First Resources posts 2Q18 net profit rose 55 percent on higher production

U.S. two-dollar billsPhoto by Leslie Shaffer

First Resources reported on Monday that second quarter net profit rose 55.2 percent on-year to US$35.94 million, mainly on higher production volumes, partially offset by lower average selling prices.

Sales in the quarter increased 34.5 percent on-year to US$181.01 million, while cost of sales increased 32.6 percent on-year to US$102.39 million, the palm oil producer said in a filing to SGX after the market close on Monday.

The cost of sales increase was “mainly due to the higher sales volumes as well as the higher operating costs and depreciation from the group’s increased mature plantation hectarage,” First Resources said.

For the first half, net profit fell 11.1 percent on-year to US$63.67 million, while sales declined 3.7 percent on-year to US$316.57 million, it said.

“The lower net profit and profit from operations were mainly due to weakness in palm oil prices. In addition, there was a net inventory build-up during the period, which resulted in a smaller increase in overall sales volumes than the growth in production volumes,” First Resources said.

In the first half, fresh fruit bunches (FFB) harvested increased 20.0 percent on-year to 1.6 million tonnes, with a recovery in FFB yield to 8.3 tonnes per hectare in the period, compared with 7.5 tonnes in the year-earlier period, it said. Crude palm oil (CPO) production increased 27.2 percent on-year to 388,058 tonnes in the first half, with CPO yield at 1.9 tonnes per hectare, compared with 1.7 tonnes per hectare in the year-earlier period, First Resources said.

First Resources declared an interim dividend of 1.25 Singapore cents, unchanged from a year earlier.

In its outlook, the company said it expected output growth to continue in the second half of the year amid continued improvement in FFB yield and as newly mature areas contribute, in addition to a seasonal production upswing.

“Several recent macro developments are expected to continue their influence on palm oil prices, amongst which are India’s import duty hikes on palm oil and other edible oils as well as China’s imposition of import tariffs on U.S. soybeans,” Ciliandra Fangiono, CEO of First Resources, said in the statement.

“On the biofuel front, the positive spread between gasoil and palm oil prices together with the push for higher biodiesel blending by the Indonesia government is envisaged to be supportive of biodiesel demand,” he said.

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