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Highlights From Golden Agri-Resources’ Latest First Quarter Results

Golden Agri-Resources (SGX: E5H) is one of the largest oil palm players in the industry. It has interests in the entire oil palm value chain with activities that range from  growing oil palm trees in plantations to refining crude palm oil into other industrial and consumer products. Golden Agri-Resources’ largest shareholder is the Widjaja family from Indonesia. The company announced its first quarter results yesterday and saw its profits decline.

Shares of the company are currently weighed down with a 1.6% decline to S$0.60.

Operating results for the quarter

Golden Agri-Resources now has about 469,600 hectares of palm oil plantation. The average age of the oil palm trees is 14 years old, which is considered as a prime age for palm oil production.

Revenue for the quarter is up 34% year-on-year to US$1.91 billion. This is mainly due to two factors: 1) an increase in downstream production capacity (think refined palm oil and consumer products); and 2) higher fresh fruit bunch (FBB) production.

However, the healthy top-line growth could not be translated into bottom-line growth; net profit attributable to shareholders actually decreased 8% year-on-year to US$104 million.

According to Golden Agri-Resources’ segment reporting, revenue for its Plantation and Palm & laurics sectors both increased while its Oilseeds sector faced a 11.7% decrease in revenue. However, in terms of EBITDA (earnings before interest, depreciation and amortization), the Plantation segment was the only one that saw growth with both the Palm & lauric and Oilseeds segments experiencing huge declines; EBITDA for the Palm & lauric segment was slashed by 60% while the oilseeds segment saw its EBITDA drop into negative territory.

The poor showing in EBITDA for the Palm & laurics segment had been caused by higher raw material costs while the Oilseeds business had also failed to shine due to an oversupply of crushing capacity in China.

Golden Agri-Resources ended the quarter with a balance sheet that had stayed relatively stable compared to a quarter ago. Its leverage ratio (total asset/total equity) had been maintained at around 1.6. The company ended the quarter with a net asset value per share of US$0.69.

The company had generated US$174.5million in operating cash flow for the quarter, down by 22% compared to a year ago.

Going forward

Golden Agri-Resources’ management is still positive on the long-term prospects of the palm oil industry and they believe that demand-growth for its downstream products will continue to be healthy. The company will continue to invest to improve upon its integrated business model with a focus more on its distribution and logistics capabilities.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.