IOI Corp focusing on high-value CPO products

KUCHING (March 5): IOI Corporation Bhd (IOI Corp) has set its sights on increasing its exposure to high-margin, value-added crude palm oil (CPO) products, which helps buffer the negative margin in the refining segment and the volatility in CPO prices.

Meanwhile, new ventures such as JV-owned paper pulp, palm wood, and coconut projects are only expected to see contributions in 2028.

Analysts with Public Investment Bank Bhd (PublicInvest Research) noted that IOI Corp’s upstream plantation is expected to continue doing well while the downstream outlook remains challenging.

After registering an eight per cent uptick in the first half of financial year 2026 (1HFY26) its fresh fruit bunch (FFB) production is expected to see a seasonal drop of 20 per cent month on month (m-o-m) in February before seeing a 10 per cent rebound in March.

Overall, management expects a FFB production growth of 5-8 per cent for FY26 forecasts, adding that the recent drought in Johor and flood in Sabah have little impact on the production.

Meanwhile, fertiliser application has reached 60 per cent of the target as of 1HFY26. Meanwhile, replanting is on track to reach a wider size of 10,000 hectares (ha) this year due to some carried forward from last financial year.

Production cost is expected to be lower by RM200 per metric tonne (MT) in FY26, led by improving FFB yield, better oil extraction rate (OER) performance and a decline in fertiliser cost.

“To mitigate the impact of negative refining margin, the group has been penetrating high-value-added CPO products, namely low-contaminant refined CPO, RSPO-certified CPO, organic CPO and mineral oil saturated hydrocarbons products.”

IOI Corpís downstream segment saw a big improvement in the 1HFY26 on the back of stronger performance from oleochemicals in the 1QFY26, led by a sharp decline in palm kernel oil (PKO) prices.

Going forward, while both the refinery and oleochemical remains challenging, there will be incremental earnings contribution coming from its 20 per cent-owned specialty fats associate, Bunge Loders Croklaan following the completion of the 2nd new plant in in New Orleans for a range of specialty fats including cocoa butter equivalents and cocoa butter replacers as well as maiden contribution from the new state-of-the-art plant in Amsterdam with phase 1 completion by Sept 2026.

On its new ventures, PublicInvest Research noted that the group is targeting to increase its coconut plantation from 3,000ha to 5,000ha, while the construction of the coconut oil mill complex in Segamat will kick start this year and is targeted for commissioning by 2028.

The initial processing capacity is about 100,000 coconuts per day, with plans to scale up to 200,000 coconuts. This is estimated to contribute RM50 million to RM60 million profit before tax per annum.