Indofood Agri

Indofood Agri: Weak set of results which were below estimates. Rev at $395m, -3% yoy and -6.8% q/q while net profit at $14m, -72% yoy and -33.5% q/q. Gross margins collapsed to 20.6% vs 34.3% yoy. Higher sales volume of CPO at 208k mt (+15% yoy) was substantially offset by lower ASP of key plantation crops and weaker sales of Edible Oils and fat, although the weaker sales performance was partly offset by positive sales contribution from sugar products. For the qtr, ASPs for CPO was down 16%, palm kernel was down 33% and rubber was down 17%, which was in line with the general decline in agricultural commodity prices. The grp achieved total FFB production of 844,000 tons, -5% yoy and CPO production fell 4% to 182,000 tons on lower purchases from external in 1Q13. FFB yield fell slightly at 3.5 MT per Ha vs 3.9 MT yoy, while CPO extraction rate at 22.2% was relatively flat on a yoy basis. Going forward, grp note that concerns over slowing down economic growth particularly in China and Europe, slower biodiesel demand in Europe and expectations of bumper soybean crops from South America will continue to weigh on commodity prices. On a positive note, Indonesia has now become one of the largest consumers of palm oil together with China and India and the group expect Indonesia's growing food and beverage industry to sustain domestic demand for palm oil products. At current price, annualizing current qtr EPS would see grp trade at hefty valuations of an annualized 32x FY13E P/E.