Ever wondered what’s brewing in the world of Malaysian conglomerates? Today, we’re diving deep into the latest interim financial report from **Batu Kawan Berhad**, a diversified group with significant interests in plantations, manufacturing, and property development. This report, covering the second quarter ended 31 March 2025, offers a comprehensive look at the company’s performance and strategic direction.

The core takeaway? Despite navigating a complex global landscape, Batu Kawan Berhad demonstrates resilience with overall revenue and pre-tax profit growth for the first six months of its financial year. However, it’s not all smooth sailing, as specific headwinds are challenging key segments. Especially noteworthy is the continued strong performance from its Plantation segment and the consistent dividend announcement, which always brings a smile to shareholders.

A Glimpse at the Group’s Financial Pulse

Let’s kick things off with the headline numbers. For the first six months of the financial year (cumulative quarter ended 31 March 2025), Batu Kawan Berhad delivered a robust performance in its top-line and pre-tax earnings compared to the same period last year. Here’s a snapshot:

The Group’s revenue for the first six months grew by **9.9%**, reaching RM 12.63 billion. This translated into a **12.2%** increase in pre-tax profit to RM 741.7 million, and a **4.3%** rise in net profit for the period. Earnings per share for equity holders also saw a healthy bump of **9.7%**, from 49.9 sen to 55.2 sen.

Looking at the individual second quarter (3 months ended 31 March 2025) versus the same quarter last year, the growth trend continues:

Revenue for the current quarter rose by **15.0%** to RM 6.51 billion, with pre-tax profit improving by **7.0%** to RM 290.3 million. Net profit saw a modest **2.1%** increase, while basic earnings per share for the quarter were 22.5 sen, up from 21.5 sen.

Diving Deeper: Performance Across Business Segments

A closer look at the individual business segments reveals a mixed bag of performances, highlighting the diversified nature of Batu Kawan Berhad’s operations.

Plantation Segment: The Shining Star

Manufacturing Segment: Facing Headwinds

Despite a **13.9%** increase in revenue to RM 10.52 billion for the first six months, the Manufacturing segment recorded a **loss of RM 55.4 million** (compared to a RM 118.6 million profit in the same period last year). This significant swing was primarily due to higher losses from the non-oleochemical sub-segment and refinery operations. While the oleochemical sub-segment showed improved profit contribution, it wasn’t enough to offset the broader challenges. The Industrial Chemical division also saw lower profits due to reduced sales volumes and higher production costs, partly from planned plant shutdowns.

In the current quarter, the Manufacturing segment also reported a **loss of RM 20.8 million**, a stark contrast to the RM 78.4 million profit recorded in the same quarter last year. This was mainly impacted by larger losses from refineries and kernel crushing operations, though partially cushioned by profit from the oleochemical sub-segment.

Property Development: A Dip in Performance

The Property Development segment saw its profit for the first six months fall by **44.3%** to RM 11.1 million (from RM 19.9 million previously), on the back of lower revenue. The trend continued in the current quarter, with profit slipping by **54.7%** to RM 3.5 million.

Investment Holding/Others: Larger Losses

This segment recorded a larger loss of RM 259.7 million for the first six months (compared to a RM 219.0 million loss last year). Key factors contributing to this included an unrealised foreign currency exchange translation loss of RM 77.51 million on inter-company loans and a lower surplus from land sales. Notably, the farming sector recorded a profit of RM 34.78 million, providing some offset. The segment also accounted for a share of equity loss amounting to RM 63.32 million from its overseas associate, Synthomer plc, which contributed significantly to the overall loss.

Understanding the Balance Sheet and Cash Flow

Batu Kawan Berhad’s financial position remains robust. As at 31 March 2025, total assets increased to RM 33.44 billion from RM 32.04 billion as at 30 September 2024. Total equity also grew to RM 16.13 billion from RM 15.88 billion, reflecting a healthy net assets per share of RM 19.15.

However, the cash flow statement tells a different story. The net cash flows generated from operating activities saw a significant drop to RM 27.7 million for the first six months, a sharp decline from RM 1.02 billion in the same period last year. This was largely influenced by adverse changes in working capital, particularly a substantial net change in current assets. Despite this, the Group managed to reduce cash used in investing activities, and cash flows from financing activities saw an increase, driven by higher drawdown of term loans and short-term borrowings.

Navigating the Headwinds: Risks and Future Outlook

Looking ahead, Batu Kawan Berhad remains cautious. The Group’s Plantation segment is expected to continue as the primary earnings driver, with CPO prices anticipated to soften within the range of RM 3,800 to RM 4,200 per metric tonne. This outlook is framed by a challenging macroeconomic environment and volatility in commodity markets, exacerbated by recent tariff developments.

The Manufacturing segment faces ongoing challenges, particularly from losses in the midstream refinery sub-segment and a significant non-cash mark-to-market loss on hedged US dollar sales. Planned plant shutdowns also impacted the Industrial Chemical division’s sales volumes and profits. Furthermore, the equity-accounted loss from its associate, Synthomer plc, continues to weigh on overall results.

The Group’s strategy will likely focus on mitigating these risks while capitalizing on the strengths of its Plantation business. Managing working capital effectively will be crucial for improving operating cash flows in the upcoming periods.

Shareholder Returns: Dividends Maintained

Good news for shareholders! The Directors have authorized an interim single tier dividend of **20 sen per share** for the financial year ending 30 September 2025. This is consistent with the dividend paid in the previous year. The dividend will be paid on 31 July 2025, with an entitlement date of 10 July 2025.