KUALA LUMPUR (Sept 4): PPB Group Bhd, the Malaysian listed flagship of billionaire Robert Kuok, sees the weakening ringgit having a neutral impact on the diversified group as higher costs for imported wheat and corn are offset by lower prices of these commodities.
"The ringgit's decline against the US dollar will push the cost of importing wheat and corn up," its managing director Lim Soon Huat told a press and analyst briefing on the group's first half 2015 financial results.
"However, the impact is cushioned by falling commodity prices (due to abundant supply)," he added.
FFM Bhd finance and administration director Boo Yew Leng said year-to-date (YTD) wheat prices have fallen 15% to 16%, while the ringgit has declined by 18%.
Lim said the group will continue to hedge its ringgit exposure through foreign currency contracts, as well as its stocks and purchases of shipments.
While a portion of the group's capital expenditure (capex) of RM570 million is in foreign currency to be spent over the next two to three years, Boo stressed that it will not have an impact on the group's financial performance as the foreign currency exposure is minimal.
"We remain confident that we will continue to perform well in the second half of this financial year ending Dec 31, 2015 (2HFY15) despite the poor sentiment in the economy," he added.
For 1HFY15, PPB recorded a 33.8% increase in net profit to RM415.55 million from RM310.65 million a year ago, while revenue rose 6.7% to RM1.96 billion from RM1.84 billion in 1HFY14.
The higher net profit was mainly contributed by higher profit contribution from its associate Wilmar International Ltd, in which PPB holds an 18.3% stake. Wilmar contributed 63% to the group's 1HFY15 profit.
Revenue for 1HFY15 was higher due to contributions from the environmental engineering, grains and agribusiness as well as film exhibition segments, which had offset lower revenue from the property segment.
Lim said the group has no plans to increase the price of its bread under the Massimo brand under the current operating environment.
"We will absorb any extra costs. What is important for us is to drive volume and market share," he added.
On the group's property sector, Lim conceded that the poor market sentiment has affected its business, but sales are still being recorded at its development in Puteri Harbour at Nusajaya, Johor.
"We are still selling a few units a week, which is not bad considering the current market conditions," he added.
The group is planning to launch a residential and retail development on its 3.6 acre land in Taman Megah, Petaling Jaya, and a residential, retail and a hotel development in New World Park, Penang, but details are still being finalised.
On the environmental engineering and utilities segment, the group said its order book stands at RM340 million, with RM200 million slated for this year and the remaining RM140 million worth of projects slated for delivery next year.
PPB has also tendered for RM500 million worth of water, sewage and flood mitigation projects mostly under the 11th Malaysia Plan, with a success rate of 25% to 50%.
PPB corporate affairs head Koh Mei Lee said the group is eyeing to increase its 25% stake in Vietnam's Galaxy Studio Joint Stock Co to 40% "very soon".
"We see a big potential in Vietnam. There are 90 million people there and they are underscreened with only 400 (cinema) screens," she said.
"By comparison, we have about 300 million people here with 950 cinema screens," she added.
She also said PPB aims to open a nine-screen GSC cinema in Cambodia in the second half of 2016.
Koh added that the group will be opening GSC cinemas in eight new locations in Aman Sentral in Kedah next month, Bintulu Times Square, Selayang Star City, Paradigm Johor Baru next year and Melawati Mall, Aeon Big Ipoh, MyTown shopping centre in Cheras and Emporia Mall in Shah Alam in 2017.
As at 4.11pm, PPB shares were traded up 4 sen or 0.26% at RM15.22, with 103,900 shares done. Its market capitalisation stood at RM18.02 billion.