Golden Agri-Resources H2 profit up 71.2% to US$323m

GOLDEN Agri-Resources E5H on Tuesday (Mar 1) posted a 71.2 per cent growth in net profit to US$323 million for the second half ended Dec 31, 2021, up from US$188.6 million in the corresponding year-ago period.

The palm oil company's revenue for H2 FY2021 stood at US$5.73 billion, a 55.3 per cent increase from H2 FY2020's revenue of US$3.69 billion.

In a bourse filing, the group said the higher revenue is mainly due to the strong international crude palm oil prices, higher production output and improved margins in its downstream business.

Earnings per share (EPS) for the second half was at 2.54 US cents per share, up from 1.49 cents in H2 FY2020. This brought EPS for FY2021 to 3.75 cents, an increase from 0.25 cent in the previous year.

The board has proposed a final dividend of 1.077 Singapore cents per share, bringing the total dividend for FY2021 to 1.605 cents per share. The final dividend is set to be paid out on May 17, 2022, subject to the approval of the shareholders.

In a call to discuss the company's financial results, Golden Agri's director for investor relations Richard Fung said Golden Agri will also initiate a share buyback programme to "further reward shareholders". For 2022, some US$100 million will be allocated for share buybacks, and the shares acquired by the company will be held as treasury shares.

Revenue for the full fiscal year was recorded at US$10.18 billion, up 43.9 per cent from US$7.08 billion in FY2020 while net profit for the full FY2021 was US$476.2 million, up from US$31.8 million in FY2020.

Fung attributed the improved performance to stronger crude palm oil prices, as well as Golden Agri's competitive strengths, among other factors.

For instance, he said Golden Agri continues to see long-term productivity in its oil palm plantations, which were attained through replanting and technological innovation. The group also replanted higher yielding next-generation seeds in some plantations. "(This) means our production will continue to grow even if our planted land area remains the same," he said.

Annual yields at Golden Agri are "consistently well above" Malaysian and Indonesian industry averages, he added. In terms of volume output in 2022, Fung estimates that Golden Agri will book a "normal increase" this year, somewhere in the low single digits.

The company's integrated business model is another factor. Golden Agri currently has 4 main pillars - origination of raw materials, processing and product customisation, logistics excellence and destination market expertise.

The "end to end" to manage the different segments across the palm oil value chain helps the group "optimally monetise production and better respond to external changes", said Fung.

On the demand end, the easing of Covid-19 restrictions in countries bodes well for demand growth. But supply troubles could push up prices for palm oil, alongside other vegetable oils.

Palm oil prices are currently touching record highs, and analysts are jacking up their price expectations. Fung said the consensus seems to be that these elevated prices will be sustained well into the second half and even for the full year.

"It is certainly true that these very high prices may not be sustainable and will result in demand destruction. But you must realise that our business is doing very well even if the price would come down from here."

Indonesia's progressive export tax structure will also help. Fung explained that the benefits of higher prices go to the government, but "the reverse is also true".

"Even if the price would come down, the actual realised price for Golden Agri actually doesn't come down that much, so we are comfortable with where the pricing is today."

With troubles brewing in agri commodity heavyweights Russia and Ukraine, edible oils will not escape unscathed. Fung said there is already a tight demand-supply situation due to factors such as weather and restrictions in production growth.

Russia and Ukraine represent about 60 per cent of sunflower oil production and over 75 per cent of exports. "This is expected to have a further tightening impact on the supply and demand situation," he said.

Chief executive officer and chairman of Golden Agri Franky Widjaja noted that worldwide edible oil supply remained tight in FY2021 as the economy was recovering gradually and said he expected the tight vegetable oil situation to persist.

To work around this, the group said it will continue to enhance its integrated operations to optimise profit opportunities across the value chain. Golden Agri also has plans to improve its yield, cost efficiency and sustainability initiatives.

Shares of Golden Agri closed at S$0.29 on Tuesday, up 1.8 per cent or S$0.005.

READ MORE:

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• Golden Agri sees itself in a good place to weather volatile palm oil prices