• Golden Agri Resources Ltd (GGR) (UNRATED) reported its FY18 results yesterday. The group’s core net loss of US$2mil for FY18 was roughly within consensus estimates of US$3.3mil. GGR’s FFB nucleus production rose by 8% in FY18 while average CPO price fell by 17% to US$565/tonne (RM2,280/tonne).

• GGR expects its FFB production (nucleus and plasma) to grow by 5% in FY19F compared with 10% in FY18. The group will be replanting about 15,000ha of ageing oil palm trees in FY19F vs. 10,500ha in FY18. Average age of GGR’s oil palm trees is 16 years old.

• GGR is hopeful of keeping its cash cost below US$300/tonne (RM1,218/tonne) in FY19F in spite of a 15% increase in fertiliser costs and 10% hike in minimum wage. The group’s cash cost was US$286/tonne (RM1,154/tonne) in FY18 compared with US$299/tonne (RM1,286/tonne) in FY17.

• GGR’s biodiesel division performed well in FY18. The unit generated an EBITDA of US$40mil to US$50mil in FY18, which was 7.0% to 8.7% of group EBITDA. GGR’s biodiesel plant is operating at full capacity currently as its biodiesel allocation from Pertamina has increased from 292,000 kiloliters (254,355 tonnes) to 531,000 kiloliters (462,544 tonnes).

• GGR has not decided whether to exit or make an impairment for its plantation operations in Liberia. GGR said that it is difficult to grow the business in Liberia as its infrastructure is challenging and there is little policy support from the government. GGR has concessions for almost 200,000ha of land in Liberia. Including shareholders’ loans, GGR’s cost of investment is US$400mil in Liberia.

Source: AmInvest Research - 28 Feb 2019