KLK 1QFY20 net profit down 33% on lower income across multiple segments

KUALA LUMPUR (Feb 17): Kuala Lumpur Kepong Bhd's (KLK) net profit in its first quarter ended Dec 31, 2019 (1QFY20) fell 33% year-on-year to RM169.2 million from RM250.92 million, on lower income from its manufacturing, investment holdings and corporate segments.

The decline was mitigated by stronger profit from its plantation business, as well as property development. Still, quarterly earnings per share fell to 15.7 sen, from 23.6 sen in 1QFY19.

The decline in the oleochemical manufacturing segment was caused by lower selling prices, coupled with unrealised loss arising from fair value changes on outstanding derivative contracts.

Under its investment holding segment, the farming sector's profit fell sharply due to a substantial drop in crop production, as a result of lower yield and smaller cropped area. “The extremely dry season had affected the yield,” KLK said.

Also contributing to the decline was a decrease in foreign exchange gain compared with the year before, as well as an absence of surplus from government acquisition of plantation land.

Meanwhile, gains in the plantation segment’s contribution was due to higher crude palm oil (CPO) selling price, though this was offset by higher CPO production costs and lower palm kernel (PK) selling price.

Quarterly revenue slid a marginal 0.19% to RM4.08 billion from RM4.09 billion, as declines in the manufacturing segment and investment holding, more than offset gains it had recorded at its plantation and property development segments.

On prospects, KLK expects better performance from the plantations segment, on improved CPO and PK prices.

“Oleochemical division continues to face keen competition and higher raw material costs. This division’s performance will be challenging for financial year 2020.

“Overall, the group expects profit to improve for financial year 2020, subject to uncertainties arising from the global outbreak of Covid-19 (coronavirus),” KLK said.

At 5pm, KLK share price closed 20 sen or 0.85% higher at RM23.74, giving it a market capitalisation of RM25.34 billion.