Kim Loong counts on higher CPO prices to offset lower FFB

By the Editorial Team · Thursday, October 1, 2026

Kim Loong Resources Bhd reported a 9.4% decline in core net profit for Q2 FY27 due to a 6% drop in fresh fruit bunch production, though it expects higher crude palm oil prices to help offset weaker output. Despite improved milling efficiency boosting half-year earnings, TA Research downgraded the stock to "sell," citing limited upside and potential challenges to further CPO price gains.

Kim Loong Resources Bhd, an integrated plantation company, is anticipating higher crude palm oil (CPO) prices to offset a decline in fresh fruit bunch (FFB) production for its financial year ending January 31, 2027 (FY27). The company reported its second-quarter results for the period ending July 31, 2026 (2Q27) on Tuesday, revising its FFB production forecast down by 6% year-on-year (y-o-y) to 310,000 tonnes. It expects CPO prices to average between RM4,500 and RM4,800 per tonne for FY27 to help mitigate the lower output.

According to TA Research, Kim Loong’s 2Q27 core net profit, excluding non-core items, declined 9.4% y-o-y to RM43.5 million, while revenue decreased 3.1% y-o-y to RM422.8 million. This softer performance was largely attributed to reduced FFB production and CPO sales volume. The company also declared an interim single-tier dividend of five sen per share.

For the first half of FY27 (1H27), the company recorded a 5.1% rise in cumulative core net profit to RM93.6 million, alongside a 2.9% increase in revenue to RM872.4 million. TA Research noted that stronger milling contributions, driven by improved processing efficiency and a higher oil extraction rate (OER), partly offset weaker earnings from the plantation segment.

Kim Loong’s plantation profit for 1H27 fell 24.1% to RM65.1 million, primarily due to a 17.8% decline in FFB production to 136,900 tonnes and a 16.4% decrease in FFB yield to 9,850 tonnes per hectare. This was somewhat cushioned by a 5.3% rise in the average FFB selling price to RM893 per tonne. Conversely, milling profit increased by 39.7% to RM78.8 million, buoyed by better processing efficiency and improvements in OER, which rose to 21.12% from 20.41% a year earlier.

The average CPO selling price increased by 3.2% to RM4,426 per tonne during the first half of FY27, while CPO sales volume remained broadly steady at 157,900 tonnes despite a 3.4% dip in production.

While maintaining a positive outlook on CPO prices supported by factors such as firm energy prices, Indonesia’s biodiesel B50 mandate, and stronger demand during the Indian festive season, TA Research downgraded Kim Loong’s stock rating to “sell” from “buy.” The target price remains unchanged at RM2.82, based on a 2027 price-to-earnings ratio of 16 times. The downgrade reflects concerns about limited upside potential following recent share price gains.

However, the brokerage also cautioned that seasonal increases in palm oil production and competition from soybean oil prices could constrain CPO price growth in the second half of 2026.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.