KLK positions for recovery in FY26 on back of plantation operations
06/01/2026 (The Malaysian Reserve) - AFTER a challenging 2025 marked by weak downstream performance, Kuala Lumpur Kepong Bhd (KLK) is positioning itself for a stronger year ahead.
For the financial year ended Sept 30, 2026 (FY26), KLK is anticipating better performance with the plantation division underpinning the results, which the company said showcases the strength and resilience of its integrated business model.
“With key expansion projects completed, the Group will be in a better position to generate more free cashflow to pare down the loans,” KLK executive chairman Tan Sri Lee Oi Hian said in the company’s annual report released on Dec 31, 2025.
Oi Hian is also the chairman of Batu Kawan Bhd which ranks as the largest shareholder of KLK with a 48.1% stake followed by the Employees Provident Fund (EPF) at 17.1% and Permodalan Nasional Bhd (PNB) at 3.1%. Oi Hian’s 42-year-old son Lee Jia Zhang is KLK’s ED and COO.
In FY25, KLK’s net profit jumped 38% year-on-year (YoY) to RM817.28 million on a turnover of RM25.020 billion, up 12% from the year before.
The company noted that the result was predominantly supported by the performance of the core plantation division, which was once again the key driver of the group’s results, delivering a 41% increase in pre-tax profit, reaching RM2.28 billion.
It was supported by higher average selling prices for crude palm oil (CPO) (RM3,964 per metric tonne/ MT) and palm kernel (RM3,215/ MT), slightly improved fresh fruit bunch yields and effective internal cost management.
Higher CPO and palm kernel prices helped KLK keep its FY25 dividend at 60 sen per share, even as downstream margins stayed tight and manufacturing continued to drag.
Manufacturing was the key drag, with the division recording a pre-tax loss of RM173.6 million as the oleochemical sub-division only delivered marginal profits, while the refinery and non-oleochemical operations reported losses.
KLK said tight margins and start-up costs at new facilities hit both the oleochemical and refinery subdivisions, while KL-Kepong Rubber Products was affected by plant reliability issues and fierce Chinese competition.
On the property front, KLK launched the KLK TechPark series in Tanjong Malim, a 1,500-acre (607.03ha) industrial development positioned to support new investments and supply-chain activity around northern Perak.
Exciting year
In the executive chairman statement, Oi Hian talked about the ‘exciting year’ for the property division as it celebrated the launch of the KLK TechPark series in Tanjung Malim, which will become home to BYD Co Ltd’s first automotive assembly plant in Malaysia.
“Covering 1,500-acre, this development was made possible through the proactive efforts of the Perak state government who were key in bringing all parties together,” he said.
He noted that the global growth expectations have slowed down and trade tensions remain elevated, though the operating environment continued to be shaped by persistent geopolitical uncertainties.
“Fortunately, the palm oil sector maintained favourable market conditions, supported by resilient demand and the tightening of exportable supply due to Indonesia’s increasing domestic biodiesel mandates. However, downstream was adversely affected by over-expansion of capacities globally and structural oversupply, resulting in margin pressures,” he said.
One major development has been for its oleochemical division, with the completion of the restructuring and reorganisation exercise, predominantly in Europe.
In 2025, KLK unified the pharmaceutical business in Europe, now known as KLK OLEO Life Science, to strengthen the portfolio.
“These efforts carried out during softer market conditions are to prepare us for full market capture, when demand returns,” he said.
In October 2025, KLK also formed a strategic partnership with Sweden’s AAK AB to jointly develop and operate Nura Speciality Oils and Fats Sdn Bhd, formerly known as KLK Nura Fats Sdn Bhd, a new specialty refinery in Pasir Gudang, Johor Bahru, producing high-value fractionated palm oil products for the global food industry. AAK is a global player in specialty oils and fats.
For FY26, the group is projecting that the average price of CPO and palm kernel will be in around RM4,000/MT and RM3,300/MT, respectively, basis ex-mill Peninsular Malaysia.
It cautioned that palm oil prices may remain volatile, citing stronger Malaysian output in October to November 2025 and the possibility of tighter export availability if Indonesia’s B50 biodiesel move materialises after technical preparations.
Share Price
On its share performance, KLK has a mixed bag of reactions from analysts covering the counter. At this point, it has five ‘Buy’ and 14 ‘Hold’ calls, with no ‘Sell’. The 52-week target price (TP) consensus is RM22.08. The counter ended the year at RM20, having traded between RM19.92 and RM21.86.
In most recent notes, both Public Investment Bank Bhd (PIBB) and MBSB Investment Bank Bhd (MBSB Research) reiterated ‘Hold’ calls with the same TP of RM20.23.
In a Nov 27, 2025 note soon after KLK announced its full result for FY25, Maybank Investment Bank Bhd noted that the FY25 headline/ core profit after tax and minority interests (PATMI) missed the estimates of both the house and the street, impacted by manufacturing losses and impairments.
“Stronger upstream earnings weathered weaker performances in manufacturing and property divisions in FY25. For FY26E, we expect stronger earnings driven by higher fresh fruit bunch output, improving manufacturing margins and better property contribution to mitigate lower average selling prices,” it said. It had a ‘Hold’ with a TP of RM20.30, down from RM20.40.
On its part, CGS International Securities (M) Sdn Bhd also reiterates a ‘Hold’ with a TP of RM22.
“We believe KLK’s downstream operations will continue to face challenges, led by elevated feedstock costs and intense pricing competition among downstream players. In addition, the lower utilisation rate at its newly commissioned oleochemical facilities has resulted in start-up and commissioning costs,” it said.
It expects KLK’s upstream operation to benefit from higher CPO prices ahead as it assumes CPO will reach RM4,500/tonne in 2026F (year-to-date [YTD] 2025: RM4,318/ tonne).
“Having said that, there may be additional downside risk for KLK compared to its Malaysia peers given the potential increase in Indonesia’s export levy, which may result in lower CPO average selling price for its Indonesia estates. Note that 57% of KLK estates are located in Indonesia as of 2024,” it said
It said it has maintained its call on KLK as it thinks the downstream segment is facing stiff competition from Indonesia players as well as softer demand, contributing to lower average selling price and margin pressure.
Kenanga Investment Bank Bhd noted that KLK’s fourth quarter of 2025 (4Q25) upstream earnings held well but downstream losses widened on persistent poor margins and lumpy commissioning cost, with its UK associate Synthomer performing poorly.
“Moving ahead, we expect upstream to stay healthy with downstream recovering and rising property profits,” it said, keeping its ‘Buy’ call with a TP of RM24.
Making KLK’s investment case, Kenanga Investment Bank said KLK’s upstream is expected to fare better moving ahead from yield enhancement and cost optimisation while property contributions should grow over FY26-FY27.
It added the downstream looks set to face headwinds but the absence of commissioning cost of a new plant in FY25 and recent tie-up with AAK to focus on specialty products should help margins moving forward.