Golden Agri reverses into the red in 3Q and 9M on weaker palm oil prices

SINGAPORE (Nov 13): Golden Agri-Resources reversed into the red in 3Q18 and 9M18 ended Sept with losses of US$53.9 million ($74.6 million) and US$81.1 million respectively on weaker palm oil prices.

Revenue in 3Q18 rose 3.2% to US$1.8 billion but as cost of sales grew 4.7% to US$1.6 billion, gross profit dipped 4.3% to US$277 million.

With total operating expenses increasing 4.5% to US$225.7 million, operating profit ended 30.2% lower at US$51.3 million which was further reduced by a foreign exchange losses which widened to US$28.7 million from US$7.4 million a year ago.

Golden Agri says third quarter fruit yield for its Plantations and palm oil mills segment continued to recover in 2018 to 6.6 tonnes per hectare, 27% higher than in the second quarter, resulting in a nine-month period fruit yield of 16.3 tonnes per hectare. Palm product output reached over 2.2 million tonnes during the nine-month period of 2018, 8% higher than the previous year’s production.

Conversely, CPO market prices weakened during nine-month period of 2018. As a result, Golden Agri’s upstream EBITDA margin reduced slightly to 28%, reaching US$305 million.

As per Sept 30, Golden Agri’s planted area maintained at approximately 500 thousand hectares, of which 21 percent is owned by plasma smallholders.

Despite a continued challenging market environment, the group says it was able to maintain Palm and laurics EBITDA margin at 1.2 percent for the third quarter 2018.

The Oilseeds segment recorded a positive turnaround of US$5.0 million EBITDA during the third quarter of 2018 subsequent to the impact from the 25% import tax on US soybeans in the previous quarter. Golden Agri expects the commodity market in China to remain challenging in the near term.

Golden Agri chairman and CEO Franky O Widjaja says he is confident that the long-term demand fundamentals for palm oil remain robust as it is the most efficient and widely used vegetable oil.

Year to date, shares in Golden Agri have fallen by 37% to 24 cents.