Indofood Agri

Indofood Agri: Announced 3Q13 result which was largely in line with estimates. Net profit came in at Rp 122.9b (-52% y/y, +86% q/q) and revenue at Rp 3,076.3b (-13% y/y, -8% q/q), taking the group’s 9M13 earnings to Rp 295.6b (-67%) The lower y/y sales performance was affected by lower average selling prices (ASP) of key plantation crops, lower bulk oil and copra-based product sales. The lower ASPs also impacted gross margins, which fell 27.2% vs 30.1% further contributed by higher production cost arising from rising wages and from newly matured plantations. The plantation division saw total revenue at Rp 2,042.2b (-12%), reflecting principally lower commodity prices, but on a q/q basis, the division reported a good improvement in EBITDA margins, in line with the recovery in the average selling prices of CPO and palm kernel (PK) of 11% and 16% respectively. The Edible Oils & Fats (EOF) division reported total revenue of Rp 2,185.9b (-6%), with the softer sales attributable to the combined effects of lower sales volume of bulk oil and copra-based products, as well as a 10% price reduction for consumer cooking oil and margarine. On a positive note, the bottom-line’s decline was partly negated by the recognition of a maiden profit contribution from its investment in a joint venture, CMAA of Rp 50b in 3Q13. Going forward, the group expects to see softer commodity prices for the remainder of 2013, which will continue to impact its performance. Note however that its Edible Oils & Fats division continues to deliver positive results, demonstrating the strength of its brand and integrated business model. The group has also commenced its sugar harvest season in May, with contributions expected to be realized in 2H13.