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First Resources Ltd’s Latest Results: The Good and The Bad

First Resources Ltd (SGX: EB5) is an integrated palm oil producer. It manages over 210,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia. The company has three business segments, namely crude palm oil (CPO), palm kernel, and refinery and processing.

Recently, First Resources released its fourth quarter earnings report for 2017. Let’s take a look at the positive and negative points from its results.

1. A Bird’s Eye View

Source: First Resources’ earnings presentation

The table above provides a summary of First Resources’ fourth quarter results.

Overall, we can see sales was up by 3.2% year-on-year, but its gross profit and net profit was down due to higher cost of sales.

2. The Positives

Volume for fresh fruit bunches (FFB) harvested was up 2.6% year-on-year in the quarter to 885.6 thousand tonnes. At the same time, the refinery and processing segment delivered higher revenue in the quarter, increasing 8% year-on-year to US$ 169.5 million. The growth was driven by higher sales volume. To round it off, First Resources’ balance sheet had a net gearing of 0.21, as of 31 December 2017, relatively unchanged from a year ago, when net gearing was 0.20.

3. The Negatives

On the flipside, plantations and palm oil mills reported weaker revenue for the quarter as compared to the same period last year due to lower selling price.

Quarterly gross margin also declined from 54.5% a year ago to 47.6% in the latest quarter. Similarly, its EBITDA (earnings before interest, tax, depreciation and amortization) margin declined from 52.2% last year to 43.3% in the fourth quarter of 2017. The decline was also caused by a lower selling price.

Another area of weakness was in its operations. FFB yield was down from 5.4 tonnes per hectare in the fourth quarter of 2016 to 5.1 tonnes in the fourth quarter of 2017. At the same time, CPO extraction rate was down from 22.4% in the same quarter in 2016 to 22.1% in the latest quarter.

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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.