Global Palm Resources

Global Palm Resources (GPR): 3Q13 net profit declined 19% y/y to Rp10.3b due to higher cost of sales (+40%) and labour expenses (+13%), while gross margin shed 7ppts to 37.5%. Revenue jumped 25% to Rp73.2b on higher crude palm oil (CPO) (30%) and stable palm kernel sales, despite lower CPO (-2%) and palm kernel (-6%) average selling prices due to the supply glut and sluggish demand in the industry. At the operational level, FFB yield fell 7% to 4.2 tons/ha while production efficiency remained stable at 21.4% CPO extraction rate and 4.2% extraction on palm kernel. GPR expects labour costs to rise in the coming months with the upward revision of Indonesia’s minimum wages with effect 2013, though it does not expect the impact to be significant as labour costs constitute 20% of its total production cost per ton of CPO. Management continue to have a positive outlook on the longer term sustainability of global demand for palm oil, and will maintain its focus on cost optimization going ahead.