First Resources’ Q1 profits crash 78% to $6.86m

Last year’s El Nino dried up FFB yields.

First Resources’ (FR) 1Q16 earnings wilted as the company saw a steep 78% crash in core profit after tax and minority interests (PATMI) of US$5m, or roughly $6.86m.

According to a report by Maybank Kim Eng, the massive drop in income is on back of 2015’s El Nino, which hurt 1Q16 FFB (fresh fruit bunch) nucleus output at 439,111 MT. Earnings were also hit by low crude palm oil (CPO) average selling price (ASP), which came in at US$476/t.

Even after considering the US$50/t CPO export levy, the ASP proceed was still US$50/t below market price.

FR asserts that this was partly due to the one month lagged effect in sales recognition whereby the recent CPO price spike in March 2016 only benefited FR in April 2016 when goods are delivered.

The agribusiness company also maintains its flat to -5% guidance for 2016. The lower yield due to 2015’s drought is offset by over 10,000 ha of new areas coming into maturity, and young mature entering prime maturity.

Maybank KE notes that though the weather has normalised at FR’s estates of late, FR sees more robust output only in the second half of the year.

FR also maintains its cash cost per tonne estimate for 2016 at US$220/t.