Golden Agri sinks to US$39m Q2 loss on soft palm oil prices, forex losses

Palm oil fruits at a plantation in Mamuju, Indonesia. PHOTO: REUTERS

SINGAPORE - Golden Agri-Resources fell into a net loss of US$39.02 million for the second quarter from a year-ago profit of US$21.88 million amid softer prices and foreign exchange losses, the Indonesia-based palm oil producer announced on Tuesday (Aug 14) before the stock market opened.

On a per-share basis, net loss was 0.31 US cent for the three months ended June 30. For the first six months of the year, net loss was US$27.17 million, or 0.21 US cent per share, down from a net profit of US$49.43 million a year earlier.

No dividend has been declared. Golden Agri shares last traded at 28.5 Singapore cents on Monday.

Revenue grew 5.9 per cent during the quarter to US$1.86 billion. First-half revenue revenue, however, slipped 3.3 per cent to US$3.68 billion, dragged lower by plantations and palm oil mills, and by oilseeds.

Fresh fruit bunch production declined to 4.60 million tonnes for the first half from 4.70 million tonnes a year ago, while palm product output shrank to 1.32 million tonnes from 1.34 million tonnes. Golden Agri said "tree stress" - explained as a biological slowdown after the high production in 2017 - accounted for the lower outputs.

The average international crude palm oil (CPO) price was US$632 per tonne for the first half, compared to US$702 per tonne in the year-ago period. This dragged earnings before interest, tax, depreciation and amortisation from plantations and palm oil mills lower by 19.1 per cent for the first half of the year to US$197.2 million.

Government intervention in commodity markets in India and Malaysia also affected CPO market prices, which hit revenue from palm and laurics. The group also blamed changes in trade policies between the United States and China for weaker performance in palm and laurics, and in oilseeds.

"Weather conditions, demand and supply of CPO and other competing seed oils, and developments in government policy on import duties of the countries we trade with will continue to have an impact on the prices for commodities including CPO," Golden Agri said. "Nonetheless, we expect the demand for CPO to remain stable supported by global food and energy demand growth, including the increase in biodiesel consumption in Indonesia."

Golden Agri also recorded a net foreign exchange loss of US$17.1 million for the first half of 2018, a reversal of a US$3.7 million net gain a year earlier due to the weakening of Indonesian rupiah-denominated assets against the US dollar during the period.

Acknowledging the tough quarter, chief executive Franky Widjaja hoped for support from government policies.

"Golden Agri faced a tough quarter in 2018, with performance impacted across all segments," he said. "We welcome the Indonesian government's plan to pursue a higher biodiesel mixture mandate amidst the appreciation of crude oil prices. This is part of the government's efforts to achieve independence in the energy sector while reducing greenhouse gas emissions. In the longer term, we believe the fundamental demand for palm oil remains robust. We will continue to drive operational transformation for long-term shareholders return."

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