The group said notwithstanding the price discount to soybean oil, palm oil prices have eased considerably from the historically high levels seen recently, leading KLK to expect its financial performance for FY23 to be subdued compared with FY22.
PETALING JAYA: Kuala Lumpur Kepong Bhd
(KLK) expects lower prices to lead to softer profits from its plantation segment for its financial year ending Sept 30, 2023 (FY23).
In a filing with Bursa Malaysia, the group said notwithstanding the price discount to soybean oil, palm oil prices have eased considerably from the historically high levels seen recently, leading KLK to expect its financial performance for FY23 to be subdued compared with FY22.
It stated the palm oil market appears to remain uncertain, influenced by trade policy changes in both consuming and producing countries while lingering geopolitical tensions could impact commodity prices and global economic performance.
“The group remains focused on boosting its productivity and improving the fresh fruit bunch (FFB) and crude palm oil (CPO) yield to mitigate the impact of rising costs,” it said.
KLK added the operating environment for its oleochemicals business continues to face headwinds, especially in Europe, amidst global recessionary fear, which could result in weaker consumer demand.
“The economic impact of China’s reopening remains to be seen, despite some positive outlook,” it said, adding it continues to focus on operational efficiency and consistency in delivering high-quality, specialty and sustainably produced products to the market.
For its first quarter ended Dec 31, 2022 (1Q23), KLK’s net profit dropped 26.1% on-year to RM443.04mil while revenue was marginally lower by 1.8% to RM6.7bil. Earnings per share in 1Q23 was 41.1 sen (versus 55.6 sen in 1Q22).
The group attributed the sharp fall in plantation pre-tax profit to RM333.6mil for the period was largely due to lower CPO and palm kernel prices, notwithstanding an increase in sales volume.
KLK also faced higher CPO production cost, a net loss of RM70.1mil arising from fair value changes on outstanding derivative contracts, as well as a lower fair value gain of RM5.3mil on valuation of unharvested FFB
Its manufacturing segment saw pre-tax profit fall 20.4% on-year to RM254.4mil in the quarter, and despite revenue holding steady at RM5.522bil, mainly due to lower profit contribution from the oleochemical division which was partially offset by higher profit from the refineries and kernel crushing operations.
Meanwhile, KLK’s property segment’s pre-tax profit fell 52.5% to RM8.9mil in the period on lower revenue at RM31mil.
The group’s investment folding segment saw improved profit to RM26.5mil, due to better profit from the farming sector of RM62.7mil as a result of higher crop production and better average selling prices of all crops.
