KUALA LUMPUR: Plantation player Kuala Lumpur Kepong Bhd (KLK), which issued a warning of reduced profit for its financial year 2019 (FY19) together with its parent Batu Kawan Bhd in August, saw a 37% year-on-year (y-o-y) jump in net profit for its fourth quarter of FY19 (4QFY19).

The improved quarter, thanks to the group’s improved manufacturing business, resulted in the group posting a slightly better FY19 instead, with net profit rising a marginal 1% to RM617.51 million from FY18’s RM609.37 million, despite revenue retreating 16% to RM15.53 billion from RM18.38 billion.

This came after its 4QFY19 net profit rose to RM175.02 million from RM127.99 million last year,  its stock exchange filing yesterday showed, though revenue shrank 9% to RM3.8 billion from RM4.19 billion.

This was because its manufacturing segment, which includes the oleochemical division, saw profit more than doubled to RM95.3 million from RM43.7 million, even though revenue fell 16% to RM2.05 billion from RM2.44 billion, dragged down by lower prices.

“The improvement in profit [of the manufacturing segment] was mainly attributed to the strong performance from operations in Malaysia which achieved better profit margins as a result of lower raw material prices. The preceding year’s 4Q result was impacted by RM21.6 million impairment on an underperforming specialised oleochemical plant,” it explained.

Its plantation segment, on the other hand, saw profit fall 26% to RM126.4 million from RM170.1 million, mainly because of weaker crude palm oil (CPO) and palm kernel (PK) prices amid higher production costs though fresh fruit bunches improved. KLK said CPO price dropped 4% y-o-y to RM1,920 from RM2,060, while PK price fell 33% y-o-y to RM1,070 from RM1,594.

Its property development segment, meanwhile, posted a 15% decline in profit to RM18.1 million from RM21.2 million, as revenue sank 31% to RM49.3 million from RM71.5 million.

Batu Kawan 4Q net profit up 25%

Batu Kawan, which considers KLK as a main subsidiary, separately announced that it recorded a 25% y-o-y rise in 4QFY19 net profit to RM96.7 million from RM77.25 million, thanks to a stronger manufacturing segment, higher other operating income, better share of results from associates, and lower income tax expenses. Revenue, however, retreated 9% to RM3.92 billion from RM4.32 billion.

Consequently, it closed the year with a net profit of RM363.5 million, little changed from RM365.68 million a year ago. Revenue was down 15% at RM16.05 billion, versus FY18’s RM18.95 billion.

Going forward, both KLK and Batu Kawan expect their FY20 to see higher profits, as their plantation segments are expected to improve with the recovery of CPO and PK prices, while their oleochemical divisions should be sustained with some additional capacities coming on stream.

“As for the group’s industrial chemical division, profits from both chlor-alkali and sulphuric acid businesses are projected to be satisfactory,” Batu Kawan said in its bourse filing.

KLK shares closed four sen lower at RM22.50 yesterday, with a market capitalisation of RM23.96 billion. Batu Kawan ended the day two sen lower at RM15.40, with a market value of RM6.04 billion.