Palm Oil Hits 27-month High

Palm Oil Hovers at Near 7-Month Peak

Revenue is up 7.7 per cent on the year at 3.87 trillion rupiah

 

BUMITAMA : P8Z +2.22%Agri : P8Z +2.22% on Tuesday (May 14) posted a 23.5 per cent drop in net profit to 328.4 billion rupiah (S$27.6 million) for the first quarter ended Mar 31, 2024, from 429.1 billion rupiah in the same period last year.

 

The group attributed the fall in profit to the strengthening US dollar, especially against the Indonesian rupiah, amid a higher-for-longer interest rate environment.

 

Excluding foreign exchange (forex) losses in the quarter, net profit would have been 22.8 per cent higher at 373.7 billion rupiah, versus 304.2 billion rupiah in the same period a year earlier, where the group recorded forex gains.

 

Q1 was also a &ldquo low cycle&rdquo period for palm oil production amid extreme weather conditions, the group said in its business update. 

 

This resulted in a considerably tight supply situation earlier in the year when it coincided with increased domestic demand during Ramadan, driving palm oil prices to a peak of 13,400 rupiah per kilogram at the start of April.

 

Revenue was up 7.7 per cent at 3.87 trillion rupiah from 3.6 trillion rupiah on higher crude palm oil (CPO) sales.

CPO, which registered a 7 per cent year-on-year rise in sales volume, accounted for 91 per cent of total sales. This more than offset the 1 per cent decline in average selling prices.

 

Palm kernel sales, meanwhile, jumped 19 per cent year on year on strong sales volumes, which rose 18 per cent compared with the same period a year earlier.

 

Average selling prices for palm kernel products inched up 1 per cent during the quarter.

 

&ldquo While the 1 per cent year-on-year rise in PK (palm kernel) price looks negligible, it is worth noting that the lauric oil market has started to rebound in early 2024 due to improving supply-demand dynamics,&rdquo the group said.

Bumitama Agri

Between Apr 22 and 23, Bumitama Agri&rsquo s : P8Z 0% lead independent director Lim Hung Siang increased his deemed interest by 100,000 shares at S$0.74 per share. This raised his total interest in the producer of crude palm oil (CPO) and palm kernel in Indonesia to 250,000 shares or 0.014 per cent of the company. Lim&rsquo s expertise spans the transport and engineering sectors, including leadership roles at Singapore Automotive Engineering and ComfortDelGro. He was first appointed to the Bumitama Agri board in June 2018.

 

Bumitama Agri ranks among Singapore&rsquo s 100 most traded stocks and also among the 20 Singapore stocks that have booked the most net institutional inflow since the end of 2023. The stock also maintains a PE ratio of 6.3 times and ROE of 19 per cent. Within the five-year period starting 2019, Bumitama Agri&rsquo s revenue has doubled, and attributable net profit has grown at a compound annual growth rate (CAGR) of 37.4 per cent.

 

Earlier this month, the executive chairman and CEO of Bumitama Agri, Gunawan Lim, highlighted that the company&rsquo s focus on sustainable practices and efficiency programmes led to a record monthly yield of 2.1 tonnes per hectare in July 2023 and a total fresh palm fruit bunches (FFB) production of 5.38 million tonnes for the year. The five-year CAGR stood at 3.3 per cent, with Western Kalimantan estates showing a 4 per cent increase in FFB output and a 6 per cent rise in CPO production. The company&rsquo s palm oil mills, with a combined FFB processing capacity of 6.39 million tonnes, achieved an oil extraction rate of 22.7 per cent in FY2023. This resulted in 1.22 million tonnes of CPO, marking a 2.9 per cent increase from the previous year. Palm kernel production also rose by 0.9 per cent to 253,114 tonnes. By the end of FY2023, Bumitama managed 187,116 ha of palm plantations, with the majority being mature plants, and replanted 892 ha with high-yield, climate-resilient seedlings.

 

Bumitama Agri&rsquo s financial summary for FY23 (ended Dec 31) highlights a strategic focus on reducing debt and improving the company&rsquo s financial health. Despite a drop in total assets, the company successfully lowered its liabilities by 30.3 per cent, demonstrating a strong commitment to de-gearing. The allocation of 1.39 trillion rupiah for debt repayments significantly lowered the gearing ratio to 0.17 times, marking the fourth year of consistent reduction. The liabilities-to-equity ratio also improved, dropping to 0.25 times from 0.38 times the previous year. These measures have strengthened the balance sheet and positioned the company to enhance shareholder returns moving forward.

 

For the full FY23, Bumitama shareholders approved a total dividend distribution of S$0.068 per share. This was made up of a S$0.0192 special dividend and S$0.0363 final dividend that were proposed in the recent AGM, as well as the S$0.0125 interim dividend that was distributed in September 2023. Based on a share price of S$0.60 at the end of 2023, this represents a gross dividend yield of 11.3 per cent. Since the end of 2023, the share price of the stock has climbed to S$0.75 (as at Apr 25).

 

Looking forward, Bumitama Agri expects CPO prices to find support within the RM3,900 to RM4,200 per tonne range, especially in the first half of the year, adding that this stability is underpinned by restrained supplies and Indonesia&rsquo s continued implementation of its B35 biodiesel mandate, which is on course to be extended to B40.