Golden Agri’s net profit crashed 86% in Q3 as palm oil prices plunge

These are its worst results since 1Q09.

Golden-Agri’s once-lucrative crushing business again failed to bring in cash in the third quarter, causing the group’s profit to crash 86% year-on-year to just $5.7m (US$4.4m).

Management reported that its loss-making Oilseeds segment was again the main drag in Q3. The segment turned in negative earnings of $23.22m ($18m), due to sustained losses at its China crushing facilities.

According to OCBC, a turnaround is unlikely for Golden-Agri as CPO production is likely to not grow as fast in 4Q14 as some of its plantations are starting to show signs of tree stress from the drought earlier in the year.

“As such, 9M14 NPAT slipped 28% to US$135.5m; core earnings fell nearly 14% to US$175.7m, meeting just 57% of our full-year estimate. GAR declared an interim dividend of 0.408 S cent, versus 0.585 S cent for 9M13. Accounting for the sharp miss in 3Q14 and potentially a disappointing 4Q14, we see the need to slash our FY14 core earnings by 28% (also cutting our FY15 by 19%),” noted OCBC.

Here’s more from OCBC:
Management also warns that it may see some fair value losses from biological assets (but this has no impact on our core estimates). 

More worrying is its China crushing operations - GAR expects to see losses although it has taken steps to reduce utilisation to stem the red ink, as it may to endure another quarter of high cost feedstock. 

And as feared, inventory rebounded back to 550k tons in 3Q14, versus 456k ton in 2Q14.