KUALA LUMPUR (Feb 23): Hap Seng Consolidated Bhd saw its net profit grow 37.5% to RM106.48 million or 4.28 sen per share for the fourth quarter ended Dec 31, 2016 (4QFY16) from RM77.44 million or 3.59 sen per share a year ago, mainly driven by increased earnings contributions from its plantation and fertiliser trading divisions.

Quarterly revenue also increased 11.7% to RM1.21 billion from RM1.08 billion in 4QFY15 on higher revenue from all divisions except automotive division.

In a filing with Bursa Malaysia today, Hap Seng said the plantation division, whose 4QFY16 operating profit rose 55% year-on-year (y-o-y), benefitted from higher average selling price realisation of crude palm oil (CPO) and palm kernel (PK).

CPO sales volume for 4QFY16 fell 25% to 32,799 tonnes from the year-ago period, while PK sales volume was 18% lower at 10,077 tonnes.

The fertiliser trading division’s operating profit rose 142% y-o-y to RM6.5 million in 4QFY16 as it benefitted from better margins achieved from Malaysian operations despite lower revenue and competitive market conditions.

Hap Seng added that its property division’s operating profit was negatively impacted by the net loss from fair value adjustments of its investment properties, resulting in lower operating profit of RM28.4 million in the current quarter under review, while the auto division’s operating profit was lower by 16% y-o-y in 4QFY16 mainly due to lower sales volume and sales mix variance with higher sales of lower-priced models.

Nevertheless, the strong quarterly earnings boosted full-year FY16 net profit to RM1 billion or 42.36 sen per share from RM908.47 million or 42.26 sen per share in FY15, while revenue rose 11.3% to RM4.89 billion in FY16 from RM4.39 billion the previous year.

Going forward, Hap Seng is cautiously optimistic of achieving satisfactory results for FY17 as it expects CPO prices to be lower in the second half of the year as production recovers.

It also foresees a challenging year ahead for its property division amid the current soft consumer sentiments. "In spite of this, the division will be launching several new projects in 2017," the group said.

At the same time, demand for fertilisers is expected to pick up in the coming months as plantations are expected to resume their fertilising activities after the year-end wet weather conditions which inhibited fertilisers applications in the preceding quarter.

"Demand of fertilisers is expected to be further supported by the current high palm oil prices. Nevertheless, the business environment is anticipated to remain competitive amid the volatility of foreign exchange movements," said Hap Seng.

As for the auto sector, it expects the competitive environment in the Malaysian premium passenger vehicles segment to prevail.

“Nevertheless, new models launched in 2016 and upcoming new models to be launched in 2017 are expected to continue to boost the division’s vehicles sales,” said Hap Seng.

Hap Seng’s share price closed up one sen or 0.11% to RM9.02 today, giving it a market capitalisation of RM22.46 billion.