3 Things Investors Should Know From Bumitama Agri Ltd’s Latest 2016 Results

Bumitama Agri Ltd (SGX: P8Z) is a palm oil producer. Its primary business activities include cultivating oil palm trees, harvesting fruits from the trees, and processing the fresh palm fruit bunches (FFB) into palm oil and palm kernel.

Its operations are located mainly in three provinces in Indonesia, namely, Central Kalimantan, West Kalimantan, and Riau. As of December 2016, the company controls plantations that total 175,243 hectares in size.

In late February, Bumitama Agri reported its 2016 full year results. Let’s look at three useful pieces of information from the announcement:

1. The overall result

Here’s a table showing some of the important numbers from the company’s income statement for the quarters and years ended 31 December 2015 and 2016:

Bumitama Agri 2016 income statement
Source: Bumitama Agri 2016 full year earnings presentation

On the whole, we can see that Bumitama Agri had a good year in 2016. Revenue, gross profit, EBTIDA (earnings before interest, taxes, depreciation, and amortisation), and net profit attributable to shareholders, all had double-digit growth.

The company’s performance was driven mainly by higher CPO (crude palm oil) prices and higher sales volumes.

2. Operational statistics

The following table shows the operational statistics for Bumitama Agri in 2016 and 2015:

Bumitama Agri 2016 production table
Source: Bumitama Agri 2016 full year earnings presentation

Interestingly, Bumitama Agri’s production numbers for 2016 were mostly down due to lower production of FFB. A severe drought in 2016 had reduced the company’s FFB yield per hectare from 17.8 metric tonnes to 14.6, leading to the fall in FFB production.

3. What lies ahead

As investors, we rely on many tools, including management’s forecasts, to help us gain insight on what to expect for the near to long term performance of our investments’ business.

With regard to Bumitama Agri, this is what its manager said about its future outlook in the earnings release:

“The palm oil industry forecast a recovery from the El Nino impact on palm oil production for 2017. Palm oil prices is expected to be resilient for the next three months of the year.

The Group remains positive on the long term outlook of the palm oil industry and will continue to focus on yield improvement as well as cost management.”

In all, Bumitama Agri had a good year in 2016 as it benefitted from higher CPO prices. The company’s weak FFB production seen during the year should improve in 2017 after a recovery was observed in the fourth quarter of 2016.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.