IOICORP: Half-Year Earnings Align with Forecasts, Driven by Manufacturing Strength

A major industry player has reported a robust core profit of RM812.8 million for the first half of FY26, marking an 11% year-on-year increase. These results were broadly in line with both the investment bank’s and street’s full-year expectations, accounting for 59% and 58% respectively. The positive performance follows the exclusion of several exceptional items, including net foreign exchange translation gains and losses, fair value gains on derivative financial instruments, and fair value losses on biological assets.

Performance Review

The second quarter of FY26 saw core profit climb significantly by 23% year-on-year to RM445 million. This growth was primarily propelled by a strong showing from the resource-based manufacturing segment, which nearly doubled its earnings to RM66.7 million. This segment benefited from robust contributions from the refinery sub-segment and an increased share of results from associates, particularly Bunge Loders Croklaan, which experienced favourable margins in the cocoa butter business across Asian and American operations.

The plantation segment also registered a marginal increase in earnings, reaching RM500.6 million. This was due to higher sales volume, which partially offset the impact of increased production costs and softer selling prices. Fresh Fruit Bunch (FFB) production saw a healthy rise of 13.8% year-on-year, contributing to an improved oil extraction rate, which moved from 21.43% to 21.74%. Despite these positive trends, the average Crude Palm Oil (CPO) price experienced a slight decline from RM4,470 per metric tonne to RM4,224 per metric tonne quarter-on-quarter. Palm kernel prices also experienced a slight dip, and oleochemical earnings contributions faced a slump.

Future Outlook

Looking ahead, management anticipates that CPO prices will remain supported above RM4,000 per metric tonne over the next three months. This expectation is underpinned by the seasonal decline in FFB production and a significant discount relative to soybean oil prices. For the full fiscal year, the group projects higher overall production, supported by an expanding plantation area comprising prime age group trees, despite ongoing accelerated replanting efforts in Sabah.

However, the outlook for the refinery and oleochemical sub-segments is expected to remain challenging. Margins in these areas are likely to stay under pressure due to elevated inventory levels and intense competition, particularly from Indonesian counterparts. The investment bank maintains its previous assessment, signaling a consistent view on the company’s prospects.