Quick Look At IOI Quarterly Earnings

Posted Saturday, February 21, 2009 IOI Earnings Results And Flashback On What Has IOI Done The Past One Year

This morning I caught this news. IOI third quarter net profit down 94pc to RM37.3m

• The profit plunge for Malaysia’s No 2 palm oil producer by market value is attributed to translation losses on its foreign debt and lower crude palm oil prices
  
  IOI Corp Bhd's net profit in the third quarter ended March dived 94 per cent to RM37.3 million from RM601.6 million in the comparable quarter a year ago, due to foreign exchange losses on its foreign denominated loans and lower crude palm oil (CPO) prices.
  
  In a statement yesterday, Malaysia's most valuable planter said revenue dipped to RM3 billion from RM3.5 billion, dragged by an unrealised translation loss on its US dollar denominated borrowings of RM232.4 million and weaker product prices.
  
  "The global economic slowdown, which is now affecting Malaysia, will no doubt make the current year a challenging one for business corporations.
  
  "Operating profit from the plantation segment is 46 per cent lower than the previous quarter, due mainly to lower fresh fruit bunches production and lower CPO prices realised," said IOI directors.
  
  The company said CPO prices averaged RM2,932 a tonne for the nine months to March compared with RM2,705 a tonne in the same period last year.

Not doing that well, eh?

My oh my, oh quickly the good times end!

I was more interested in what was stated in their quarterly earnings notes.

• In tandem with the global economic slow down, the Group reported a 58% lower pre-tax profit of RM937.4 million for Q3 YTD FY2009 as compared to RM2,239.1 million for Q3 YTD FY2008. The lower profit is due mainly to unrealised translation losses on long term USD denominated borrowings as well as lower contribution from both the manufacturing and property segments. After excluding the unrealised translation loss on long term USD denominated borrowings of RM482.0 million (Q3 YTD FY2008 - gain of RM226.8 million), the pre-tax profit for Q3 YTD FY2009 is RM1,419.3 million or 30% lower than Q3 YTD FY2008, which is reasonable in light of the challenging economic conditions. The ringgit has been strengthening against the USD since 31 March 2009 and should this trend continues, it is likely that part of the unrealised translation loss on long term USD denominated borrowings will be written back.
  
  The plantation segment reported a 6% increase in operating profit, i.e. RM1,380.5 million for Q3 YTD FY2009 as compared to RM1,302.4 million for Q3 YTD FY2008. The better performance is due mainly to higher CPO prices realised from the forward sales entered into during the second half of FY2008. Average CPO prices realised for Q3 YTD FY2009 was RM2,932/MT as compared to RM2,705/MT for Q3 YTD FY2008.
  
  The resource-based manufacturing operating profit of RM169.1 million for Q3 YTD FY2009 is significantly lower as compared to RM457.4 million for Q3 YTD FY2008. The lower profit is attributable mainly to realised foreign exchange losses and customer defaults on high priced contracts incurred during the first half of the financial year and lower sales volume due to the unfavourable global economic conditions.
  
  The property segment’s operating profit of RM200.5 million for Q3 YTD FY2009 is 35% lower than Q3 YTD FY2008. The decrease is due mainly to the soft property market conditions and lower margins.
  
  In the opinion of the Directors, the results for the financial period under review have not been affected by any transaction or event of a material or unusual nature which may have arisen between 31 March 2009 and the date of this announcement.

The following caught my attention.

• After excluding the unrealised translation loss on long term USD denominated borrowings of RM482.0 million (Q3 YTD FY2008 - gain of RM226.8 million), the pre-tax profit for Q3 YTD FY2009 is RM1,419.3 million or 30% lower than Q3 YTD FY2008, which is reasonable in light of the challenging economic conditions.

I chuckled.

As mentioned in the previous posting, IOI Earnings Results And Flashback On What Has IOI Done The Past One Year, back in May 2008, IOI earnings clearly was boosted by huge forex gains of over 226 million.

I am wondering. Why did they NOT include statements like 'excluding our forex gain.. our profits would have been lesser..'?

Anyway let's look at their group borrowings. Anyway from that posting, I posted this table from IOI last reported quarterly earnings.

And the table below is from IOI's earnings last night.


How the loans have increased, especially the US Denominated!

I would assume that the company is hoping and praying very hard that USD plunges!