SECOND-QUARTER earnings for Indofood Agri (IndoAgri) plunged 99.1 per cent to 2.06 billion rupiah (S$210,000), as its cost of sales outpaced a slight growth in revenue and other operating income also fell.
The group's revenue for the three months ended June 30 rose 3.4 per cent to 4.13 trillion rupiah, as it recorded higher external sales from its plantation division.
This positive impact on the topline, however, was lessened by the lower average selling prices of palm products. The group's revenue so far this year has declined 10 per cent year-on-year due to the lower average selling prices of agriculture crops, IndoAgri said.
The key reasons for the lower crude palm oil prices were the slowdown of global demand in major markets such as China and Europe, weak crude oil prices which has "virtually eliminated" discretionary biodiesel demand, and higher soybean supplies from the US and South America.
"Nonetheless, we expect demand for basic commodities like palm oil to continue to grow, underpinned by growing consumer markets and a rising middle class," said IndoAgri. "We also expect the higher biodiesel blending mandate of 15 per cent, announced by Indonesia's government in March 2015, to sustain domestic demand growth for palm oil products, albeit over time as the mandate ... will not be achieved immediately."
Commenting on its other products, the firm added that rubber prices will remain under pressure in the medium term until global demand recovers, and sugar prices will also remain depressed until the current high level of sugar stocks worldwide falls.