UpdateGolden Agri doubles H1 net profit to $1bn

13 August 2008 05:28  [Source: ICIS news]

(Adds analyst comments in paragraphs 10, 11 and 12 )

SINGAPORE (ICIS news)--Indonesia’s Golden Agri-Resources (GAR) has posted a doubling of its first half net profit to $1.02bn (€ 683m) from $447m in the previous corresponding period, the company said in a filing to the Singapore Exchange late on Tuesday.

The firm attributed its record showing to a 31% increase in sales volume that was due to improved crude palm oil (CPO) production and fulfilment of higher downstream demand with the commencement of its new 300,000 tonne/year refinery in south Kalimantan back in May 2008.

“GAR also benefited from the increase in the CPO market prices. For the first half of 2008, the average CPO market price rose to $1,097/tonne, an increase of 76% over the previous corresponding period”, the company said.

Revenue for the period more than doubled to settle at $1.56bn from $682m year on year.

GAR explained that it had, through the period, rigorously managed and controlled production costs, in particular, fertiliser costs that allowed for the achievement of higher margins.

Looking forward, the company expected strong palm oil demand from the growing middle class in major developing economies such as China, India and Pakistan.

“The fundamental industry factors affecting CPO prices remain valid. The strong global demand for palm oil, especially from developing countries is expected to continue,” said Franky Widjaja, CEO.

“A high barrier of entry persists in the industry and a long lead time is required to increase CPO production”, he added.

GAR intended to increase its plantation yields, extraction rates and harvesting productivity by expanding its planted area by 40,000 to 60,000 hectares this year through new planting and acquisitions.

However, OCBC investment research analyst Carey Wong was not so confident about the firm’s future performance due to the recent weakening in CPO prices.

“Industry watchers expect the weakness to continue in the short to medium term, depending on the recovery of crude oil and soy oil prices, as well as other macro-economic demand factors,” she said.

OCBC has estimated GAR’s full year net profit to be around $507m, excluding any gains from revaluations of bio-assets.

($1 = € 0.67)

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By: Bohan Loh
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