KLK 4Q net profit up 37%, lifted by manufacturing segment

KUALA LUMPUR (Nov 20): Plantations player Kuala Lumpur Kepong Bhd (KLK)’s net profit for the fourth quarter ended Sept 30, 2019 (4QFY19) rose 37% year-on-year (y-o-y) to RM175.02 million from RM127.99 million, despite weaker plantation and property development segments, as its manufacturing business improved.

As a result, it's earning per share grew to 16.4 sen from 12 sen last year (4QFY18), according to its filing with Bursa Malaysia. Revenue, however, shrank 9% to RM3.8 billion from RM4.19 billion a year ago.

KLK said its manufacturing segment, which includes the oleochemical division, saw profit more than doubling to RM95.3 million from RM43.7 million, despite a drop in revenue to RM2.05 billion from RM2.44 billion, due to declining prices.

“The improvement in profit (manufacturing segment) was mainly attributed to the strong performance from operations in Malaysia, which achieved better profit margins as a result of lower raw material prices. The preceding year’s 4th quarter’s result was impacted by RM21.6 million impairment on an under-performing specialised oleochemical plant,” it explained.

"The oleochemical division’s profit was much higher at RM94.6 million (4QFY18: profit RM32.0 million), whilst the other manufacturing units had registered a lower profit of RM672,000 (4QFY18: profit RM11.7 million)," it added.

Its plantation segment, on the other hand, saw profit declining 26% to RM126.4 million from RM170.1 million, mainly dragged by weaker crude palm oil (CPO) and palm kernel (PK) prices and higher production costs, despite being partly mitigated by higher fresh fruit bunches (FFB). 

CPO price dropped 3.8% y-o-y to RM1,920 in 4QFY19, compared to RM2,060 for 4QFY18, KLK said. PK price also fell 32.9% y-o-y to RM1,070 from RM1,594.

Its property development segment, meanwhile, posted a 15% decline in profit to RM18.1 million from RM21.2 million, as revenue sank 31% to RM49.3 million from RM71.5 million. The quarter under review also saw the group accounting for a surplus of RM42.5 million in corporate gain from government acquisition of plantation land.

For the full year ended Sept 30 (FY19), KLK’s net profit recorded a marginal 1.4% y-o-y increase to RM617.51 million from RM609.37 million, despite revenue retreating 16% to RM15.53 billion from RM18.38 billion in FY18.

On prospects, the group anticipates higher profits from its operations for the financial year ending Sept 30, 2020 (FY20), with the plantation segment expected to improve with stronger CPO and PK prices.

Its oleochemical division, under which it will see additional capacities coming onstream, is expected to maintain its performance for FY20.

KLK shares closed four sen or 0.18% lower at RM22.50 yesterday, bringing it a market capitalisation of RM23.96 billion. The counter saw some 983,900 shares traded.

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