KLK, Batu Kawan post lower Q1 earnings on weak CPO prices

PETALING JAYA: Kuala Lumpur Kepong Bhd (KLK) and its parent company Batu Kawan Bhd reported reduced earnings for the first quarter ended Dec 31, 2017, due to lower crude palm oil (CPO) prices.
KLK’s net profit fell 11.1% to RM320.63 million for quarter under review against RM360.68 million in the previous corresponding period. Revenue was also down 5.5% from RM5.5 billion to RM5.19 billion.
The plantation firm told Bursa Malaysia that plantations profit fell 36.5% to RM266.4 million as average selling prices for CPO and palm kernel declined 5.1% and 6% to RM2,581 and RM2,488.
Besides lower CPO prices, the group’s profitability was also affected by the increase in cost of CPO production and net unrealised forex losses of RM29.7 million on loans advanced and bank borrowings to its Indonesian subsidiaries.
KLK noted that the decline in CPO prices during the period under review was due to post El-Nino fresh fruit bunches production recovery, resulting in high CPO inventories.
“Our plantations profit was correspondingly affected but this will be partly compensated by our oleochemical operations, which have benefited from higher capacities utilisation and operational efficiencies as reflected in the current quarter’s higher profit.”
It believes that the various positive steps taken by Malaysian authorities should limit any further CPO price erosion.
“Overall, the group anticipates a satisfactory result for this financial year”, KLK said.
Meanwhile, Batu Kawan’s first-quarter net profit decreased 9.9% from RM197.54 million to RM177.9 million, while revenue was down by 5.1% from RM5.63 billion to RM5.34 billion.
Average selling prices for its CPO and palm kernel contracted 5.2% and 6% to RM2,573 and RM2,475.
KLK’s share price gained 2 sen or 0.1% to close at RM25.24 today, while Batu Kawan rose 8 sen or 0.4% to RM19.48.