JAKARTA (TheInsiderStories) – Decline in Crude Palm Oil (CPO) prices slammed the financial condition of Indonesian palm oil producers in the first quarter (1Q) of 2019, Shentonwire reported.
Bumitama Agri Ltd, one of them. Its net profit fell sharply 52.3 percent to Rp110.61 billion (US$7.66 million), according to the SGX on Tuesday (05/14). The company’ revenues for the quarter ended March 31, fell 12.1 percent to Rp1.68 trillion.
That was due to the average selling price of CPO falling by 16.3 percent on-year to Rp6,555 per kilogram and palm kernel’ average selling price declining 38.3 percent on-year to Rp4,083 per kilogram.
Bumitama sees gloomy company performance going forward. It stated: “High stock level of the palm oil industry has kept palm oil prices low. We do not foresee any changes in palm oil prices in the near future unless there are changes affecting supply and demand dynamics.”
This year, Bumitama Agri targets investment to reach Rp1 trillion. The target is recorded 30 percent higher than the investment made in 2018 which only reached Rp700 billion, said an official statement.
Meanwhile, Singaporean palm oil producer Golden Agri-Resources Ltd., (GAR) net profit up 55 percent on an annual basis to $18 million in 1Q 2019, mainly due to profits from the release of Indonesian subsidiaries.
However, the company’ earnings fell 11 percent on an annual basis to $1.62 billion and profit before interest, tax, depreciation and amortization (EBITDA) came flat this year at $121 million.
The company’ total operating costs also fell sharply by 22.3 percent one year to $161.10 million, so that it could lift company profits. Then, the EBITDA increased to $59.3 million for 1Q, up from $28 million in the past year, on a higher EBITDA margin due to additional contributions from biodiesel and the elimination of export levies in Indonesia.
“Declining palm oil prices continued to be the main factor affecting GAR’s performance this year, especially from the plantations and palm oil segment,” the company said.
However, GAR is helped by the productivity of companies that are able to produce fresh fruit bunches and total output of palm oil products of 2.17 million tons and 629,000 tons, respectively, compared to 2.13 million and 612,000 tons respectively in the last quarter.
The increase in production output partially offset the weaker CPO market prices, said Golden Agri. In prospect, Chairman and CEO Franky O. Widjaja, said the market price of palm oil gradually recovered in the first quarter.
“We expect to see more positive development on biodiesel demand as the realization of the Indonesian biodiesel mandate during the first three months of 2019 was on track,” he noted.
Besides, Agri-business Olam’ net profit increased slightly in 1Q by 6.9 percent YoY to S$168.88 million due to a higher contribution from edible beans and cocoa. The company’ 1Q revenue rose 16.7 percent to S$7.35 billion from previous year.
“Our recent acquisition of BT Cocoa in Indonesia and proposed acquisition of Dangote Flour Mills in Nigeria are examples of us investing further in our leading businesses,” said co-founder and CEO Sunny Verghese in an official statement.
In addition, the company has also emerged from the sugar trade, Fundamental Fund, Latin American wood products and Argentina’s peanut farming business.
The company’ EBITDA also increased 14.9 percent year on year to S$156 million in an increased contribution from the cashew, almond, hazel and spices business. In its outlook, Olam is optimistic despite showing political and economic uncertainty.
“Olam believes its diversified and well-balanced portfolio provides a resilient platform to navigate the challenges in both the global economy and commodity markets,” it said.
In its outlook, Olam was optimistic despite pointing to political and economic uncertainties.
According to GAR sees Indonesian CPO prices has potential to rise on biodiesel program and high demand from China. The unit of Sinar Mas Group predicted Indonesian CPO price will move in the range $550 to $600 a ton.
The Indonesian Palm Oil Association predicted that the production of crude palm oil (CPO) in 2019 will grow 5 percent. In 2018, the palm oil exports (CPO and derivative products, biodiesel, and oleochemicals) posted an increase of 8 percent from 32.18 million tons (MT) of CPO in 2017 to 34.71 MT of CPO in 2018.
Written by Daniel Deha, Email: email@example.com