IOI Corporation has just released its Q3 FY2023 report indicating a lower profit due to the subdued palm oil market, the group reported a profit before tax of RM260.8 million as compared to RM580.9 million reported for Q3 FY2022. Profit for the period was also down recording RM201 million compared to RM421 million in the preceding year’s quarter.
The plantation segment profit for Q3 FY2023 of RM221.2 million was 57% lower than the profit for Q3 FY2022 of RM518.5 million due mainly to lower CPO and PK prices realised and higher cost of production, mitigated by higher FFB production. Average CPO and PK prices were RM3,928/M (Q3 FY2022 – RM5,064/MT) and RM2,153/MT (Q3 FY2022 – RM4,588/MT).
For the 3 quarter cumulative the group reported a PBT of RM1,432.9 million as compared to RM1,694.2 million reported for in 20222. Excluding the non-operating and one-off items as tabulated below, the underlying PBT of RM1,514.8 million for Q3 YTD FY2023 was 19% lower than the underlying PBT of RM1,871.8 million for Q3 YTD FY2022, due mainly to lower contribution from plantation segment, mitigated by higher contribution from the resourced-based manufacturing segment
On the outlook, IOI Corp said the Crude palm oil (“CPO”) spot price dropped significantly in the month of May to around RM3,500 – RM3,700 level due to the expected seasonal increase in palm fruits production as well as the larger than expected soybean harvest, although Malaysian palm oil stock declined further at end April to the lowest in 13 months. During the next 3 months, CPO price is expected to stay around this level, before the looming El Nino phenomenon affects palm fruit production probably in Q4 of this year.
For the plantation segment, the group expects palm fruit production to increase in line with the seasonal trend, but this positive factor will be offset by the lower CPO price. As the refinery and commodity marketing sub-segment, refining and fractionation margins have been squeezed at a negative level, due to the high CPO export duty in Indonesia as well as the near price parity of palm oil against soyabean oil in major destination markets.
The performance of the oleochemical sub-segment is largely dependent on global economic and trade growth. With the downbeat economic outlook in USA and most European countries and geopolitical tensions between USA and China, coupled with the substantial spike in Malaysia’s electricity cost for large manufacturers, our oleochemical sub-segments performance is expected to decline in Q4 FY2023, despite the moderate raw material price and China’s economy growing healthily this year
Overall, IOI Corp expects the operating environment to be challenging and financial performance to be flat with downside bias during Q4 FY2023.
