IndoAgri rakes in a whopping 286% profit hike to $24 million

Palm products are getting their much needed attention.

IndoAgri group has seen growth across the board following the strong recovery in commodity prices for palm products and cooking oil and margarine.

A recent release by IndoAgri reveals that the stronger sales was attributable to higher average selling prices for edible oil products and higher sales volume of cooking oil and margarine, allowing the company to pose an 80.6% increase in gross profit and 95.7% increase in EBITDA or earnings before interest, taxes, depreciation and amortization.

On the production front, the company achieved strong FFB nucleus production of 1,488,000 tonnes in 1H14, up 18% year on year on higher production from South Sumatra and Kalimantan. CPO production grew 25% year on year to 444,000 tonnes in 1H14 arising from higher nucleus production as well as higher purchases of FFB from external parties, according to Mark Wakeford, CEO and executive director of IndoAgri.

Here’s more from IndoAgri:

In 1H2014, CPO prices (CIF Rotterdam) recovered to an average of US$895 per tonne compared to averaged US$857 per tonne in 2013. The recent CPO price increase was supported by seasonally lower production in the first half of the year and concerns over the dry weather in 1Q 2014 which may affect the palm production in the near term. Nonetheless, Indonesia has become one of the largest consumers of palm oil together with China and India given its vast and growing population base of over 240 million people. We also expect the higher biodiesel blending mandate of 10%, announced by Indonesia's government in September 2013, to sustain domestic demand growth for palm oil products. Rubber prices (RSS3 SICOM) continues to sustain pressure on higher rubber production coming from Thailand and Indonesia in 2013. Rubber prices fell over 20% at the beginning of the year to an average of US$2,185 per tonne in 1H2014 compared to an average of US$2,795 per tonne in 2013. According to a leading agriculture research firm, LMC International, rubber production is expected to slow down in 2014 as producers respond to lower prices, but the demand will continue to grow driven by growth from developed markets and China. 

Indonesia remains a net importer of sugar. The domestic sugar price in Indonesia is above the international market as the government operates a strict import quota system for sugar, restricting imports when domestic prices fall below the government-mandated floor price of Rp8,250 per kilogram which took effect since May 2014. By tapping into the efficiency and yield of sugar production in Brazil, we are positioning the Group to capture these opportunities with our sugar investments. Moving forward, we expect that the direction for global sugar prices will be strongly influenced by production levels in Brazil, Thailand and India, together with the Brazilian government policies on ethanol.