The Star Online (18/04/2025) - PETALING JAYA: IOI Corp Bhd is expected to report weaker earnings for its third quarter ended March 31, (3Q25) due to seasonally low fresh fruit bunch (FFB) and crude palm oil (CPO) output, but production appears to be picking up ahead of 4Q25, according to UOB Kay Hian Research (UOBKH Research).

“Despite IOI Corp reporting a 4.4% decline year-on-year (y-o-y) for FFB production in 3Q25, we nonetheless observed signs of production picking up once again since January, with the latest disclosed output figures for March indicating 7% y-o-y growth in addition to a 19% month-on-month increase versus February,” the research house said.

IOI Corp is slated to announce its 3Q25 results on May 27.

UOBKH Research projects core earnings for the quarter to come in at RM300mil, down 24% quarter-on-quarter (q-o-q).

It said this comes amid a 25% q-o-q drop in FFB output and a 27% decline in CPO production, although average selling prices are likely to be comparable.

“Prices in 3Q25 are expected to remain comparable with 2Q25, with average spot prices of CPO and palm kernel up RM50 per tonne and RM35 per tonne, respectively, during the quarter,” the research house said.

On the other hand, UOBKH Research said production in 4Q25 “looks on track to recover based on the trend in recent months, with output in March rising y-o-y.”

“For 4Q25, our estimates imply FFB production will come in 9% higher y-o-y at 700,000 tonnes compared to 645,000 tonnes in 4Q24,” it added.

“The trend in recent months thus far aligns with management’s guidance for the group’s production to peak one or two months earlier than usual in FY25 versus June in previous years.”

UOBKH Research said it anticipates FFB output to rise 20% q-o-q in 4Q25, “which should continue to support the next quarter’s results despite weaker prices”.

The research house kept its earnings estimates for IOI Corp unchanged after recently trimming its FY25 earnings per share forecast by 2.8%, following a revision of its FFB growth assumption to being flat y-o-y.

“To recap, we recently adjusted IOI’s FFB growth assumption for FY25 downwards from 4.6% previously to 0.1% y-o-y, following the release of its FFB output for the eight months of FY25 alongside management’s guidance in end-February expecting its original 5% growth target to be missed,” the research house said.

“With FFB output down 2.5% y-o-y for the first nine months of FY25 and given our expectations of a stronger pickup in 4Q25 both y-o-y and q-o-q, we continue to maintain our flat FFB growth assumptions for FY25.”

The research house also maintained its FY25 downstream operating margin assumption at 2%, noting that while revisions in export duties and levy measures in Indonesia and Malaysia present downside risks, the group’s June financial year-end mitigates some of the volatility.

UOBKH Research maintained a “hold” call on the stock with an unchanged target price of RM3.70 a share.

“We believe the current risk/reward tradeoff for IOI Corp remains fair, given its plantations’ capped exposure to high CPO prices in addition to limited earnings visibility for its downstream business,” the research house said.

Read more at https://www.thestar.com.my/business/business-news/2025/04/18/ioi-corps-palm-oil-output-on-track-to-rise-in-4q25