• Indofood Agri Resources Ltd (IFAR) (UNRATED) reported its FY18 results yesterday. The group reported a core net loss of Rph185.5bil in FY18 compared with a net profit of Rp656.9bil in FY17.

• IFAR’s reported net profit in 4QFY18 included an impairment of Rp87.0bil in respect of its sugar assets in Brazil.

• IFAR’s FFB nucleus production rose by 9% in FY18 while average CPO price fell by 15% to Rp6,956/kg (RM1,973/tonne).

• Sumatra accounted for 77% of IFAR’s FFB nucleus production in FY18 while Kalimantan accounted for another 23%. IFAR’s FFB nucleus output rose by 6% in FY18 while FFB nucleus production in Kalimantan surged by 17%.

• IFAR expects its FFB production (nucleus) to grow by 5% to 10% in FY19F compared with9% in FY18. The group will be replanting about 4,000ha of ageing oil palm trees in FY19F vs. 4,200ha in FY18. Average age of IFAR’s oil palm trees is 15 years old.

• IFAR thinks that Indonesia’s CPO production will increase by 2mil to 2.5mil tonnes in 2019F. Currently, Oil World is forecasting CPO output in Indonesia to rise to 41.5mil tonnes in 2019F from 39.8mil tonnes in 2018 while Indonesian Palm Oil Association is estimating CPO production to expand to 47.3mil tonnes from 43mil tonnes.

• IFAR reckons that its cost of production will inch up by 5% in FY19F from FY18’s Rp4,970/kg (RM1,409/tonne). Average minimum wage is expected to increase by 8% in FY19F while fertiliser costs are envisaged to be flat.

Source: AmInvest Research - 1 Mar 2019