Halcyon Agri Q3 revenue recovers from Q2 on improved rubber demand

IMPROVED global demand led to higher sales volume and revenue for Halcyon Agri Corp's third quarter, it said on Thursday in a business update.

The mainboard-listed natural rubber supplier's revenue for Q3 was up 11 per cent on the quarter to US$396.4 million, from US$357.3 million in Q2, although it is still down 22.7 per cent year on year due to lower delivered volumes and lower average realised selling prices.

Sales volume was 296,184 tonnes in the third quarter, up 19 per cent from the second quarter but down 11 per cent year on year. The Singapore-based company said that despite an improvement in market sentiment in Q3, its customers were still "relatively cautious" compared with a year ago.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) stood at US$10.9 million for the latest three months, a reversal of the previous quarter's negative Ebitda of US$17.4 million.

This sequential recovery was thanks to improved margins from higher rubber prices, as well as an increase in customer offtakes and demand which allowed the group to better utilise its factory capacity.

Year on year, Ebitda also improved, with the Q3 2020 figure being 4.5 times that of US$2.4 million in Q3 2019, buoyed by strong margins.

Despite the present uncertain business conditions caused by the Covid-19 pandemic, overall sentiment in the rubber market has gradually improved, Halcyon Agri said. Delivery and shipment activities, which were affected by lockdowns in the previous quarters, have also returned to regular levels.

Halcyon Agri chief executive Li Xuetao said the group has been able to take advantage of the recovery in rubber prices to capture wider margins and capitalise on the improved demand to ramp up its factory utilisation during the quarter.

And with last week's issuance of US$200 million in perpetual securities, the group "is now in good shape heading into 2021, to scale up its operations and capitalise on opportunities in the post-pandemic economy", Mr Li added.

The perpetuals, carrying a 3.8 per cent coupon rate, are guaranteed by Chinese state-owned enterprise Sinochem International Corp, which owns Halcyon Agri's major shareholder Sinochem International Overseas.

Halcyon Agri on Thursday said that moving forward, it will focus on initiatives such as building operational resilience; protecting its business and people amid the pandemic; expanding its lead in the global sustainability arena; and deepening collaboration with strategic partners.

Halcyon Agri cited an example of a recent strategic tie-up - its wholly-owned subsidiary earlier this month invested in preferred stocks of Continental American Corporation (CAC), which owns balloon supplier Pioneer Balloon. This transaction supports CAC's new venture to produce latex gloves, and paves the way for further similar investments by Halcyon Agri in the future as well as a potential diversification of the latter's business.

Shares of Halcyon Agri rose 4.4 per cent or one Singapore cent to trade at 23.5 cents as at 9.56am on Friday.

Amendment note: A previous version of this article misspelt Halcyon Agri's company name.