CPO Firms Won Big in 2008, but Now Face Tough Odds
With the corporate reporting season now in full swing, the country’s plantation companies have been busy trumpeting their bumper profits last year. But analysts say that joy is likely to be short-lived as the global slump impacts demand for crude palm oil, leading to a significantly reduced earnings outlook for the sector.
Rising production would also further undermine prices, and therefore earnings, they say.
On March 16, PT Astra Agro Lestari Tbk, the country’s biggest agribusiness company by value, reported a 33 percent rise in net profit to Rp 2.6 trillion ($223.6 million) last year from Rp 1.97 trillion a year earlier, with sales increasing 37 percent to Rp 8.12 trillion, compared with Rp 5.96 trillion in 2007.
On the same day, PT PP London Sumatra Indonesia Tbk announced that it had booked a net profit of Rp 928 billion last year, a 64 percent rise compared with Rp 564 billion the previous year, with sales up 31 percent to Rp 3.8 trillion.
On Monday, PT Sampoerna Agro Tbk announced that its 2008 net profit rose by 104 percent to Rp 439 billion from Rp 215 billion in 2007, on the back of sales of Rp 2.29 trillion - a 43 percent rise compared with the previous year.
On a negative note, however, PT Bakrie Sumatera Plantations Tbk said on Tuesday its net profit dropped 16 percent to Rp 174 billion last year from Rp 207 billion in 2007, even though sales rose 50 percent to Rp 2.9 trillion from Rp 1.9 trillion in 2007. It said the earnings slump was mainly due to foreign exchange losses of Rp 243 billion, compared with Rp 80 billion in 2007.
Analysts say the strong overall earnings growth was primarily driven by high CPO prices, which ranged between $1,000 and $1,400 per metric ton in Rotterdam up to October last year before collapsing.
Palm oil for June delivery gained 1.5 percent to 2,000 ringgit ($548.40) per metric ton on the Malaysia Derivatives Exchange at the close of trading on Tuesday in Kuala Lumpur.
Analysts expect CPO to move within a range of $500 to $600 per ton this year, depending on how long the downturn persists.
Christine Salim, head of research at PT Samuel Sekuritas Indonesia, said that lower CPO prices would erode the net profits of plantation companies this year.
“We believe CPO prices are facing a negative outlook until the second half of the year,” she said.
Asti Pohan, an analyst at BNI Securities, said she expected the CPO price to stay at about $650 per ton this year, compared with an average price of $942 in 2008.
Rising production would also further undermine prices, and therefore earnings, they say.
On March 16, PT Astra Agro Lestari Tbk, the country’s biggest agribusiness company by value, reported a 33 percent rise in net profit to Rp 2.6 trillion ($223.6 million) last year from Rp 1.97 trillion a year earlier, with sales increasing 37 percent to Rp 8.12 trillion, compared with Rp 5.96 trillion in 2007.
On the same day, PT PP London Sumatra Indonesia Tbk announced that it had booked a net profit of Rp 928 billion last year, a 64 percent rise compared with Rp 564 billion the previous year, with sales up 31 percent to Rp 3.8 trillion.
On Monday, PT Sampoerna Agro Tbk announced that its 2008 net profit rose by 104 percent to Rp 439 billion from Rp 215 billion in 2007, on the back of sales of Rp 2.29 trillion - a 43 percent rise compared with the previous year.
On a negative note, however, PT Bakrie Sumatera Plantations Tbk said on Tuesday its net profit dropped 16 percent to Rp 174 billion last year from Rp 207 billion in 2007, even though sales rose 50 percent to Rp 2.9 trillion from Rp 1.9 trillion in 2007. It said the earnings slump was mainly due to foreign exchange losses of Rp 243 billion, compared with Rp 80 billion in 2007.
Analysts say the strong overall earnings growth was primarily driven by high CPO prices, which ranged between $1,000 and $1,400 per metric ton in Rotterdam up to October last year before collapsing.
Palm oil for June delivery gained 1.5 percent to 2,000 ringgit ($548.40) per metric ton on the Malaysia Derivatives Exchange at the close of trading on Tuesday in Kuala Lumpur.
Analysts expect CPO to move within a range of $500 to $600 per ton this year, depending on how long the downturn persists.
Christine Salim, head of research at PT Samuel Sekuritas Indonesia, said that lower CPO prices would erode the net profits of plantation companies this year.
“We believe CPO prices are facing a negative outlook until the second half of the year,” she said.
Asti Pohan, an analyst at BNI Securities, said she expected the CPO price to stay at about $650 per ton this year, compared with an average price of $942 in 2008.