SINGAPORE - First Resources said on Friday (May 13) that its net profit for the first quarter endedMarch 31 plunged 77.9 per cent from the same period a year ago to US$5.35 million.
The drop came even as sales rose 17.5 per cent to US$113 million, as the selling prices of its palm-based products fell.
Profit from operations declined 59.8 per cent in the first quarter from the same period a year ago, to US$16.5 million.
The decline was mainly due to the lower average selling prices of palm-based products, as well as the decline in production volumes and yields, it said.
Average selling prices of crude palm oil fell by approximately US$150 per tonne, mainly due to the lower market prices as compared to the same period last year and the imposition of a palm oil export levy by the Indonesian government from July 2015.
First Resources also recorded losses on derivative financial instruments of US$1.1 million in the first quarter. These arose primarily from financial instruments entered into by the firm to hedge its exposure to commodity price movements during the course of its business.
The firm sounded an optimistic note in its outlook, however, saying palm oil prices are improving.
"The recovery in palm oil prices has been largely driven by concerns over the impact from prolonged dry weather last year, which is suppressing industry-wide production. The recent higher prices is expected to improve our financial performance as compared to the first quarter of 2016."
While palm oil prices continue to be influenced by prices of other competing oils and the low crude oil price, First Resources said it expects the Indonesian biodiesel mandate and demand from emerging economies to support palm oil prices.
"On the production front, the group expects its production to continue to be impacted by the lagged effects of the dry weather in 2015, such that overall production in 2016 is expected to be lower than the preceding year," it added.
"The group will continue to focus on strengthening its operational efficiencies and keeping costs low."