RM1.62bil impairment clears earnings overhang, says KL Kepong

Kuala Lumpur Kepong Bhd (KLK) has taken a non-cash impairment of RM1.62 billion on its investment in Synthomer plc. This move is aimed at removing a recurring drag on earnings and providing greater clarity on the company's underlying performance. Despite this impairment, KLK's core operations, including plantation and manufacturing, showed stronger contributions.

For the nine months ending June 30, 2026, KLK reported a net loss of RM668 million, compared to a net profit of RM721.3 million in the same period last year. If the Synthomer impairment and its share of losses were excluded, KLK would have recorded a 43 percent increase in net profit to RM1.12 billion from RM785.1 million. The same exclusion would have resulted in a 30 percent rise in pre-tax profit to RM1.67 billion from RM1.28 billion.

The third quarter ended September 30, 2026, saw a net loss of RM1.34 billion, but this could have been an RM444.8 million profit excluding the Synthomer impact, compared to a RM347.1 million profit a year earlier. KLK's COO, Lee Jia Zhang, stated that this impairment would provide greater certainty to stakeholders and remove the overhang distorting the group's strong fundamental performance.

The carrying cost in Synthomer had been significantly reduced to RM190 million. KLK's plantation segment maintained a 9M pre-tax profit of RM1.65 billion, thanks to higher sales volumes and lower crude palm oil production costs, despite weaker selling prices. The segment is expected to remain strong due to robust production and favorable palm product prices, with flat operating costs.

The manufacturing division showed a sharper turnaround, with a 9M pre-tax profit of RM100.2 million, up from a RM64.6 million loss previously. This improvement was driven by stronger oleochemical contributions and reduced losses from non-oleochemical operations. Downstream operations also showed improvements across regions. The upstream segment demonstrated sustained strong yields due to effective management practices, while the downstream segment showed operational and commercial improvements across all operating regions. KLK remains optimistic about closing the financial year with a strong performance.