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What Investors Should Know About First Resources Ltd’s Latest Operational Performance

First Resources Ltd (SGX: EB5) is an integrated palm oil producer that manages nearly 209,000 hectares of oil palm plantations across the Riau, East Kalimantan, and West Kalimantan provinces of Indonesia.

As a palm oil producer, First Resources’ financial numbers can be heavily influenced by the unpredictable movement of crude palm oil (CPO) prices. During times when CPO prices are falling, improvements in the operational aspects of First Resources’ business can sometimes be masked.

So, I thought it would be useful to have a quick look at the operational side of things for First Resources, since it had released its 2017 third quarter results just two weeks ago. Here’s a slide from the company’s earnings presentation showing its latest operational performance:


Source: First Resources 2017 third quarter earnings presentation

There are a few takeaways here:

1) FFB (fresh fruit bunches) harvested grew 7.6% year-on-year in the third quarter of 2017. This resulted in a higher production of CPO (crude palm oil) and PK (palm kernel) compared to a year ago. Growth in the FFB, CPO, and PK numbers are a good thing.

2) The FFB yield for the third quarter of 2017 had declined from 4.9 tonnes per hectare (tonnes/ha) a year ago to 4.8 tonnes/ha. Similarly, the CPO yield declined from 1.1 tonnes/ha to 1.0 tonnes/ha. It’s the same dynamic with the CPO extraction rate (a 100% extraction rate means one tonne of CPO is produced from one tonne of FFB), which fell from 22.2% to 22.0%. With a palm oil producer, we would ideally like to see the yield and extraction rate numbers grow or at least remain the same.

So, during the third quarter of 2017, First Resources’ higher CPO production level was driven by a sheer increase in the amount of FFB harvested.

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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.