KLK banks on plantations as CPO prices hold strong

KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK) expects its Plantation segment to remain the main earnings driver, with crude palm oil (CPO) prices likely to stay above RM4,000 per tonne.

“The oleochemical sub-segment is anticipated to support the performance of the manufacturing segment with the contribution from new capacities in Europe and Asia.

“Hence, management remains optimistic that the financial year ending Sept 30, 2025 (FY25) will outperform FY24,” KLK said in the notes accompanying its financial results.

In the first quarter ended Dec 31, 2024 (1Q25), KLK’s net profit fell 2.86% to RM220.5mil, or earnings per share of 20.10 sen against RM226.9mil, or 21.00 sen in the year-ago quarter.

Revenue for the period rose 5.5% to RM5.94bil compared with RM5.64bil achieved a year ago.

The group’s plantation segment recorded a substantial 56% surge in profit, as compared to the same period last year, reaching RM578mil in 1Q25.

KLK said this growth was driven by good fresh fruit bunch (FFB) yields and firm CPO prices.

"The group shall remain focused on enhancing yields through consistent agronomic practices and operational efficiencies to enhance long-term sustainability and resilience in a volatile market environment,” it added.

The group noted that its manufacturing segment, particularly the oleochemical sub-segment, registered an improved operational performance across all sites, showing positive profit contribution compared to a loss in the corresponding quarter of the previous financial year.

However, the midstream refinery sub-segment remained loss-making due to market volatility and uncertainties over Indonesia’s biodiesel policy, which disrupted trading and stability.

“The manufacturing segment was also impacted by mark-to-market losses on the hedged US dollar sales due to the strengthening of the US dollar, which resulted to a net non-cash mark-to-market loss of RM162mil,” KLK said.

The group’s results were also adversely impacted by foreign exchange losses of RM34mil arising from the translation of foreign currency-denominated inter-company borrowings and a higher effective tax rate.