UOBKH Research said management now anticipates a sharp increase in production over the next three months.
PETALING JAYA: Fresh fruit bunch (FFB) production for IOI Corp Bhd
would likely miss its original financial year 2025 (FY25) target of 5% growth year-on-year (y-o-y), despite an anticipated strong pick-up in the next few months.
UOB Kay Hian (UOBKH) Research said the integrated palm oil player’s management indicated that its FY25 target would likely be missed during its post-first-half 2025 briefing.
Management had attributed the weaker FFB output in recent months to unfavourable weather affecting its estates.
“The total harvested area has also declined due to the group’s accelerated replanting programme. As compared to its initial FY25 FFB growth target of 5% y-o-y mentioned in the previous post-FY24 briefing, FFB production for the eight-month period of FY25 is down 3.5% y-o-y, with January 2025 and February 2025 output falling 12% and 9% y-o-y respectively,” the research house said in a report yesterday.
On a more positive note, UOBKH Research said management now anticipates a sharp increase in production over the next three months, given easing weather-related disruptions and the transition to the peak production season.
“Nevertheless, given the weak FFB volumes to date, management now anticipates FFB growth for FY25 to come in only 1% to 2% higher y-o-y, with risks still tilted to the downside.
“Separately, the peak production month this year is expected to arrive earlier in April 2025 (as compared with June during previous years),” the research house said.
Meanwhile, UOBKH Research said earnings visibility remains lacklustre for IOI Corp’s downstream business, whose performance is likely to be mixed across sub-segments.
To recap, earnings before interest and taxes contribution in the second quarter of 2025 (2Q25) by the group’s downstream segment improved quarter-on-quarter to RM5mil versus an operating loss of RM17mil previously in 1Q25.
The research house said this was attributed in part to the government announcing a rise in palm oil export duties (October 2024) which lifted refining margins for its Malaysia operations.
“However, this came to be short-lived as Indonesia’s government subsequently announced in December 2024 their plan to hike crude palm oil export levies from 7.5% to 10%; although the planned hike did not take immediate effect, this nonetheless resulted in refining margins in Malaysia turning negative once again.
“Management has commented that refining margins in Malaysia have remained slightly negative to date.”
