• Bumitama Agri Ltd (BAL) (UNRATED) reported a 1QFY19 net profit of Rp110.6bil yesterday, which was below consensus estimates of Rp1.235 trillion for the full year.

• Revenue declined by 12.1% YoY to Rp1.7 trillion in 1QFY19 while net profit plunged by 52.3%. BAL’s nucleus FFB production inched up by 2% YoY in 1QFY19.

• BAL is sticking to its FFB growth guidance of 15% for FY19F even though the group’s FFB (nucleus and plasma) only increased by 3.4% in 1HFY19. BAL has carried out two samplings on some of its oil palm trees. The results of the samplings indicated that the group’s FFB is expected to be stronger in 2HFY19.

• BAL’s FFB production patterns are envisaged to change this year. 2H is expected to account for 58% of full year’s FFB production instead of the usual 55%. 1H is forecast to account for only 42% of BAL’s FFB output this year. We understand that so far, there are no issues with weather.

• BAL is hopeful that its CPO production cost would remain flat at Rp3,796/kg (RM1,077/tonne) in FY19F. The group’s cost of production rose by 8.7% to Rp4,879/kg (RM1,412/tonne) in 1QFY19 from Rp4,487/kg (RM1,297/tonne) in 1QFY18.

• The YoY increase in the cost of production in 1QFY19 was mainly due to a 10% rise in fertiliser cost, 8% climb in wages and 7% hike in fuel costs. BAL applied 35% of its full-year fertiliser requirements in 1QFY19 compared with 31% in 1QFY18.

• Apart from these, BAL’s selling expenses surged by 84.3% YoY to Rp90.6bil in 1QFY19 dragged by higher costs of barges, insurance and freight.

• BAL’s customers such as Wilmar International and Golden Agri Resources are now buying CPO on a CIF (cost of insurance and freight) basis, instead of FOB (free on board). About 60% of BAL’s CPO sales in 1QFY19 were based on a CIF basis compared with 40% in 4QFY18.

• BAL’s target is to plant 2,000ha of oil palm in FY19F. In 1QYF19, the group’s new plantings of oil palm were only 29ha. BAL’s mature areas are anticipated to increase by 7,000ha in FY19F and 4,000ha in FY20F.

Source: AmInvest Research - 15 May 2019