Golden Agri's net profit dragged down by lower CPO prices in 3Q

It plunged 65% to US$30.2m.

According to OCBC Investment Research, Golden Agri-Resources (GAR) continued to feel the blunt of weaker CPO prices (ASP of US$806/ton versus US$811/ton in 2Q13), with 3Q13 revenue falling 6% YoY (-7% QoQ) to US$1570.8m.

Coupled with higher cost of production, reported net profit tumbled 65% YoY (down 33% QoQ) to US$30.2m. 9M13 revenue grew 3% to US$4683.1m, meeting 75% of our original FY13 forecast, but due to higher-than-expected salary costs, net profit slipped 47% to US$188.3m, or just 51% of our full-year estimate.

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GAR declared an interim dividend of 0.585S cent/share versus 0.6 S cents a year ago.

Guides for lower CPO production this year
While CPO production saw a 17% QoQ growth in 3Q13, and should continue to see seasonal improvement in 4Q13, management now expects a contraction of 5% versus its earlier guidance of 5-10% growth for 2013.

Capex remains at US$550m for this year, with the bulk of it going towards plantation expansion, downstream and logistics capacity increases.

Nevertheless, GAR believes that CPO production should revert to the usual 5-10% growth next year. It is also generally positive about the CPO market next year, where prices should recover further.

However, it warns that rising wage pressures could push cash cost of production higher again next year, although the lower fertilizer cost could mitigate the extent of the increase.