Golden Agri’s core net profit up 12% on stronger China agribusiness

Also boosted by higher CPO sales.

According to CIMB, higher CPO sales and a stronger showing from its China agribusiness pushed Golden Agri’s FY13 core net profit 11-12% ahead of CIMB's and consensus estimates.

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Working back from the lower-than-expected inventory at end-Dec, we estimate that CPO sales grew by 140k tonnes or 30% qoq in 4Q, above our estimate.

Also above our estimate was the crush margin for its China operations, leading to a strong 4Q for this unit. We fine-tune our earnings forecasts but maintain our target price, which is based on 14x CY15 P/E or its historical average.

Golden Agri posted a strong set of 4QFY13 results, driven mainly by higher plantation earnings and a record quarterly profit from its China operations.

The good results were fuelled by the turnaround of its China operations from a loss of US$21.4m in 4Q12 to a profit of US$36.6m in 4Q13. Plantation earnings were flattish as higher CPO sales volumes were offset by the weaker selling prices achieved.

4Q earnings also benefited from a lower effective tax rate of only 21%, which may be due to higher income from subsidiaries operating in lower tax jurisdictions.

For the full year, core net profit fell 21% yoy as weaker plantation earnings trumped the better results from its China agribusiness. The group’s reported earnings included a US$37m net gain from changes in the fair value of biological assets.