Kim Loong Resources Q1 FY2026: Navigating Palm Oil Dynamics with Resilience
The Malaysian palm oil sector, a cornerstone of our economy, is constantly evolving. Today, we delve into the latest financial report from Kim Loong Resources Berhad (KLK) for the first quarter ended 30 April 2025. This report offers a fascinating glimpse into how a key player is performing amidst fluctuating commodity prices and operational shifts. While the company recorded a commendable increase in revenue, its profitability saw a dip compared to the same period last year, primarily due to challenging milling margins. However, a closer look reveals a robust operational rebound from the immediate preceding quarter, signaling the company’s underlying strength.
Key Takeaway: KLK’s revenue grew by 6% year-on-year, but profit before tax declined by 10% due to lower milling margins. Despite this, the company demonstrated a strong operational recovery compared to the previous quarter, with profit before tax soaring by 75%.
Core Financial Highlights: A Mixed Bag Year-on-Year
Let’s unpack the numbers from KLK’s first quarter, comparing it to the corresponding period last year. While revenue saw a healthy increase, the bottom line tells a different story.
Current Quarter (30/04/2025)
Revenue: RM411.72 million
Profit Before Tax (PBT): RM68.98 million
Profit for the Period: RM52.58 million
Profit Attributable to Owners: RM41.92 million
Basic Earnings Per Share: 4.28 sen
Previous Corresponding Quarter (30/04/2024)
Revenue: RM388.39 million
Profit Before Tax (PBT): RM76.33 million
Profit for the Period: RM58.66 million
Profit Attributable to Owners: RM49.52 million
Basic Earnings Per Share: 5.08 sen
As you can see, revenue increased by 6% to RM411.72 million, primarily driven by higher palm oil prices. However, Profit Before Tax (PBT) decreased by 10%, and profit attributable to owners saw a 15% decline. This was largely attributed to a lower processing margin from the milling operations, an important detail we’ll explore further.
Operational Performance: Diving Deeper into Plantation and Milling
Understanding KLK’s two core segments – Plantation and Milling – is crucial to grasping its overall performance.
| Segment | Revenue (Q1 FY2026) | Revenue (Q1 FY2025) | Change (%) | Profit (Q1 FY2026) | Profit (Q1 FY2025) | Change (%) |
|---|---|---|---|---|---|---|
| Plantation Operations | RM72.19 million | RM60.84 million | +19% | RM47.28 million | RM34.92 million | +35% |
| Milling Operations | RM402.59 million | RM380.44 million | +6% | RM21.77 million | RM38.74 million | -44% |
The Plantation operations shone brightly, recording a 19% increase in revenue and a significant 35% jump in profit. This impressive growth was fueled by a 15% higher average Fresh Fruit Bunches (FFB) selling price and a 3% increase in FFB production. The FFB yield per hectare also saw a healthy 12% improvement.
In contrast, while Milling operations saw a 6% increase in revenue due to 11% higher average Crude Palm Oil (CPO) selling prices, its profit plummeted by 44%. This sharp decline was primarily due to a lower processing margin, exacerbated by a 4% drop in CPO extraction rate. Despite good market demand, the efficiency of converting FFB to CPO impacted profitability.
Financial Health Check: Balance Sheet and Cash Flow
KLK’s balance sheet remains robust. Total assets grew to RM1.44 billion as of 30 April 2025, up from RM1.37 billion at the end of the last financial year. Total equity also increased to RM1.01 billion, reflecting a stable financial position. Net assets per share remained consistent at RM0.90.
From a cash flow perspective, net cash generated from operating activities remained stable at RM60.22 million (compared to RM60.01 million last year). However, there was a notable shift in investing activities, moving from a net inflow of RM12.92 million last year to a net outflow of RM27.99 million this quarter, largely due to increased investments in short-term funds. Financing activities saw a positive shift, contributing RM6.47 million in cash, mainly from the issuance of shares and disposal of treasury shares, contrasting with a net outflow last year.
Quarter-on-Quarter Performance: A Strong Rebound
While the year-on-year comparison shows some challenges, looking at the immediate preceding quarter (Q4 FY2025) reveals a strong recovery for KLK.
Current Quarter (30/04/2025)
Profit Before Tax (PBT): RM68.98 million
Profit Attributable to Owners: RM41.92 million
FFB Production (MT): 79,668
Plantation Profit: RM47.28 million
Milling Profit: RM21.77 million
Immediate Preceding Quarter (31/01/2025)
Profit Before Tax (PBT): RM39.46 million
Profit Attributable to Owners: RM22.44 million
FFB Production (MT): 68,944
Plantation Profit: RM36.16 million
Milling Profit: RM13.44 million
PBT surged by a remarkable 75% compared to the previous quarter. Profit attributable to owners also saw an 87% jump. This significant improvement was driven by a 16% increase in FFB production, especially a strong recovery from the Group’s estates in Keningau, Sabah, which recorded a 73% production increase. Both plantation and milling operations contributed to this rebound, with plantation profit up 31% and milling profit up 62%, despite lower average FFB and CPO selling prices.
Prospects and Potential Headwinds
Looking ahead, KLK’s management has set clear targets and expectations for the financial year ending 31 January 2026:
- FFB Production: A target increase of 5% – 10%, driven by improved age profile of young productive palms and ongoing replanting programs. The company aims to replant 300 – 500 hectares in FY2026.
- Milling Throughput: Expected to reach 1.6 million MT of FFB.
- CPO Price: Management anticipates the average CPO price to hover around RM4,000 per MT for FY2026.
Based on these factors, the management expects a “satisfactory” performance for the financial year 2026. This outlook suggests a cautious optimism, acknowledging the inherent volatility of the palm oil market.
Summary and Investment Recommendations
Kim Loong Resources’ latest quarterly report paints a picture of a company navigating a dynamic market. While profitability faced pressure year-on-year due to milling margins, the strong operational rebound from the immediate preceding quarter highlights the company’s ability to recover and adapt. The plantation segment continues to be a strong performer, benefiting from increased FFB production and favorable selling prices. The milling segment, despite higher revenue, needs to improve its processing margins to contribute more significantly to the overall profit.
As the company moves forward, it will focus on increasing FFB production and managing its milling efficiency, all while operating within a projected CPO price range. For investors, understanding these operational nuances and market dynamics is key.
Key points to consider:
- The impact of lower processing margins in the milling segment on overall profitability.
- The effectiveness of the ongoing replanting program in boosting future FFB yields.
- The stability of CPO prices around the RM4,000/MT mark and its influence on revenue and profit.
- The company’s ability to maintain the strong FFB production recovery seen in the current quarter.
From a professional standpoint, KLK’s strategic focus on increasing FFB production and its continuous replanting efforts are positive long-term indicators. However, the sensitivity of milling margins to CPO extraction rates and overall market prices remains a critical factor to monitor. The palm oil industry is inherently exposed to commodity price fluctuations and weather conditions, which can significantly impact performance.
What are your thoughts on Kim Loong Resources’ performance this quarter? Do you believe the company can maintain its operational momentum and improve milling margins in the coming quarters? Share your views in the comments below!
