Wednesday, August 15, 2012

Indofood Agri

Indofood Agri: 2Q12 results in-line. Stronger contribution from Indofood Agri’s downstream division could not cover the drop in plantation profits, leading to weaker 2Q earnings. However, 2H12 should get a boost from stronger FFB production and maiden sugar contributions. The main surprise was higher operating costs from its plantation division, which could have emanated from the new sugar mill commissioned in 2H11. Grp also explained that higher costs were partly due to higher purchases of 3rd parties’ fruits. As a result, 2Q plantation earnings fell 16% despite the 5% improvement in CPO sales volume and ASP for CPO in 2Q. Refining margin of the edible oils and fats division slipped from 8% in 1Q to 3% in 2Q, probably due to rising competition from new refineries. Going forward, CIMB expect a better 2H performance due to 1) seasonally stronger palm production in 2H, 2) stronger sales vol for cooking oils and fats due to the Ramadan festival in 3Q, and 3) maiden earnings contribution from its sugar business. Ratings as follow: CIMB maintains OutPerform with $1.85 TP

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