IOI's Q4 profits up on lower tax

MALAYSIA'S second largest palm oil producer IOI Corp Bhd saw its fourth-quarter profit rise by 12 per cent, mainly due to lower tax charges. IOI Corp's full-year profit doubled to RM2.04 billion on foreign exchange gains, no further property losses in Singapore and better palm oil prices.

Net profit for the quarter to June 30 2010 was RM547.05 million, a slight improvement from RM487.07 million in the same quarter a year ago. Revenue, however, slid 2 per cent to RM3.06 billion.

IOI Corp, controlled by the family of Tan Sri Lee Shin Cheng, expressed caution for the current year ending June 30 2011. "The global economic growth is starting to show signs of slowing down. It will be a challenging year ahead," the group said in its filing to Bursa Malaysia yesterday.

IOI Corp only paid RM77.12 million in tax charges compared with RM111.95 million during the fourth quarter. It was lower because the group posted more non-taxable income and factored in previously unrecognised tax losses.

In the year ended June 2010, IOI said its 80-odd estates produced 732,275 tonnes of palm oil output, 6 per cent less than 777,310 tonnes harvested in the previous year.

In the quarter under review, the group's plantation profit was 6 per cent higher despite the lower harvest. Higher palm oil pricing in the international market had helped boost its bottom line. "Average palm oil prices realised for the fourth quarter is RM2,504 per tonne compared with RM2,455 per tonne for the fourth quarter of 2009," it said.

IOI Corp's operating profit in its oleochemical business fell 28 per cent to RM135.7 million.

Its property business also reported a 28 per cent drop in operating profit to RM190.8 million due to lower appreciating value in investment properties.

Total dividend for the financial year just ended amounted to 17 sen per unit of 10 sen share each.


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IOI'S GROWTH BELOW INDUSTRY AVERAGE

KUALA LUMPUR, Aug 25 (Bernama) -- IOI Corp Bhd's growth will continue to be below industry over the next four to five years, unless it plants more aggressively, says OSK Research.

"IOI's low production of young trees means its growth would remain relatively stagnant, hence earnings growth and stock price appreciation would also slow down.

"The stock has been underperforming its peers and we do not see any rerating catalyst on the horizon," OSK said in a research note today.

OSK also said, based on its numbers, IOI's young mature trees only made up about 8 per ent of its mature hectarage compared to its peers of between 20 and 35 per cent.

"Its percentage of trees not yet at peak maturity is also low at 15 per cent compared to its peers at 28 per cent to 46 per cent. This means IOI's growth will continue to be below industry, unless more aggressive planting takes place," OSK explained.

It also said with IOI's new refinery in Rotterdam having started operations in July and along with palm oil price volatility starting to pick up, refinery margin should improve.

However, this is provided, the company can ensure sufficient palm oil supply after cutting off Sinar Mas Group as supplier.

"We make no change to our earnings forecast, which has factored in contribution from the new refinery. There's room for an earnings upgrade if IOI''s effective tax rate stays at its fourth quarter level and our target price based on 15 times of current year 2011 earnings, is maintained at RM3.91," OSK explained.

Meanwhile, Kenanga Research said: "Based on guidance, fresh fruit bunches production will most likely improve 5 per cent year-on-year and which we have adjusted accordingly in lowering our assumptions by some 7 per cent."

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