Golden Agri's net profit crashed 58.1% to US$14m

Blame it on higher forex losses.

According to OCBC Investment Research, Golden Agri-Resources (GAR), being one of the largest palm oil plantation owners in the world, understandably felt the impact of weaker CPO prices.

Affected by higher forex losses of US$14.0m, reported net profit tumbled 58.1% YoY and 59.9% QoQ to US$45.3m.

Here's more:

Although 2Q13 revenue climbed 25.4% YoY and 17.6% QoQ to US$1682.3m, gross profit tumbled 23.7% YoY and 15.0% QoQ to US$303.6m, yielding a margin of just 18% (versus 30% in 2Q12 and 25% in 1Q13), weighed by lower ASPs (down 25% YoY, +0.6% QoQ) and higher production costs.

We estimate that core earnings would have come in around US$55.1m, still down 52.3% YoY and 50.0% QoQ.

While 1H13 revenue grew 8.8% to US$3112.4m, meeting 49.7% of our FY13 forecast, net profit tumbled 41.5% to US$158.1m; core earnings slipped 40.9% to US$165.2m, or just 33.7% of our full-year forecast.

Nevertheless, management continues to remain upbeat about the long-term prospects of the palm oil industry, and will continue to increase its production of sustainable palm oil, improve operating efficiency and also optimise its downstream value chain opportunities.

However, we expect the nearterm outlook to remain challenging, given the muted outlook for CPO prices in general as global demand (especially out of China and India) remains weak.

In addition, market watchers expect to see further softening in CPO prices on supply concerns, given that production of CPO tends to improve in the second half of the year; they are also expecting an increase in supply from substitutes like soy and corn.

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