Indofood Agri

Indofood Agri: 2Q11 results slightly disappointing.
Net profit at Rp 309b, +31% yoy, but -40% qoq, partly due to the lower shareholding of PT SIMP following listing.
Revenue at Rp 3.2tr, +53% yoy, +10% sequentially, with improvements from both the Plantation division (+35% yoy) and Edible Oils & Fats division (+69% yoy). The group saw higher sales volume and ASP for most pdts (CPO, palm kernel, oil palm seeds, cooking oil, margarine and palm by-pdts), with the exception of copra-based and palm-based pdts. In addition, 1H11 edible oils and fats sales volume increased by 20% yoy supported by the increased refining capacity of the new Jakarta refinery.
CPO prices (CIF Rotterdam) remained well supported in 1H11 with an average of US$1,199 / ton vs US$901 / ton in FY10.
Gross margins however, slipped to 34% from > 40% in the previous 2 quarters, and 37% in 2Q10.

Following the listing of its main subsidiary, PT SIMP, the group raised total net proceeds of Rp3.3 tr, of which Rp1.7 tr were used for the repayment of loans to acquire a majority equity ownership in Lonsum. Net debts to total equity ratio improved from 0.3x in last year end to 0.06x as of end Jun. NAV/sh improved 11% to Rp 8,450 (S$1.20/sh).
Mgt notes CPO stock levels and supply are expected to rise in 2H11, entering into the usual peak production season for palm. But adds, the recent widening of palm oil’s price discount to soya oil and increasing festival demand in 3Q11 could lend certain support for palm oil prices in the near term.