Kencana Agri swings to 1Q19 net profit on fair-value gain

Palm kernels at a plantation in IndonesiaPalm kernels at a plantation in Indonesia

Kencana Agri reported Tuesday a first quarter net profit of US$602,000,  swinging from a year-earlier loss of US$9.85 million, on fair-value gains on biological assets and the Indonesian rupiah strengthening against the U.S. dollar.

Revenue for the quarter ended 31 March dropped 26.8 percent on-year to US$20.50 million, mainly on a lower average selling price of crude palm oil (CPO), partly offset by higher sales volume, the palm-oil producer said in a filing to SGX.

The average selling price for CPO fell 29 percent on-year to US$424, while sales volume rose around 4 percent, it said.

Fair value changes of biological assets and other receivables surged to US$3.05 million, from US$157,000 in the year-ago quarter, Kencana Agri said.

The company reported a US$3.21 million gain on foreign exchange, compared with a year-ago loss of US$3.62 million.

Kencana Agri issued a cautious outlook.

“While prices have recovered slightly from its lows of the fourth quarter of 2018, it is still at a relatively low level historically. The strong production and weak demand in 2018 resulted in a build-up of inventory which will limit any upward movement in prices until it is drawn down to a lower level,” Henry Maknawi, chairman of Kencana, said in the statement.

He said he didn’t see a resolution of U.S.-China trade tension happening anytime soon, adding “we expect commodity prices to remain volatile… and are optimistic that the biodiesel program in Indonesia will provide support to prices.”


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