IJM Plantations 2Q net loss narrows, quarterly revenue up 22%

KUALA LUMPUR (Nov 25): IJM Plantations Bhd’s net loss narrowed to RM1.04 million in the second financial quarter ended Sept 30, 2020 (2QFY21) from RM2.32 million in the previous corresponding quarter.

Quarterly revenue grew 22.28% to RM211.37 million in 2QFY21 from RM172.86 million in the corresponding quarter last year.

The reduced losses in 2QFY21 were due to higher commodity prices and revenue, specifically from its Malaysian operations.

For the six months ended Sept 30, 2020 (6MFY21), it registered a net profit of RM81.08 million, from a net loss of RM7.1 million a year prior. Half-year revenue was up by 36.4% to RM417.36 million from RM305.93 million in 6MFY19.

On a quarter-to-quarter (q-o-q) basis, the group slipped into losses from a net profit of RM82.12 million in the immediate preceding quarter.

Quarterly revenue was up by 2.6% at, from RM205.99 million in 2QFY20.

The plantation group’s performance in 2QFY21 was dragged down by foreign exchange loss of RM34.97 million on its US dollar and Japanese Yen denominated borrowings compared with a forex gain of RM91.74 million in 1QFY21.

Fresh Fruit Bunch (FFB) production in Indonesia declined by 20.1% to 117,473 tonnes in 2QFY21 from 146,975 tonnes in 1QFY21. Crude Palm Oil (CPO) sales declined by 19.7% to 36,077 tonnes from 44,936 tonnes in 1QFY21.

“The group could continue to face pressures arising mainly from adverse weather impact disrupting crop production, the uncertainty of commodity prices, and the volatility of the foreign exchange rates particularly that of the rupiah against the US dollar and the Japanese yen.

With the expectation of the prevailing CPO prices being sustainable, the group is optimistic for a better financial performance for the year barring any unfavourable volatility in the foreign exchange rates,” it said on its prospects.

In a separate statement, IJM Plantations Chief Executive Officer (CEO) Joseph Tek said that the recent steep downward revisions of crop estimates in other competitive vegoils (sunflower and soybean) will have helped to support CPO prices above RM3,000 a tonne.

“I believe that CPO prices will continue to be supported with steady and sustained demand for palm oil from buyers, especially from China and India.

“On the other hand, the global soybean outlook has changed intensely with lower than expected production in the US and South American producing Brazil and Argentina, thus creating a production deficit of soybeans worldwide in 2020/21. Thus, the strong and sustained global demand coupled with lower-than-expected production across all edible oils would keep other edible oils, including palm oil inventories in producing countries extremely tight,” Tek noted.

That said, Tek opined that 2021 will see more bearish than bullish factors for the industry.

There is an acute shortage of workers, he pointed out.

"Weather uncertainties affecting crop production, whether immediately impacting operations per se or lag effects on crop production, are becoming a major determining factor for price discovery, particularly set against the current La Nina forecast weather phenomenon.

On the other hand, it is hoped that any further issues and measures relating to the Covid-19 pandemic would not hamper the efforts to sustain and improve the operations throughout the palm oil supply chain as the plantation industry continues to remain vigilant and operate within the strict SOP framework and impose voluntary lockdowns,” he said.

IJM Plantations fell two sen to RM1.86, valuing it at RM1.64 billion.