IFAR reported 1Q15 PATMI of Rp35bn (-81% YoY, -85% QoQ), equivalent to about 4% of consensus estimates for FY15. Results were hit by lower ASPs for CPO and lower volumes for both palm products and edible oils & fats (EOF). Foreign exchange losses (- Rp117bn vs. a gain of Rp86bn in 1Q14) on an already tough quarter exacerbated impact on net income line. Excluding foreign exchange impact, net profit would be Rp163bn (-40% YoY). We cut our CPO price assumptions to US$680/t for FY15-16, long-term price of US$750/t, and reduce our FY15E and FY16E net earnings by ~5% and ~4% respectively.
■ FFB and CPO production affected by a dry 1Q14
1Q15 nucleus FFB production was 650mt (-8% YoY, -24% QoQ), CPO production was 190mt (-9% YoY, -23% QoQ). FFB yields were poor at only 3.5mt/ha (-10% YoY, -24% QoQ), while CPO yield was down to 0.8mt/ha (-20% YoY, -11% QoQ), attributed to lower production and yields following a very dry 1Q14. EBITDA for this segment was Rp473bn (-42% YoY, -38% QoQ). New palm plantings continued to slow at 417ha vs 1,158ha in 1Q14.
■ Higher EBITDA for edible oils and fats due to lower input costs
1Q15 EOF sales volumes was 157kt (-17% YoY, -13% QoQ). EBITDA recovered to Rp93bn (nm YoY, +38% QoQ) on lower raw material costs. There was some market share loss as competitors took advantage of lower raw material costs.
■ Capex guidance
Capex for FY15 is expected to be between Rp2.2trn– Rp2.5trn, less than the Rp3.1trn for FY14 (~23% reduction).
■ Maintain Sell rating, new TP S$0.65
Maintain Sell on IFAR on higher G&A and interest expenses. Re-rating catalyst is linked to IFAR’s ability to transmit higher FFB volumes into better earnings, a function of a stronger CPO price environment as well as improved cost leverage. We prefer First Resources and DSNG for stronger hectarage growth. (Read Report)
Source : Citi Research