First Resources Q1 net profit falls by 60.5% on higher export taxes

FIRST Resources on Monday reported net profit of US$8.8 million for the first quarter ended March 31, down 60.5 per cent from US$22.2 million the year before.

This came despite an increase in sales, reflecting the impact of higher export taxes from the new export levy structure implemented in Indonesia since December 2020, the palm oil producer said in a business update.

Sales rose by 40.3 per cent to US$196.9 million, from US$140.4 million the year prior, mainly due to the recovery in production volumes and yields.

The group saw an 18.1 per cent increase in crude palm oil (CPO) production to 212,564 tonnes from 179,997 tonnes in Q1 2020. Palm kernel production was up 15.9 per cent to 46,971 tonnes, from 40,534 tonnes the year before.

The amount of fresh fruit bunches harvested stood at 797,432 tonnes, up 12.3 per cent from 709,977 tonnes in Q1 2020.

First Resources said under the new levy structure, the levy payable by exporters for every tonne of CPO exported rose from a flat rate of US$55 per tonne to a progressive system wherein the levy increases by US$15 per tonne for every US$25 per tonne of increase in market CPO price. The export levy amounts also vary depending on product type, with that for processed products lower than that for CPO.

"While palm oil prices have rallied and are expected to remain supportive, our H1 2021 results may not be able to enjoy the upside from subsequent increases in market CPO prices due to forward sales entered into previously, whilst having to bear the higher export levies from the higher market CPO prices," First Resources said.

The group expects overall output growth for the full year from a recovery in yields.

"On a full-year basis, there can still be some price upside from remaining unhedged volumes, especially in H2 2021, which is also expected to be seasonally stronger in terms of production volumes," it added.

Shares of First Resources closed at S$1.43 on Monday, down S$0.03 or 2.1 per cent.