Key Financial Highlights: A Tale of Profit Growth Amidst Revenue Contraction

At first glance, NPC Resources Berhad’s Q1 FY2025 results present a fascinating paradox: a dip in revenue but a strong surge in profit. The Group recorded a commendable 37% increase in Profit Before Tax (PBT), reaching RM7.488 million, up from RM5.465 million in the corresponding quarter of the previous financial year. This impressive bottom-line growth occurred despite a 6% decline in revenue, which stood at RM96.308 million compared to RM102.850 million in the same period last year.

The primary driver behind this improved profitability was the significantly higher average selling prices of palm-based products. The average selling price of Crude Palm Oil (CPO) saw an 18.9% increase to RM4,300 per metric ton, while Palm Kernel (PK) prices surged by an impressive 77.0% to RM3,319 per metric ton. This pricing power effectively offset the impact of lower sales volumes, a direct consequence of reduced Fresh Fruit Bunch (FFB) production, particularly in Sabah.

Segmental Performance: A Closer Look at the Engines

Plantation and Milling Segment

The backbone of NPC Resources, the plantation segment, experienced a 7% decrease in external revenue for the current quarter compared to the previous year’s corresponding quarter. This was largely due to a significant reduction in CPO and PK sales volumes, down by 23.3% and 29.9% respectively. The main culprit? A substantial 46.6% drop in FFB production in Sabah, attributed to both seasonal factors and the disposal of certain plantation lands in Q4 2024, which reduced the Group’s productive hectarage.

Despite the revenue decline, the segment still registered a profit of RM13.861 million, though this represents a 19% decrease from the preceding quarter. The impact of lower production volumes clearly outweighed the benefits of higher average selling prices. On a brighter note, FFB production in Indonesia showed resilience, increasing by 4.5%, partially mitigating the overall shortfall.

Hotel Segment

The hotel segment saw a modest 2% increase in external revenue for the current quarter compared to the previous year. However, its segment profit declined, reporting a loss of RM195,000 for the quarter (compared to a profit of RM76,000 in Q1 FY2024). This moderation in profit was primarily due to lower occupancy and room revenue, a typical seasonal slowdown during the Ramadan (Puasa) month, which affects travel activity, especially among corporate and government clientele. Fortunately, strong performance in food and beverage operations provided a partial offset.

Financial Health: Balance Sheet and Cash Flow Insights

Examining the balance sheet, NPC Resources’ financial position remains stable, though some shifts are noteworthy. Total equity saw a slight decrease to RM619.611 million as at 31 March 2025 from RM628.176 million at the end of FY2024. Net assets per share also marginally decreased to RM5.30 from RM5.42.

A significant highlight in the balance sheet is the substantial increase in cash and bank balances to RM70.496 million from RM41.792 million at the end of December 2024. This boost in liquidity is further explained by the cash flow statement.

The cash flow statement reveals a mixed picture. Net cash flows from operating activities turned negative, recording a net outflow of RM1.749 million, a significant shift from the RM22.176 million generated in the same period last year. Investing activities also saw increased cash usage, primarily due to the acquisition of non-controlling interest. However, the Group’s financing activities generated a substantial RM44.811 million, primarily driven by proceeds from the drawdown of bank borrowings, which helped bolster the overall cash position, leading to a healthy increase in cash and cash equivalents at the end of the period.

Risks and Prospects: Navigating the Future

NPC Resources Berhad acknowledges the challenges ahead while maintaining a cautiously optimistic outlook for both its segments.

Plantation Segment

The outlook for the plantation segment is cautiously optimistic, with expectations for a gradual recovery in production volumes, particularly from the Indonesian region. Management is committed to optimizing yields from mature areas and improving operational efficiencies. While the Sabah region faces reduced productive hectarage due to recent land disposals, the focus will be on maximizing returns from existing assets. The Group remains vigilant about external risks such as fluctuating commodity prices and weather-related disruptions, emphasizing the importance of cost control measures, effective supply chain management, and favorable weather conditions for future performance.

Hotel Segment

The hotel segment anticipates a positive recovery, especially after the Ramadan slowdown, as domestic and international travel is expected to pick up with peak holiday seasons and increased corporate and government travel. The strong performance of the Food & Beverage (F&B) operations is a key strength that the Group plans to leverage for revenue growth. Management’s strategy includes enhancing guest experience and implementing targeted marketing initiatives to boost occupancy and maintain profitability. The full recovery of this segment, however, will largely hinge on broader macroeconomic conditions and a sustained return of both business and leisure travelers.