KUALA LUMPUR (Aug 24): Kuala Lumpur Kepong Bhd (KL:KLK) slipped into the red in its latest quarterly results after making a massive RM1.62 billion impairment charge to slash the carrying value of its investment in loss-making UK-listed specialty chemicals associate Synthomer plc to reflect its depressed market valuation.

The non-cash and non-operational accounting adjustment is to "decisively remove recurring and uncertain drag on KLK's earnings ahead, with no expected impact on cash flow and dividend outlook", the plantation giant said in a statement on Monday.

Consequently, the group reported a net loss of RM1.34 billion for its third quarter ended June 30, 2026 (3QFY2026) — its first quarterly net loss as far as Bloomberg tracking data shows — compared with a net profit of RM346.59 million for 3QFY2025, even as revenue expanded nearly 10% to RM7.05 billion from RM6.43 billion.

Stripping out the one-off impairment of Synthomer and its share of losses, the group's net profit would have seen a 28.1% growth to RM444.8 million from RM347.1 million.

Likewise, the group's earnings for the nine months ended June 30 (9MFY2026) would have risen to RM1.12 billion from RM785.1 million in 9MFY2025 had the Synthomer impact been excluded.

Instead, its cumulative earnings fell to a net loss of RM667.97 million from a net profit of RM721.32 million in 9MFY2025, even as revenue grew 6.6% to RM19.95 billion from RM18.72 billion.

KLK said the impairment followed a prolonged decline in Synthomer’s market value and slower-than-expected recovery in its earnings performance.

“To remove the overhang that distorts the group’s continued strong fundamental performance, it is important that we provide certainty and clarity to our stakeholders by the decisive move to impair Synthomer. Moving forward, while we continue to equity account, our carrying cost is significantly marked down to RM190 million," said KLK chief operating officer Lee Jia Zhang.

Prior to the impairment, Synthomer's carrying value was RM1.81 billion, with cumulative impairment of RM240 million recognised.

During the period under review, the group's upstream demonstrated "sustained strong yields", while downstream showed operational and commercial improvements across all operating regions, said Lee. "We are optimistic of closing the financial year with a strong performance."

The accounting hit also dragged parent company Batu Kawan Bhd (KL:BKAWAN), which holds a 47.9% stake in KLK, into a quarterly net loss of RM653.17 million, from a net profit of RM182.92 million a year earlier.

This is despite revenue rising 9.6% to RM7.24 billion from RM6.61 billion, on higher contributions from its plantation and manufacturing businesses, Batu Kawan's bourse filing showed.

For 9MFY2026, Batu Kawan incurred a net loss of RM306.04 million, as opposed to a net profit of RM398.41 million, though revenue grew to RM20.47 billion from RM19.24 billion.

If not for the Synthomer impairment and share of losses, Batu Kawan would have recorded a net profit of RM560 million for the nine months ended June 30, 2026 (9MFY2026).

Neither KLK nor Batu Kawan declared dividends with their latest results announcements.

KLK’s share price closed 28 sen higher at RM21.92 on Monday, for a market capitalisation of RM24.5 billion. Batu Kawan closed unchanged at RM21, valuing the group at RM8.39 billion.