Another record year for IOI Corp

Link here

22 August 2007

It chalks up net profit of RM1.48bil on higher revenue

KUALA LUMPUR: IOI Corp Bhd announced yesterday yet another record profit for its 2007 financial year (FY07), boosted by high crude palm oil prices (CPO) and robust property sales.

The country's top plantation company expects its financial performance in FY08 to be good, and analysts feel the company is well-placed to realise its target should CPO prices continue to hover near record levels.

“IOI only benefited from half a year of high CPO prices and FY08's numbers should be better if palm oil prices remain high and the other divisions of the group such as property and manufacturing deliver,'' an analyst said.

For the year ended June 30, IOI Corp announced a net profit of RM1.48bil, or 24.13 sen a share, compared with RM829mil, or 14.51 sen a share, in FY06.

Revenue, as a result of higher volume in the manufacturing segment and high palm oil prices, jumped 47% to RM8.95bil from RM6.11bil while pre-tax profit rose 73% to RM1.99bil from RM1.15bil.

“All three major business segments achieved record operating profits,'' IOI Corp said in a statement to Bursa Malaysia.

For the fourth quarter, IOI Corp announced a net profit of RM451.7mil, or 7.28 sen a share, against RM211.9mil, or 3.58 sen a share, in the previous corresponding period.

Revenue was RM2.54bil for the fourth quarter compared with RM1.65bil previously.

IOI Corp said plantation earnings in FY07 was 46% better than in FY06 with the CPO price averaging 27% higher at RM1,759 per tonne compared with RM1,386 previously.

Fresh fruit bunches (FFB) production, at 3.69 million tonnes, was about the same level as in FY06 and IOI Corp said its resource-based manufacturing segment achieved a multi-fold increase in operating profit to RM405.4mil.

The company said its property business also achieved record pre-tax profit, which rose 62% to RM598.4mil from RM368.3mil in the previous year.

Profit from property was, however, boosted by a gain of RM160.7mil from the revaluation of investment properties as required under accounting standards.

For its fourth quarter, IOI Corp said the 8% increase in operating profit in its plantation segment was proportionately lower than the 16% increase in CPO price from the third quarter. That was because of the newly imposed cooking oil cess as well as higher fertiliser inputs in the fourth quarter.

“Resource-based manufacturing showed lower contribution for the fourth quarter because of volatile raw material prices,'' IOI Corp said.

While cost pressures may have risen, analysts feel IOI Corp is in a position to chalk up better profit in FY08, given the higher CPO prices seen now at over RM2,300 to RM2,400 per tonne compared with the average price in the fourth quarter.

“If the momentum is maintained, we can expect higher CPO prices in 2008,'' an analyst said.

How much higher would depend on the level of activity by hedge funds in CPO futures.

“In recent years, we have seen more participation by hedge funds in palm oil contracts,'' an analyst said. However, the general opinion is that their involvement in CPO futures pales in comparison with hedge fund activity in soy bean futures.

FFB production should improve as IOI Corp's trees are said to emerging from biological stress and the group's property division, analysts say, should do even better in FY08 as IOI Corp has forecast a 5% rise in yearly property revenue for the period.

Analysts feel the full-year contribution following the acquisition of Pan Century Edible Oils Sdn Bhd and Pan Century Oleochemicals Sdn Bhd last September would boost earnings from its resource-based manufacturing business.