Golden Agri hit by $53.6m Q2 loss amidst weaker palm oil prices

Its oilseeds segment also succumbed to uncertainties caused by the trade wars.

Golden Agri-Resources (GAR) sank into a loss of $53.62m (US$39m) in Q2 2018 from a profit of $30.25m (US$22m) in Q2 2017 as it was hurt by the weaker palm oil prices and downstream margins, an announcement revealed. Despite this, the firm’s revenue saw a 6% YoY growth in Q2 to $2.56b (US$1.86b) from $2.42b (US$1.76b).

For H1 2018, the firm incurred a loss of $37.12m (US$27m) from a profit of $81.12m (US$59m) in H1 2071. H1 2018 revenue also slipped 3% YoY to $5.06b (US$3.68b).

“GAR faced a tough quarter in 2018, with performance impacted across all segments,” GAR chairman and CEO Franky Widjaja commented.

Despite the losses, the firm’s plantation and palm oil mills segment saw a fruit yield increase of 9% YoY to 5.2 tonnes per hectare. The segment’s earnings before interest, tax, depreciation and amortization (EBITDA) in H1 stood at $270.85m (US$197m).

“We target to replant between 10,000 to 15,000 hectares during 2018,” the firm said.

Meanwhile, the palm and laurics continued to be challenged mainly due to governments’ intervention in commodity markets. Apart from these interventions which mainly occur in India and Malaysia, the changes in trade policies between the US and China have also hurt the segment.

“As a result, we saw margin compression for the palm and laurics segment in the reporting period,” the firm explained. “Q2 2018 recorded EBITDA of $27.5m(US$20m), leading to the H1 EBITDA of $61.87m (US$45m with a softer margin of 1.4%.”

The firm’s oilseeds also fall into the uncertainties caused by the US-China trade wars as its China business experienced higher prices for feedstock. The segment saw a negative EBITDA of $6.32m (US$4.6m) in H12018.

Widjaja is positive on the Indonesian Government’s plan to pursue a higher biodiesel mixture mandate amidst the appreciation of crude oil prices.

“In the longer term, we believe the fundamental demand for palm oil remains robust,” he commented. “We will continue to drive operational transformation for long-term shareholders return.”