• Bumitama Agri Ltd (BAL) has released its 2QFY19 results. BAL’s net profit of Rp235.2bil in 1HFY19 was below consensus estimates of Rp977.3bil for the full year.

• BAL has forecast its FFB to grow by 5% to 8% in FY19E. BAL’s mature areas are expected to rise by 7,000ha in FY19E. 2H is expected to account for 57% of BAL’s full-year FFB production in FY19E while 1H is estimated to make up the balance 43%.

• Previously, the group guided for a 15% increase in FFB production in FY19E. BAL’s nucleus FFB production fell by 5.3% YoY in 1HFY19 as FFB yield shrank by 8.2% to 8.9 tonnes/ha. On a QoQ basis, the group’s FFB production rose by 9.7% to 246,282 tonnes in 2QFY19.

• BAL’s cash cost is anticipated to increase by 5% in FY19E (FY18: Rp3,796/kg) due to the fall in CPO production and higher costs of fertiliser and wages.

• BAL’s cash costs were Rp4,813/kg (RM1,397/tonne) in 1HFY19 compared with Rp3,987/kg (RM1,140/tonne) in 1HFY18. BAL applied 54% of its full-year fertiliser requirements in 1HFY19 vs. 46% in 1HFY18.

• BAL’s selling expenses are also expected to rise in FY19E due to higher costs of insurance and freight. About 60% of BAL’s CPO products were sold on a CIF (cost of insurance and freight) basis in 1HFY19 vs. 45% in 1HFY18. BAL’s selling expense climbed by 86% YoY to Rp174.2bil in 1HFY19.

• We understand that the weather is hot at BAL’s oil palm estates currently. Although there are intermittent rains, rainfall is low. BAL has reported about 23 fire incidents, which took place outside its oil palm estates this year.

• We gather that Indonesia plans to implement the B30 biodiesel policy in January 2020. Also, there is no news that the government would be reintroducing the CPO export levy anytime soon.

Source: AmInvest Research - 15 Aug 2019