Batu Kawan's 3Q profit drops 21% y-o-y on absence of non-operational gains

• Its property development profit, meanwhile, climbed 13.8% to RM17.64 million from RM15.5 million, as revenue jumped 60.4% to RM53.51 million from RM33.36 million.

KUALA LUMPUR (Aug 17): Batu Kawan Bhd's net profit declined 21.26% year-on-year (y-o-y) to RM304.3 million for the third quarter ended June 30, 2022 (3QFY22) from RM386.465 million in the previous corresponding quarter of 3QFY21, despite higher revenue, because the previous year had accounted for non-operational gains.

This translated into lower earnings per share of 77.2 sen, versus 97.51 sen previously. Quarterly revenue grew 34.27% to RM7.25 billion from RM5.4 billion, the group's Bursa Malaysia filing showed.

The non-operational gains were fair value surplus of RM324.26 million on deemed disposal of associate Aura Muhibah Sdn Bhd and negative goodwill that amounted to RM2.94 million from the acquisition of Aura Muhibah.

Excluding the above non-operational items, Batu Kawan said its 3QFY22 profit before tax would have been 23.88% higher at RM807.51 million, as opposed to RM651.87 million in 3QFY21, supported by higher revenue.

The group's plantation profit grew 47.5% to RM602.34 million from RM408.4 million, as revenue rose 41.7% to RM1.03 billion from RM726.91 million amid higher crude palm oil (CPO) and palm kernel (PK) selling prices. The segment's earnings were also boosted by contributions from newly acquired subsidiaries and higher unrealised gain of RM86.75 million from fair value changes on outstanding derivative contracts.

Its manufacturing profit was marginally lower at RM266.83 million compared with RM267.22 million previously, despite a 33.1% revenue increase to RM6.12 billion from RM4.6 billion.

"Higher profit contribution from oleochemical division was partially offset by losses from refineries and kernel crushing operations, coupled with higher unrealised loss of RM33.70 million (3Q2021: RM5.4 million unrealised loss) from fair value changes on outstanding derivative contracts. Industrial chemical division's profit surged more than two times to RM58.1 million (3Q2021: RM26.4 million) from higher selling prices and sales volume of caustic soda," said Batu Kawan.

Its property development profit, meanwhile, climbed 13.8% to RM17.64 million from RM15.5 million, as revenue jumped 60.4% to RM53.51 million from RM33.36 million.

For the full FY22, Batu Kawan is expecting a better year, with profit from its plantation segment anticipated to be higher — notwithstanding the recent decline in CPO prices from historical highs — driven by higher average CPO and PK prices, as there is still supply tightness in the vegetable oil market globally.

As for its manufacturing segment, it expects the oleochemical division to operate satisfactorily for FY22 despite challenges from raw material price volatility, high energy costs and ongoing logistic issues. "Despite some softening in caustic soda prices recently, the group industrial chemical division's performance is expected to be better due to higher average chlor-alkali product prices," Batu Kawan added.

Batu Kawan shares rose eight sen or 0.33% to close at RM23.98 on Wednesday (Aug 17), giving the group a market capitalisation of RM9.58 billion.