Pic of IOI Corp headquarters
KUALA LUMPUR: The volatile foreign exchange impacted IOI Corp’s earnings in the second quarter ended Dec 31. 2015 (Q2, FY16) and also in the first half but the plantation heavyweight reported a firm set of core earnings overall.
It said on Friday its earnings had surged 3,600% to RM724.80mil in Q2 compared with RM19.60mil a year ago. Pre-tax profit (PBT) jumped 826% to RM876.50mil from RM94.60mil a year ago.
“The higher PBT is driven by higher contribution from all segments and net foreign currency translation gain on foreign currency denominated borrowings.
“Excluding the net foreign currency translation gain of RM227.3mil (Q2, FY2015 – loss of RM273.6mil) on foreign currency denominated borrowings, the underlying PBT of RM649.20mil for Q2, FY2016 is 76% higher than the underlying PBT of RM368.2mil for Q2, FY2015,” it said.
Its revenue rose 3.8% to RM2.97bil from RM2.86bil. EPS were 11.51 sen. It declared an interim dividend of 3.5 sen.
IOI Corp said the volatility of Dollar Ringgit exchange rate has been impacting the non-cash flow forex translation gain/loss arising from its medium to long dated US Dollar denominated borrowings.
For the first half, it reported earnings of RM5.80mil compared with RM196.20mil in the previous corresponding period, mainly due to the forex losses in the first quarter. PBT was RM222.50mil compared with RM362mil a year ago.
It reported higher forex translations loss of RM626.60mil compared with loss of RM325.8mil a year ago.
However, revenue was higher by 3.4% at RM6.05bil versus RM5.85bil.
IOI Corp said the plantation division reported profit of RM582.4mil, marginally higher than the RM578.3mil.
“There is an improvement in oil extraction rate of 21.90% as compared to 21.54% for Q2 YTD FY2015 which is offset by lower share of results of associates,” it said.
As for the resource-based manufacturing business, its profit rose 65% to RM359.8mil from RM218.4mil a year ago. The higher profit is due mainly to fair value gain on derivative financial instruments of RM57.9mil (Q2 YTD FY2015 – loss of RM129.3mil).
“Excluding the fair value gain/loss on derivative financial instruments, the underlying profit for resource-based manufacturing of RM301.9 million for Q2 YTD FY2016 is 13% lower than the underlying profit of RM347.7 million for Q2 YTD FY2015. This is mainly due to lower margin from the refining and the specialty oils and fats sub-segments,” it said.
On the prospects, IOI Corp said with the effect of El Nino on oil palm fruits production and the lower palm oil stock, the palm oil price has been trending upward and “is expected to remain firm”.
“As such, we expect our plantation segment to perform satisfactorily in the remaining two quarters of this financial year.
“As for the Group’s resource-based manufacturing segment, we expect the oleochemicals and specialty oils and fats sub-segments to achieve sustained satisfactory performance in this financial year given their strong sales and distribution networks and the geographical spread of their customers across the globe.
“The refining sub-segment remains challenging as the Malaysian refineries’ margins turn negative again from the small positive recorded earlier,” it said.
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