Golden Agri-Resources' net profit fell 30% to US$112.8m

Profit from China amounted to US$6m.

According to OCBC Investment Research, Golden Agri-Resources (GAR) posted 1Q13 revenue of US$1430.1m, down 6% YoY and 6% QoQ, weighed by lower CPO prices (down 29% YoY and 7% QoQ at US$806/ton); but still managed to meet 22% of OCBC's full-year forecast. Although net profit was down 30% YoY, it rebounded 111% QoQ to US$112.8m, aided by improved performance at its China operations, sell-down of inventory and lower operating expenses.

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We estimate that core earnings came in around US$113m, down 30% YoY but up 176% QoQ, and also met 23% of our FY13 forecast. 

According to management, its China operations put in a much improved performance, turning in net profit of US$6m, compared to loss of US$23m in 4Q12, which GAR attributed to the result of a strengthening of the management team.

Separately, the significant improvement in inventory, falling by 122k tonnes to 398k tonnes, also came as a relief. Recall that management had previously guided for the inventory overhang to clear by end 1H13 to around its usual holdings of about 320k tonnes.

Management also noted that there appears to have been a substantial decline in inventories across the palm oil industry in Indonesia; it further believes that this will eventually be reflected in higher CPO prices down the road.

While CPO prices may still remain weak in the near term, headwinds appear to be dissipating; management is also remaining fairly upbeat about its prospects as it continues to expand its integrated operation capabilities to benefit from the firm industry outlook.