KUALA LUMPUR (Aug 19): Batu Kawan Bhd (KL:BKAWAN) and its 47.9%-owned Kuala Lumpur Kepong Bhd (KL:KLK) posted higher earnings for the third quarter ended June 30, 2024 (3QFY2024), driven by stronger contribution from the plantation segment.

The increase was attributed to higher selling prices and sales volumes of crude palm oil and palm kernel, lower production costs, and a reduced fair value loss on unharvested fruit.

KLK's net profit for 3QFY2024 surged 185.6% year-on-year (y-o-y) to RM240.2 million from RM84.1 million, while revenue increased by 7.6% to RM5.5 billion from RM5.12 billion.

The plantation segment saw its profit more than double to RM363.4 million from RM125.9 million a year earlier.

As for its parent company Batu Kawan, net profit rose 58.2% y-o-y to RM131 million from RM82.8 million, with revenue growing by 6.2% to RM5.7 billion from RM5.35 billion.

No dividend was declared for the quarter by either KLK or Batu Kawan.

In the plantation segment, KLK’s profit more than doubled to RM363.4 million from RM125.9 million a year earlier, while Batu Kawan’s profit tripled to RM369.37 million from RM119.64 million.

On the manufacturing front, despite higher losses recorded by the refineries and kernel crushing operations, KLK's manufacturing segment posted a profit of RM23.2 million, compared to a loss of RM73.7 million a year earlier.

This improvement was driven by higher revenue of RM4.465 billion and improved profit contributions from the oleochemical division.

Due to the recognition of development profits from phases with lower gross profit margins, KLK’s profit for the property segment fell slightly to RM18.7 million from RM19.3 million, while Batu Kawan's profit also decreased by 3.2% to RM18.86 million from RM19.49 million.

The investment holding segment underperformed, with KLK reporting a RM62.7 million loss for the quarter, compared to a RM36.8 million loss in 3QFY2023. This was mainly due to higher net interest expenses resulting from an increase in borrowings.

Batu Kawan’s investment holding division also recorded a RM44.9 million loss versus a RM14.4 million profit in the previous year, dragged down by unrealised foreign exchange losses on inter-company loans.

For the nine-month period ended June 30, 2024 (9MFY2024), KLK’s net profit declined by 18.6% y-o-y to RM584.2 million from RM718 million, while revenue also dipped by 7.1% y-o-y to RM16.6 billion from RM17.9 billion.

Batu Kawan’s net profit for 9MFY2024 dropped 25.3% y-o-y to RM327.5 million from RM438.2 million, as revenue also fell by 7.9% y-o-y to RM17.2 billion from RM18.6 billion.

KLK’s 26.89% associate company, Synthomer plc, is expected to impact the group and Batu Kawan’s performance for FY2024, as it continues to report losses due to a challenging business environment in the chemical industry.

KLK has accounted for equity losses of RM87.2 million from Synthomer for the nine-month period ended June 30, 2024.

"Synthomer's business environment remains challenging despite some signs of reasonable recovery, particularly in its coatings and construction solutions segment," KLK noted.

Nevertheless, KLK stated that the plantation segment will remain a key contributor to the group’s overall profits for the remainder of FY2024, driven by cost optimisation and improved yields.

The group also expects its European oleochemical sub-segment to continue recovering, with increased demand and margin improvements. However, it highlighted that the Chinese market remains challenging, with weak demand and ongoing uncertainties, prompting the group to proceed cautiously.

Meanwhile, Batu Kawan also expects its plantation segment to deliver stronger results than last year.

Shares in KLK gained 10 sen or 0.48% to RM21.10 at Monday's market close, valuing the company at RM23.19 billion. Batu Kawan's shares settled two sen or 0.1% higher at RM19.58, giving it a market capitalisation of RM7.82 billion.