.7% y-o-y jump in 2QFY19 net profit to RM79.29 million from RM55.97 million, mainly due to lower operating expenses, finance cost and income tax expense. Revenue fell 15.6% to RM4.08 billion from RM4.83 billion.

For the cumulative 1HFY19, its net profit rose 18.82% to RM215.97 million from RM181.77 million a year earlier, though revenue fell 18.29% to RM8.3 billion from RM10.16 billion.

Shares in KLK closed up two sen at RM24.40, giving the group a market value of RM26.05 billion. Batu Kawan closed four sen or 0.24% lower at RM16.80, with a market capitalisation of RM6.66 billion.