Bumitama Agri Q4 profits down 21.2% to $33.54m

Biodiesel revenue was cut down after it closed its production plant.

Bumitama Agri’s profits slumped by 21.2% YoY from $42.57m (IDR461.58b) to $33.54m (IDR363.61b), due to slower production in Q4. According to its financial statement, however, profits were up 18.7% to $114.75m (IDR1.19t) for the full year due to higher revenue, fair value changes in biological assets, and reduced losses from associates.

Biodiesel accounted for 3.3% of the total revenue of 2017, a decreased of 14.4% YoY. The company said it had discontinued its biodiesel production plant at the end of 2017. “In view of thin profit margin, uncertain biodiesel market conditions and the need to focus on improving the productivity of palm oil, it was in the best interest of the Company and the Group to close this plant.”

Revenue in Q4 fell 9% to $199.55m (IDR2.07t) due to a lower sales volume of crude palm oil and palm kernel, which fell 11.7% and 13.9% despite higher selling prices. On the upside, aggregate sales of the two oils for the whole year increased along with selling prices and raised revenue 22.6% YoY to $783.77m (IDR8.13t).

Bumitama Agri noted that cost of sales comprised of palm oil and biodiesel costs. “Palm oil costs mainly consist of costs in relation to plantation maintenance, harvesting, plantation overhead, depreciation and amortisation, milling, and fresh fruit bunches (FFB) purchased externally (including plasma and third parties). Biodiesel costs mainly consist of processing and feedstock purchase costs.”

Cost of sales rose 0.6% to $134m (IDR1.39t) in Q4 and 23.4% to $553.36m (IDR5.74t) in 2017. The increase in the cost of sales during the whole year was mainly attributable to higher production volume, higher fertiliser application, and a higher purchase price of external FFB during the year.

The company noted that the price of CPO is affected by global vegetable oil supply and demand, climatic conditions, and fluctuating foreign currency exchange rate. “The CPO price is expected to remain at the current level for the first half of 2018, in the absence of fresh positive news which can lift palm prices from its current level. Nonetheless, the long-term fundamental of the palm oil industry remains positive, supported by increasing demand particularly from the growing domestic and emerging markets,” it added.