Batu Kawan optimistic of a stronger FY20 despite 24% drop in 1Q profit

KUALA LUMPUR (Feb 17): Batu Kawan Bhd's first quarter net profit fell 24% to RM103.43 million from RM136.67 million a year ago, despite revenue holding largely steady with stronger plantation profit, as its manufacturing and investment holding segments posted weaker results.

Revenue for the quarter ended Dec 31, 2019 (1QFY20) came in at RM4.21 billion versus RM4.22 billion previously, its stock exchange filing today showed.

In particular, its plantation segment's profit before tax (PBT) grew 32% to RM169.74 million from RM128.39 million a year ago, thanks to stronger CPO prices and a fair value gain of RM12.80 million on the valuation of unharvested fresh fruit bunches. Its property development segment also recorded a 22% rise in PBT to RM13.58 million, from RM11.13 million before.

However, these improvements were offset by a 21% decline in manufacturing PBT to RM98.96 million from RM125.2 million prevously, while its investment holdings/others segment's PBT dropped 88.3% to RM11.48 million from RM98.11 million.

The sharp drop in the investment holdings/others' earnings was due to a substantial drop in the farming sector's profit, due to a big drop in crop production over lower cropped area, as yield was affected by an extremely dry season.

There was also a lower foreign exchange currency gain of RM26.3 million in 1QFY20, versus 1QFY19's RM38.38 million, on translation of inter-company loans denominated in foreign currencies. In addition, 1QFY19's performance was boosted by a RM22.50 million surplus from government acquisition of plantation land.

Going forward, Batu Kawan expects its plantation segment's profit to improve, in view of recovering crude palm oil and palm kernel prices, amid declining CPO stocks and production.

"The performance of the group’s oleochemical division will be challenging, due to higher raw material prices and keen competition. The group’s industrial chemical division is projected to achieve slightly lower profits than financial year 2019, due to currently lower prices and higher energy costs.

"Overall, the group expects a higher profit for the financial year 2020, subject to uncertainties arising out of the recent global coronavirus disease 2019 (Covid-19) outbreak," it added.

Batu Kawan's shares closed 12 sen or 0.75% higher at RM16.22 today, giving it a market capitalisation of RM6.36 billion.

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