Kuala Lumpur Kepong's (KLK) realised crude palm oil (CPO) selling prices have been consistently lower than the Malaysian Palm Oil Board (MPOB) averages and those of its peers due to the dilutive impact of the Indonesian export duties.
KLK's three refineries coming on stream in Indonesia this and next year will allow the group to recoup the Indonesian CPO price “discount” of about RM500 per tonne.
However, the latest move by the Indian government to effectively raise import duty on refined palm olein imports by about RM134 per tonne is expected to cut refining margins, thereby lengthening the payback period for the three refineries.
Margins from existing Malaysian refining operations may also be affected but there will be offset from higher CPO prices as Indian refiners import more.
Meanwhile, the total immature areas of 34,495 ha imply that total mature areas adjusted for replanting of older palms could potentially increase by over 20% in the next three years.
The group also has a plantable reserve of 22,048 ha and will be converting 5,000 ha of aging and low-yielding rubber areas into oil palm plantations in the next four years.
More areas in Indonesia coming to maturity and reaching prime age as well as yield improvements are expected to contribute to fresh fruit bunches (FFB) production growth of 6%-10% in financial years 2012 to 2014.
Its capital expenditure in financial year 2012 is budgeted at RM1.1bil (more than doubled the RM477mil in financial year 2011 and RM366mil in financial year 2010) for new planting as well as new and expansion of palm oil mills and oleochemicals plants.
Funding is not an issue, given the profitability of its operations as well as the group's cash reserve of over RM1.4bil and low net gearing of less than 0.1 times as at end-March.
It should be noted that corn and soybean prices have recently hit record highs following reports of a worsening draught in the US Midwest.
CPO futures, however, have yet to show signs of a bullish rally as supply remains ample while production is still on an uptrend.
We continue to monitor the outlook as high prices of corn and soybeans could turn down quickly if weather patterns in the US Midwest and South-East Asia improve.
Overall, while we continue to like KLK's good management and long-term growth prospects, at the current price and implied 2013 price-earnings of 17.7 times, our “reduce” call is maintained.
Source: www.thestar.com.my
Showing posts with label KLK. Show all posts
Showing posts with label KLK. Show all posts
25 July 2012
24 May 2012
Kuala Lumpur Kepong (KLK) quarterly earnings fell 42.5% to RM 214.91mil, Indonesian export duties reduced selling prices of CPO and PK in the Indonesian domestic market
(KLK closing stock price today (24.5.2012) was RM 22.16)
Kuala Lumpur Kepong Bhd's (KLK) earnings fell 42.5% to RM214.91mil in the second quarter from RM373.85mil a year ago due to higher operating expenses.
It said on Thursday its revenue rose 10.8% to RM2.624bil from RM2.368bil. Earnings per share were 20.18 sen compared with 35.10 sen. It declared an interim single tier dividend of 15 sen per share.
Its operating expenses rose to RM2.18bil from RM1.79bil.
In the notes to the accounts, KLK said the plantations sector registered a profit of RM300.7mil which was 20.7% below the RM379.1mil year ago.
The decline in profit was due to a reduction in commodity selling prices. The realised selling prices for CPO and PK were diluted by the Indonesian export duties which had effectively reduced the Indonesian domestic CPO and PK prices.
KLK also said it was impacted by rising cost of production due to inflationary factors such as higher wages.
Another factor was lower refinery contributions. Last year's quarter results was aided by the gain of RM70.2mil arising from the changes in fair value on outstanding derivative contracts.
In the first half, its earnings fell 18% to RM555.89mil from RM678.04mil in the previous corresponding period. Turnover was however higher by 15.7% to RM5.547bil from RM4.791bil.
Source: www.thestar.com.my
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