17/08/2012 (Jakarta Globe) - Salim Ivomas Pratama and London Sumatra Indonesia, plantation units of the Indofood Group, have seen profits tumble on falling global palm oil prices.

Salim Ivomas said on Wednesday that its net income for the first half of this year fell 22 percent to Rp 686 billion ($72 million), compared to Rp 885 billion a year earlier. Sales rose 14 percent to Rp 6.98 trillion, from Rp 6.13 trillion, the company said in a filing with the Indonesia Stock Exchange on Wednesday.

The statement said the sales improvement was “mainly driven by higher sales volumes of crude palm oil and edible oils and fats products.”

Sales of crude palm oil rose 5 percent to 402,000 metric tons, which was in line with the increase of production volume, the company said. Sales volume for cooking oil, margarine and coconut oil rose 11 percent to 423,000 metric tons, from 382,000 metric tons in the same period last year, due to expanded capacity at its refinery.

The decline in profit “was mainly attributed to lower average selling prices of palm oil products and rubber, as well as higher production costs in respect to general wage inflation and fertilizer costs,” the company said.

In a separate statement on Wednesday, London Sumatra Indonesia, a crude palm oil producer, said its net income fell 28 percent to Rp 639.2 billion in the first half of this year, from Rp 886.3 billion in the same period last year. Sales declined 6.4 percent to Rp 2.23 trillion, from Rp 2.38 trillion.

Salim Ivomas controls 56 percent of London Sumatra.

The company cited a lower average selling price for the declining profitability but did not specify how much the price of CPO had fallen this year.

London Sumatra’s sales volume from January through June dropped 3.2 percent to 209,052 tons of CPO, of which 75 percent was sold to parent company Salim Ivomas.

Willian Simadiputra, an analyst with Trimegah Securities, said in a note to clients that he expected the average price for CPO in the second half of the year to remain above $1,000 per ton.

This would allow London Sumatra to reach a selling price of Rp 7,140 per kilogram for the year. In 2011, the company’s average selling price for CPO was Rp 7,542 per kilogram.

Based on this assumption, William expects the plantation company to post a 10 percent decline in net income for the full year.

Meanwhile, he said the share price for Salim Ivomas should be attractive for investors as the company remains the leader in the domestic edible fats and oils market.

Shares of Salim Ivomas fell 2.1 percent to Rp 1,360 on Wednesday, but have risen 18 percent for the year. London Sumatra lost 1.8 percent to Rp 2,700 but has seen a 20 percent gain for the year.