Will First Resources’ H2 profits wither in line with its waning output?

FFB output guidance sits at -10%.

Things may be looking up for First Resources in the latter half of 2016, as the company has dropped fresh fruit bunch (FFB) output guidance to -10% from its previous flat to -5% expectation.

According to a report by RHB, First Resources anticipates a marked recovery in output from September only, though the company is already enjoying normalised weather at its estates.

“This means the peak period could come in later, during 4Q. We have, therefore, revised our FY16 FFB output forecasts to reflect a -9.9% decline, followed by a higher 8-10% growth in FY17-18 (from 7-9%), coming from an anticipated recovery from tree stress,” stated RHB.

First Resources has also grown more upbeat on its downstream prospects in H2, given the lowered crude palm oil (CPO) prices coupled with more robust CPO output during the period.

DBS concurs, as it noted in a report that First Resources should see a strong comeback in Q3 and Q4 earnings, thanks to improved average selling prices and seasonal yield recovery.

On top of this, an asset revaluation tax benefit is headed for First Resources’ way, RHB stated. Unlike Golden Agri-Resources, First Resources has yet to recognise any tax benefits from the revaluation of its Indonesian assets, although it has prepaid the taxes for its asset revaluation already.

In addition, First Resources anticipates a new biodiesel tender within the next few months.