United Malacca net profit down after MFRS adoption on top of low selling prices

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KUALA LUMPUR (March 21): Plantation group United Malacca Bhd saw its net profit slide to RM2.36 million for the third quarter ended January 31, 2019 (3QFY19) from RM10.29 million in the previous corresponding quarter, partly due to its adoption of the Malaysian Financial Reporting Standards (MFRS) framework.

Excluding the impact of MFRS adoption, the group said its pre-tax profit would be RM9.88 million, compared with RM3.3 million.

Quarterly revenue fell 17% to RM53.48 million from RM64.44 million a year earlier.

Besides that, the plantation group was also affected by lower average prices of crude palm oil (CPO) of RM1,892 per tonne, versus RM2,561 per tonne in the previous year, and palm kernel (PK) of RM1,392 per tonne versus RM2,522 per tonne a year earlier.

High unit cost of production at its 2,184 ha of young matured palms in Sabah ate into its profitability as well.

It also faced high production cost in Indonesia, while lower fresh fruit bunch (FFB) selling price had contributed to the decline in its operations there.

For the cumulative nine-month period, United Malacca reported a net loss of RM28.21 million, compared to a net profit of RM21.78 million in the previous year, while revenue declined 32% to RM147.31 million from RM215.92 million.

“The adoption of MFRS framework effective FY19 requires the value of bearer plants (previously known as biological assets) to be amortised and additional depreciation of long-term leasehold land to be provided.

“Total impact on adoption of MFRS framework for the first nine months of FY19 was RM17.6 million,” said United Malacca.

In its prospects, the group expects conditions to remain challenging for the remainder of its financial year, assuming CPO prices remain at the current level.

United Malacca closed at RM5.40 today, up nine sen or 1.7%, giving it a market capitalisation of RM1.13 billion.