Weak oilseeds business crumbled Golden Agri's earnings in 1Q

Net profit dropped 8% to US$103.9m.

Golden Agri's 1Q figures took a turn for the worse as weak oilseeds business in China dragged its earnings. According to OCBC Investment Research, Golden Agri's revenue climbed 34% YoY to US$1914.2m, meeting 28% of our FY14 forecast. Management noted that the big jump came from both higher production volume (+4%) as well as higher CPO prices (+9%).

However, EBITDA slipped 5% to US$200.3m, marred by its Oilseeds business in China (which also saw negative crushing margins) and also lower margin from its Palm and Lauric business (still facing pressure on refining margins in Indonesia). As a result, net profit slipped 8% to US$103.9m, which still met 26% of our full-year forecast.

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Still upbeat about long-term outlook

Going forward, GAR remains upbeat about the long-term outlook for the palm oil industry; it has kept its capex spending at US$550m, with US$250m for upstream growth and US$300m for downstream growth. For the downstream segment, GAR expects to use US$250m to expand its refining capacity (looking to add another 1m ton in Indonesia this year) and US$50m to grow its logistics network and also buy vessels.

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