Golden Agri's Q3 net profit slumps 86%, poorest quarter in 11 years

Singapore

FLUCTUATING palm-oil prices, thin margins across the board and a challenging oilseeds business in China led Golden Agri-Resources' net profit to plunge 86 per cent to US$4.36 million in the third quarter from US$30.22 million a year ago.

This would mark the world's second largest oil palm firm's weakest quarterly earnings in 11 years.

A higher foreign exchange loss of some US$29 million from US$6 million was also recorded for the period.

Revenue for the period ended September 2014 rose 17 per cent to US$1.84 billion from US$1.57 billion.

Led by lower crude palm oil prices, Golden Agri's plantation and palm oil mills business posted earnings before income tax, depreciation and amortisation (Ebitda) of US$110 million, down 4 per cent from a year ago.

Ebitda in the palm and lauric business improved to US$6.8 million from a loss of US$7.8 million while the oilseeds business lost US$18 million.

In a statement, Golden Agri said it expects the operating environment in China to remain challenging in the near to medium term and it will review the business model and strategic alternatives for this business.

Earnings per share fell to three US cents from 24 US cents.

The firm declared a dividend per share of 0.408 Singapore cents compared with 0.585 Singapore cents previously.

For the nine-month period, net profit fell 28 per cent to US$135.84 million on the back of a 24 per cent rise in revenue to US$5.8 billion.

In a statement, Golden Agri said operating performance will be affected by the fluctuating commodity prices, sustainability of the global economic recovery, climatic conditions, as well as developments in Indonesia and China.

However, it expects fundamentals to stay strong as demand for palm oil increases due to robust primary demand growth for both food and non-food usage which include biodiesel and oleochemicals, while supply growth is expected to moderate.

"We are optimistic that (the) palm oil industry remains positive in the medium term, even though the current prices are at the lower end of its five-year historical average," said Golden Agri chairman and chief executive Franky Widjaja in a statement.

Golden Agri also announced that its wholly owned Golden Agri International India plans to acquire up to a 75 per cent stake in Gemini Edibles & Fats India (GEFI), a Hyderabad-based firm that trades, manufactures and markets edible oils and fats, for US$25.6 million.

"The acquisition provides the opportunity to participate in the high growth branded cooking oils and specialty fats industries in India, one of the major edible oil consumers globally, which is in line with the group's strategy to extend its distribution and processing reach to key consuming countries," said Golden Agri, in a separate announcement.

A big portion of that stake came from India's edible oil major Ruchi Soya. In an announcement to the Bombay Stock Exchange, Ruchi Soya said its sold its 50 per cent stake in GEFI to Golden Agri for US$17.9 million.

According to India's Business Standard, Golden Agri acquired a 20 per cent stake in GEFI from Pradeep Chowdhry, the Indian firm's current chief executive.

GEFI incurred losses three out of five years since its existence, owing to "unfavourable government policy, which made edible oil business unviable in India", said the report.

During the fiscal year ended 2014, the business sheet said, GEFI recorded a net loss of 40 million rupees (S$840,000), which the report deemed "a small yet significant amount for edible oil companies".

Shares of Golden Agri closed unchanged at 51 Singapore cents on Wednesday.