MARKET DEVELOPMENT
Surprise Dip in Palm Output Hurts Indofood Shares
Surprise Dip in Palm Output Hurts Indofood Shares
30/04/2013 (Agrimoney.com) - Shares in Indofood Agri fell back to amongst their lowest in four years as production concerns and higher costs added to the dent that weak palm oil prices have handed the plantations group.
Indofood Agri revealed that production of palm fruit at its own plantations fell in the first three months of 2013 to 628,000 tonnes – the first year on year decline in more than two years.
While the drop was only small, by some 2,000 tonnes, and Indofood stood by expectations of an increase in the palm fruit harvest of 5-10% over the full year, the figure was termed "surprising" by Malaysian-based broker TA Securities.
And rival broker AmResearch said that "we believe that some Indonesian plantation companies are experiencing tree stress this year", flagging also a 13.4% slump in output at First Resources' plantations last month.
Indofood Agri's Riau site in particular has suffered from a dearth of moisture.
However, some other palm oil groups have reported higher palm fruit production, with Astra Agro's output up 15% year on year in the first two months of 2013.
Profits Fall
Indofood Agri revealed its output data as it reported a 72% slump in earnings to 107bn rupiah for the January-to-March quarter, on sales down 3.2% at 3,100bn rupiah.
While the group lifted palm oil sales volumes by 15%, by reducing inventories, a 16% drop in selling prices ate into profits, besides a 16% jump to 102bn rupiah in sales expenses, based on higher freight costs, ate into profits.
Mark Wakeford, the Indofood Agri chief executive, flagged the Indonesia sugar cane harvest, which begins next month, and "should mitigate some of the impact from lower palm oil prices".
The company's plantation empire includes, besides 233,000 hectares of oil palm plantations, 11,800 hectares of sugar cane.
Indofood Agri is also following the likes of Bunge, Noble and Shell in expanding into Brazilian sugar, paying $71.7m for a 50% stake in Companhia Mineira de Açúcar e Álcool Participações, which operates a mill with capacity to crush 3m tonnes of cane a year.
Market Reaction
The results prompted TA Securities to cut to Sing$1.30, from Sing$1.41, its target for Indoofood shares, which are listed in Singapore, while keeping a "hold" recommendation "until there is better visibility with regards to commodity prices".
AmResearch also kept a "hold" rating, despite saying the results were "significantly below our expectations and consensus estimates due to an increase in the cost of sales".
Shares in Indofood Agri closed down 2.2% at Sing$1.115, within Sing$0.01 of their lowest since July 2009.
Indofood Agri revealed that production of palm fruit at its own plantations fell in the first three months of 2013 to 628,000 tonnes – the first year on year decline in more than two years.
While the drop was only small, by some 2,000 tonnes, and Indofood stood by expectations of an increase in the palm fruit harvest of 5-10% over the full year, the figure was termed "surprising" by Malaysian-based broker TA Securities.
And rival broker AmResearch said that "we believe that some Indonesian plantation companies are experiencing tree stress this year", flagging also a 13.4% slump in output at First Resources' plantations last month.
Indofood Agri's Riau site in particular has suffered from a dearth of moisture.
However, some other palm oil groups have reported higher palm fruit production, with Astra Agro's output up 15% year on year in the first two months of 2013.
Profits Fall
Indofood Agri revealed its output data as it reported a 72% slump in earnings to 107bn rupiah for the January-to-March quarter, on sales down 3.2% at 3,100bn rupiah.
While the group lifted palm oil sales volumes by 15%, by reducing inventories, a 16% drop in selling prices ate into profits, besides a 16% jump to 102bn rupiah in sales expenses, based on higher freight costs, ate into profits.
Mark Wakeford, the Indofood Agri chief executive, flagged the Indonesia sugar cane harvest, which begins next month, and "should mitigate some of the impact from lower palm oil prices".
The company's plantation empire includes, besides 233,000 hectares of oil palm plantations, 11,800 hectares of sugar cane.
Indofood Agri is also following the likes of Bunge, Noble and Shell in expanding into Brazilian sugar, paying $71.7m for a 50% stake in Companhia Mineira de Açúcar e Álcool Participações, which operates a mill with capacity to crush 3m tonnes of cane a year.
Market Reaction
The results prompted TA Securities to cut to Sing$1.30, from Sing$1.41, its target for Indoofood shares, which are listed in Singapore, while keeping a "hold" recommendation "until there is better visibility with regards to commodity prices".
AmResearch also kept a "hold" rating, despite saying the results were "significantly below our expectations and consensus estimates due to an increase in the cost of sales".
Shares in Indofood Agri closed down 2.2% at Sing$1.115, within Sing$0.01 of their lowest since July 2009.