2 big culprits behind Golden Agri’s earnings miss in FY13

Lower palm oil price is one.

According to Phillip Securities Research, albeit its China operations recovered back from losses in FY12, Golden Agri’s earnings were lower due to (i) lower palm oil price (-17% yoy), and (ii) lower FFB/CPO production by 7%/5% yoy.

Here's more:

The effective tax rate of 26% in FY13 was lower due to turnaround in China and in line with the lower taxable profit in the Indonesia Agri-business.

Golden Agri’s FY13 core net profit (excluding biological and forex changes) fell by 21% yoy to US$318mn. The earnings were 4%/11% above PSR/consensus estimates. The company declared a final dividend of S$0.00515/share, bringing total DPS for FY13 to S$0.011.

This implies a special dividend of 35% of underlying profit, exceeding its dividend policy of 30% of underlying profit.

FY13 FFB production decreased 7% on the back of a 10% decline in FFB yields due to palm tree’s biological down-cycle following the bumper crop experienced in 2012, which is expected to improve in FY14.

The cost of production fell by 13% qoq to US$296/MT in 4Q13 due to lower fertilizer costs and higher volume. The group indicated that cost could ease in FY14 due to higher volume.

It recorded total plantings of 13,700ha in FY13, 7,700ha of which are new plantings. The remaining 6,000ha are replanted area. This is lower than the new plantings of 9,700ha achieved in FY12 and is way short of its full-year target of 35,000-45,000ha.

The China operations returned to profitability of US$48mn in FY13 after heavy losses of US$48mn in FY12 as a result of more favourable business environment and business strategy enhancement.