UPDATE: Golden Agri reports 2018 net loss, missing some analysts’ forecasts

U.S. one-dollar currency notes; taken September 2018.U.S. one dollar bills.

This article was originally published on Wednesday, 27 February 2019 at 7:57 A.M. SGT; it has since been updated.

Golden Agri reported on Wednesday a net loss of US$1.77 million for 2018, swinging from a year-earlier profit of US$74.03 million, on a foreign exchange loss, loss from changes in the fair value of biological assets and a deferred tax expense.

Revenue for the full year was US$7.17 billion, down 4.5 percent on-year, on weaker palm oil prices, it said in a filing to SGX before the market open on Wednesday.

“Declining palm oil prices continued to be the main factor in weaker performance in 2018, especially from the plantations and palm oil segment. The industry as a whole saw very strong plantation output in 2018, resulting in high inventory levels and lower prices,” Golden Agri said in the statement.

Analysts had expected net profit to come in around US$9.8 million, according to the average of four forecasts, although those forecasts varied widely from a loss of US$9.6 million to a net profit of US$30.4 million. Revenue was expected around US$7.45 billion, according to the average of four forecasts.

For the full year, it reported a net foreign exchange loss of US$20.50 million, narrower than the US$21.50 million loss a year earlier. The net loss from changes in the fair value of biological assets was US$20.13 million for the full year, wider than the US$2.05 million loss a year earlier, it said.

Franky O. Widjaja, chairman and CEO, said that the company was “resilient in unfavorable circumstances.”

“Our focus remains on building GAR’s core competitive edge, delivering sustainably produced palm oil and palm-based products in an efficient and innovative way,” he said in the statement.

“We see demand from the energy sector as an important industry catalyst. Underpinned by strong support from the Indonesian government in implementing a larger biodiesel mixture mandate, we are optimistic that this will promote tighter supply and demand for palm oil and will eventually have a positive impact on CPO [crude palm oil] prices,” he added.

Underlying profit, which excludes changes in the fair value of biological assets and depreciation of bearer plants as well as exceptional items and non-operating items, such as foreign exchange gains or losses and deferred tax, fell 29 percent on-year to US$181 million, Golden Agri said.

Crude palm oil prices fell

The plantations and palm oil mills reported revenue fell 13.2 percent on-year to US$1.45 billion, mainly on lower CPO prices and higher inventory levels.

That was after the average international CPO price for the year fell 17.2 percent to US$565 a tonne, from US$682 in 2017, Golden Agri said, adding that better fresh fruit bunch (FFB) yield pushed up FFB and total palm product output for the year.

The palm, laurics and others posted a 4.5 percent revenue decline to US$7.10 billion.

“This was mainly affected by lower CPO prices and lower sales and crushing volume for oilseeds in China, which was offset by the strong demand from biodiesel in Indonesia,” Golden Agri said.

However, earnings before interest, tax, depreciation and amortization for the segment increased 11 percent on-year to US$184.2 million, despite the margin impact of the Indian and Malaysian governments’ intervention in commodity markets and changes in U.S.-China trade tariffs, it said. That was due to an additional contribution from biodiesel and destination sales, the removal of an export levy in Indonesia due to palm oil prices falling and a fair value gain, it said.

For the fourth quarter, it reported net profit of US$79.31 million, swinging from a year-ago loss, on revenue of US$1.65 billion, down 10 percent on-year.

It proposed a final dividend of 0.58 Singapore cent a share, compared with a 0.116 Singapore cent final dividend a year earlier.

In its outlook, Golden Agri was relatively sanguine.

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


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