Golden Agri makes restated Q1 profit but accounting change wipes out US$5b equity

BOOSTED by currency and tax gains, and better downstream margins, Indonesian palm oil producer Golden Agri-Resources swung to a net profit of US$94 million for the first three months of the year, from a restated net loss of US$3 million a year ago. But an accounting change on the valuation of biological assets wiped out a significant chunk of its book value.

Golden Agri said on Friday that excluding currency movements and changes to the fair value of biological assets, core net profit rose 65 per cent to US$40 million. A year ago, it had reported core net profit of US$52 million, but this was restated to US$24 million.

Revenue fell 4 per cent to US$1.49 billion from US$1.55 billion a year ago.

Lower crude palm oil prices and the El Nino weather condition had hit earnings from the company's upstream plantation and palm oil mills segment. Ebitda (earnings before interest, taxes, depreciation and amortisation) fell 24 per cent to US$76 million.

However, higher margins in the downstream palm and laurics segment, which makes and sells palm-based products, boosted segmental Ebitda by 179 per cent to US$62 million.

The company's first-quarter result was also lifted by foreign-exchange gains of US$52 million from the appreciation of the Indonesian rupiah against the US dollar. A US$14.5 million net tax credit also boosted the bottom line.

Net asset value at end-March was US$0.30, up from a restated US$0.29 at end-2015. Its end-2015 net asset value was US$0.68 previously.

An accounting amendment that comes into effect this year will cause oil palm tree trunks to be fixed assets valued at cost instead of fair value, while fruits can be still revalued at fair value. As a result, Golden Agri took a US$5-billion equity hit.

Golden Agri closed at S$0.37, up one cent, before results were out.