KUALA LUMPUR (Feb 25): IOI Corp Bhd (KL:IOICORP) on Tuesday posted a 67% year-on-year drop in its net profit for the second quarter as a surge in palm oil prices was overshadowed by paper losses.

The average price of crude palm oil (CPO) sold in the three months ended Dec 31, 2024 (2QFY2025) was 21% higher at RM4,470 per tonne. IOI Corp, one of the world’s largest producers by acreage, said it expects CPO price to remain supported.

Industry stockpile remains low as adverse weather conditions and low production season drag on output, the company noted. Rising demand ahead of Ramadan and Indonesia’s B40 biodiesel mandate will provide further price support, it said.

While competitive prices of substitute oils can pressure prices, “we expect CPO price to stay elevated” at more than RM4,200 per tonne over the next three months, IOI Corp said.

Net profit for 2QFY2025 was RM111.1 million, according to a bourse filing. During the quarter, IOI Corp booked RM283.5 million from net foreign exchange loss on foreign currency-denominated borrowings and deposits as well as fair value loss on derivatives.  

Revenue for the quarter rose 24% year-on-year to RM2.97 billion as the higher prices of CPO outpaced a 6% decline in output of fresh fruit bunches.

Production is projected to recover “strongly” over the next three months as the weather improves and the trees emerge from the low production season. Combined with the strong price, “we maintain a positive outlook” for the rest of FY2025, the company said.

IOI Corp’s outlook for its downstream businesses, however, was mostly cautious.

In the refinery and commodity marketing sub-segment, IOI Corp flagged pressure on refining margin from competition in Indonesia on lower raw material costs. Operating environment for the oleochemical division, meanwhile, is expected to be challenging amid trade tensions, it said.

Import of raw materials by its associate company Bunge Loders Croklaan for the specialty fats business could also be disrupted by US tariffs, the company warned. However, product margins, particularly for cocoa butter equivalents, would remain “strong” for the rest of FY2025, it added.

For its six-month period, IOI Corp reported a net profit of RM821.8 million, a 29% increase from the same two quarters a year earlier. However, there were extraordinary gains from non-underlying items totalling RM166 million, without which profit before tax would be just 19% higher.

Production costs were also lower but partially offset by lower yield and output. Cumulative revenue rose 23% year-on-year to RM5.64 billion. During the period, average selling price achieved was 14% higher at RM4,271 per tonne for CPO.

IOI Corp declared a first interim dividend of five sen per share, payable on March 24.

Shares of IOI Corp were largely unchanged following the results announcement during the midday trading break. The stock was trading at RM3.82 at 4pm, down 0.5% from the previous day. At its last price, the company has a market capitalisation of RM24 billion.