22/02/2013 (The Sun Daily) - Plantation firm IOI Corp Bhd, which saw its second-quarter net profit and revenue slip on lower contributions from its plantation segment, warned that this segment continues to face challenges on manpower constraints, higher labour costs arising from the implementation of minimum wage and prevailing lower crude palm oil (CPO) prices.

"However, the segment is expected to still perform well in the medium term with resilient demand from the food sector, higher consumption in emerging markets and expected recovery in palm oil prices beginning in second quarter of 2013," the group said in a filing with Bursa Malaysia yesterday.

IOI Corp, which is also involved in the development of properties, expects stronger sales with more property launches in the current financial year ending June 30, 2013 (FY13).

"In the resource-based manufacturing segment, the group's refineries and specialty fats businesses are seeing signs of recovery due to the lower palm oil price and the new export-duty structure introduced by the government recently.

"The oleochemical business is also expected to perform well in FY13 due to the lower feed stock prices."

Against this backdrop, the group is optimistic that its overall performance will be satisfactory in FY13, despite the lower palm oil prices beginning in the fourth quarter of 2012 and the weak global economy.

Net profit for the three months ended Dec 31, 2012 (Q2) dropped 8% to RM531.0 million from RM577.7 million a year ago, while revenue fell 14% to RM3.6 billion from RM4.2 billion.

During the quarter under review, its plantation profit fell 34% to RM304.3 million from RM462.3 million a year ago, mainly due to lower CPO and palm kernel prices, which was offset by higher fresh fruit bunch production.

Average CPO price realised for Q2 was RM2,292 per tonne compared with RM3,032 per tonne a year ago.

Nevertheless, better performance from the manufacturing segment mitigated the plantation profit decline.

The resource-based manufacturing profit for Q2 was higher at RM174.9 million from RM124.2 million a year ago, thanks to higher margins from oleochemicals sub-segment and increased sales volume from specialty fats and refinery subsegments.

For the six months period ended Dec 31, 2012 (H1), IOI Corp's net profit grew 36% to RM1.1 billion from RM835.8 million a year ago, mainly due to translation gain of RM351.1 million on foreign currency denominated borrowings and higher contributions from all major segments other than plantation segment.

However, its revenue for H1 saw a 16% fall to RM7.0 billion from RM8.3 billion.