First Resources Q3 underlying net profit rises by 44.9% on higher prices and volume

FIRST Resources EB5 on Monday (Nov 15) reported an underlying net profit of US$52.8 million (S$71.4 million) for the third quarter ended Sep 30, up 44.9 per cent from US$36.5 million the year before.

The marked improvement in topline performance was driven by the higher average selling prices and stronger sales volume, the palm oil producer said in a business update.

The group added that the better performance also came from a net inventory drawdown of 48,000 tonnes in Q3 2021 as compared to a net build-up of 5,000 tonnes in Q3 2020. Sales also rose by 89.2 per cent to US$314.2 million, from US$166.1 million the year prior.

The group saw a 4.1 per cent decrease in crude palm oil (CPO) production to 228,460 tonnes from 238,226 tonnes in Q3 2020. Palm kernel production was down 3 per cent to 53,096 tonnes, from 54,760 tonnes the year before.

The amount of fresh fruit bunches harvested stood at 909,506 tonnes, down 2.1 per cent from 928,900 tonnes in Q3 2020.

First Resources said the earnings before interest, taxes, depreciation, and amortisation and underlying net profit in the first 9 months of 2021 continued to reflect the impact of higher export taxes from the progressive export levy structure implemented in Indonesia since Dec 2020.

However, the reduction in export levies for palm oil products effective Jul 2, 2021 is positive for the Group's results in Q3 2021 and beyond.

Under the revised levy structure, the incremental levy on CPO payable by exporters for every US$50 per tonne of increase in market CPO price was reduced from US$30 per tonne to US$20 per tonne, while the maximum levy payable for every tonne of CPO exported was lowered by US$80 per tonne.

Chief executive officer of First Resources, Ciliandra Fangiono, said that on the production front, Q3 2021 is shaping up to be the peak production quarter for the group as output for Q4 2021 is expected to taper off quarter on quarter.

"Demand for palm oil has been fuelled by India's reduced import duties to contain rising domestic vegetable oil prices. In addition, China's power supply issues hampered soybean crushing activities and drove substitution demand for palm oil. The supply of palm oil, on the other hand, has been impeded by labour shortages in Malaysia. As a result, palm oil prices were propelled to historical highs recently," said Fangiono.

Fangiono added that price movements in energy and other vegetable oils will continue to exert an influence on the direction of palm oil prices going forward.

Shares of the First Resources closed up 1.9 per cent or S$0.03 at S$1.60, as at Friday (Nov 12) .

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