MKH Oil Palm’s Q2 FY2025: Strong Revenue Growth Amidst Production Nuances and Strategic Moves
Greetings, fellow investors! Today, we’re delving into the latest financial performance of MKH Oil Palm (East Kalimantan) Berhad, a key player in the Malaysian palm oil sector, as revealed in their unaudited condensed consolidated interim report for the second quarter and financial period ended 31 March 2025. This report paints a picture of robust top-line and bottom-line growth, primarily driven by favourable commodity prices, while also highlighting the strategic initiatives the company is undertaking to navigate industry challenges. Get ready to unpack the numbers and understand what’s driving MKH Oil Palm’s trajectory!
Key Takeaway: MKH Oil Palm reported a significant increase in both revenue and profit before tax for the current quarter and year-to-date, buoyed by higher Crude Palm Oil (CPO) and Palm Kernel (PK) average selling prices. The company also announced a first interim dividend for the financial year ending 30 September 2025, signalling confidence in its performance.
Unpacking the Financial Highlights: A Closer Look at the Numbers
Let’s dive into the core figures that define MKH Oil Palm’s performance for this quarter. The company demonstrated strong financial results, showcasing resilience and strategic execution in a dynamic market environment.
Quarterly Performance (Q2 FY2025 vs. Q2 FY2024)
Q2 FY2025
Revenue: RM96.188 million
Profit Before Tax: RM26.084 million
Profit for the Period (Net Profit): RM19.212 million
Basic Earnings Per Share: 1.89 sen
Q2 FY2024
Revenue: RM86.049 million
Profit Before Tax: RM20.118 million
Profit for the Period (Net Profit): RM16.019 million
Basic Earnings Per Share: 2.36 sen
For the three months ended 31 March 2025, MKH Oil Palm saw its revenue climb by approximately 11.8% to RM96.188 million, up from RM86.049 million in the same period last year. This impressive growth was largely attributed to higher average selling prices for CPO and PK, alongside the commencement of crude palm kernel oil sales in February 2025. Profit before tax also surged by 29.7% to RM26.084 million. While net profit increased, it’s worth noting that the basic earnings per share (EPS) for the quarter saw a decrease from 2.36 sen to 1.89 sen. This seemingly contradictory trend is primarily due to a significant increase in the weighted average number of ordinary shares in issue, following the company’s Initial Public Offering (IPO) and other share issuance activities since the previous corresponding period.
Year-to-Date Performance (YTD FY2025 vs. YTD FY2024)
YTD FY2025
Revenue: RM198.841 million
Profit Before Tax: RM68.571 million
Profit for the Period (Net Profit): RM51.160 million
Basic Earnings Per Share: 5.03 sen
YTD FY2024
Revenue: RM168.350 million
Profit Before Tax: RM36.042 million
Profit for the Period (Net Profit): RM27.113 million
Basic Earnings Per Share: 3.91 sen
Looking at the financial period ended 31 March 2025, the picture remains equally positive. Revenue for the year-to-date period rose by 18.1% to RM198.841 million, compared to RM168.350 million last year. Profit before tax nearly doubled, jumping by 90.3% to RM68.571 million, while net profit also saw a substantial increase of 88.7% to RM51.160 million. The year-to-date basic EPS improved to 5.03 sen from 3.91 sen, reflecting the overall stronger profitability over the longer period.
Driving Factors: Prices and Production
The stellar performance is heavily influenced by the commodity market. For Q2 FY2025, the average CPO price achieved was RM3,997 per metric tonne (MT), a significant increase from RM3,441 per MT in Q2 FY2024. Similarly, PK average prices soared to RM3,043 per MT in Q2 FY2025, compared to RM1,582 per MT in the same period last year. These higher selling prices effectively offset a slight dip in Fresh Fruit Bunches (FFB) production (98,178 MT in Q2 FY2025 vs. 103,210 MT in Q2 FY2024) and CPO production (19,998 MT in Q2 FY2025 vs. 22,721 MT in Q2 FY2024), which were impacted by wetter weather conditions and a lower oil extraction rate (OER) of 20.3% (compared to 21.1% in the preceding quarter).
Solid Financial Health and Cash Flow
MKH Oil Palm’s balance sheet reflects a strong financial position. As at 31 March 2025, total assets stood at RM670.368 million, an increase from RM638.847 million as of 30 September 2024. Total equity also grew to RM592.396 million from RM572.046 million, contributing to a higher net assets per share of RM0.58 (compared to RM0.56). The company’s cash and cash equivalents significantly improved, reaching RM243.633 million, a testament to its efficient operations. Net cash generated from operating activities for the period ended 31 March 2025 was a healthy RM51.553 million, demonstrating robust operational cash generation.
Did You Know? The company has actively engaged in share buybacks, repurchasing 5,223,700 ordinary shares during the financial period at an average price of RM0.61 per share, reflecting management’s confidence in the company’s valuation.
Navigating Risks and Cultivating Future Prospects
While the financial results are encouraging, the palm oil industry is inherently exposed to various factors. MKH Oil Palm acknowledges these and outlines its strategies for sustained growth.
Industry Trends and Challenges
The Group’s operations are inherently tied to cropping patterns, weather conditions, and fluctuating commodity prices. Despite the current favourable CPO prices (trading around RM3,600/MT to RM3,800/MT nett of export levy and duty in Indonesia), these can be volatile. Additionally, rising labour costs present an ongoing challenge within the plantation sector.
Strategic Measures for Growth
MKH Oil Palm is not resting on its laurels. The company is actively implementing proactive measures to enhance operational efficiency and productivity. These include:
- Water Management System: Enhancing existing systems to mitigate the impact of adverse weather conditions on FFB production.
- Mechanisation Efforts: Maximising crop collection and quality through ongoing mechanisation, which also helps in managing labour costs.
- Optimised Software Utilisation: Leveraging software applications to track FFB evacuation from fields to mills, aiming to further increase production efficiency and Oil Extraction Rate (OER).
Furthermore, the company is diligently utilising the proceeds from its recent IPO. A significant portion of the funds is earmarked for expansion of land banks, capital expenditures for existing plantations, setting up a palm kernel crushing facility, refurbishment of the palm oil mill, and construction of workers’ housing. These investments are crucial for long-term growth and operational improvements.
Outlook for FY2025
Given the current market demand for CPO and the strategic initiatives in place, the Board of Directors anticipates the Group to achieve satisfactory results for the financial year ending 30 September 2025.
Summary and
MKH Oil Palm (East Kalimantan) Berhad has delivered a strong performance in Q2 FY2025, marked by significant revenue and profit growth, primarily driven by favourable commodity prices. While quarterly EPS saw a temporary dip due to increased share capital from recent corporate exercises, the year-to-date figures underscore a positive overall trend. The company’s robust cash flow and strategic investments in operational efficiency and expansion position it for continued stability.
It’s important for investors to consider the inherent volatility of commodity prices and the impact of weather conditions on agricultural businesses. However, MKH Oil Palm’s proactive measures to enhance productivity and manage costs appear to be well-aligned with navigating these challenges.
Key points to consider for future performance include:
- Commodity Price Stability: The sustained strength of CPO and PK prices will be crucial for maintaining profitability.
- Operational Efficiency: The success of water management, mechanisation, and software optimisation initiatives in boosting production and OER will be key.
- Capital Expenditure Realisation: The effective utilisation of IPO proceeds for planned expansions and improvements will contribute to long-term growth.
- Labour Cost Management: Continued efforts to mitigate the impact of rising labour costs through mechanisation and efficiency gains.
Please note: This blog post is for informational purposes only and should not be construed as investment advice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.
Final Thoughts and Your Perspective
MKH Oil Palm has shown impressive resilience and growth in a challenging yet opportunistic market. Their commitment to operational improvements and strategic expansion is evident in this latest report.
What are your thoughts on MKH Oil Palm’s latest performance? Do you think the company can maintain this growth momentum in the next few years, especially with its strategic initiatives? Share your insights in the comments section below – let’s have a productive discussion!
For more in-depth analyses of Malaysian companies, stay tuned to our blog for future updates.
