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Tuesday, 29 Aug, 2017

IOI expects higher output to offset lower palm oil prices

Production uptrend: The country's palm oil exports in July climbed 15% to 1.83million tonnes, according to industry figures.

KUALA LUMPUR: IOI Corp Bhd expects rising palm oil production from its estates to offset the impact of projected lower selling prices in the current financial year ending June 30, 2018 (FY18).

IOI Corp posted a net profit of RM317.5mil in the fourth quarter ended June 30, boosted by net translation gain on its foreign currency denominated borrowings and derivative financial instruments that amounted to RM156mil.

Excluding the currency gains, the group’s underlying profit before tax (PBT) was up 39% in the last quarter to RM309.8mil.

“The higher underlying PBT is due mainly to higher contribution from all the segments,” it said in a filing with Bursa Malaysia yesterday.

Full year PBT stood at RM1.45bil.

IOI Corp said the projected increase in fresh fruit bunch (FFB) production in FY18 will be driven by higher yield and more young palm trees reaching the prime production age.

The company joined other planters in predicting improved output in the coming months as the industry recovers from the El Nino phenomenon in 2015/16.

Palm oil production in July climbed 15% to 1.83 million tonnes, according to industry figures. This lifted stockpile in the country to a 15-month high of 1.78 million tonnes.

But rising output and higher stockpile have dampened the outlook on prices.

The price of the benchmark futures contract for crude palm oil (CPO) had declined 12% so far this year at RM2,738 a tonne.

“Palm oil price outlook has softened in recent months due to anticipated seasonal increase in production although the palm oil stock is at a moderate level,” IOI Corp said.

“Overall, the plantation segment is expected to perform satisfactorily during the next financial year,” the company said.

For its resource-based manufacturing segment, the company said oleochemical sub-segment has been improving due to lower and more stable feedstock prices which are expected to continue during the next few months.

As for the specialty oils and fats sub-segment, its performance is expected to improve with higher business volume from multinational customers and positive market factor in the US due to the impending trans fat ban in June 2018.

The company also noted the steady ringgit exchange rate as a factor that will contribute to its performance in the coming months.

“The US dollar-ringgit exchange rate which affects the foreign exchange translation gain/loss arising mainly from our medium to long dated US dollar-denominated borrowings has become less volatile in recent months,” it said.

Meanwhile, IOI Properties Group Bhd made a net profit of RM336.6mil in the last quarter.

This lifted its full-year earnings to RM920.9mil.

Source : The Star


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