Higher repairs weigh down on Kim Loong’s milling division

KUCHING (Dec 31): Kim Loong Resources Bhd’s (Kim Loong) net earnings declined 7.2 per cent quarter-on-quarter (q-o-q) to RM43.9 million in the third quarter of financial year 2026 (3QFY26), weighed down by weaker performance from its milling division due to higher repairs and maintenance expenses.

AmInvestment Bank Bhd in a note on Tuesday said the softer milling results likely stemmed from a breakdown at one of the group’s palm oil mills during the quarter.

As a result, milling earnings fell despite steady overall operations. Milling earnings fell 22.2 per cent q-o-q to RM26.9 million, reversing a strong 59.1 per cent rebound recorded in 2QFY26.

Milling earnings before interest and tax (EBIT) margin also narrowed to RM66 per tonne in 3QFY26 from RM82 per tonne previously.

Despite the weaker quarter, AmInvestment Bank expects 4QFY26 earnings to be broadly flat as a recovery in milling operations is likely to be offset by softer palm product prices.

Nevertheless, the bank maintained its “buy” recommendation on the stock with a target price of RM2.91 due its status as a pure planter that stands to benefit from any rebound in crude palm oil (CPO) prices.

For the nine months ended FY26 (9MFY26), KLR’s results came in within AmInvestment Bank’s expectations.

Net profit eased 4.2 per cent year-on-year to RM133.1 million mainly due to lower milling earnings.

Milling EBIT declined 19.8 per cent year on year (y-o-y) to RM83.3 million, while EBIT margin narrowed to RM72 per tonne from RM87 per tonne in 9MFY25.

The research house attributed the margin compression to higher repairs and maintenance, compliance-related costs and transportation expenses.

“Due to the rise in expenses, we reckon that KLR would be raising the milling charge again in FY27F. The last increase, which was RM15 per tonne, took place in 2QFY26,” it said.

In contrast, the plantation division delivered a solid performance, with plantation EBIT rising 20 per cent y-o-y to RM126 million in 9MFY26.

This was supported by a 2.9 per cent increase in fresh fruit bunch (FFB) output to 248,291 tonnes and a higher average CPO price of RM4,300 per tonne, compared with RM4,097 per tonne in 9MFY25.

Overall, it said plantation operations accounted for 60 per cent of group EBIT during the period, with milling contributing the remaining 40 per cent.

In a separate note, TA Securities said Kim Loong’s management has revised its FY26 FFB production growth guidance to 6 to 8 per cent from an earlier 5 to 10 per cent to reflect an improved age profile of productive palms and ongoing replanting efforts.

It noted that the group plans to replant about 300–500 hectares of oil palm in FY26 and targets total FFB processing throughput of 1.6 million tonnes.

For 2026, TA Securities maintains a cautious view on CPO prices as ample South American soybean supplies and the potential resumption of US–China trade could increase soybean oil flows and cap CPO demand.

However, it noted that biodiesel mandate-driven demand and possible weather-related supply disruptions could provide upside support to CPO prices and offset downside risks from trade and policy uncertainties.