• Bumitama Agri Ltd (BAL, UNRATED) has released its 3QFY19 results. The group reported a net profit of Rp424.9bil in 9MFY19, which was below consensus estimates of Rp767.6bil for the full year.

• BAL’s net profit fell by 52.2% YoY to Rp424.9bil in 9MFY19 dragged mainly by a 12.8% decline in average CPO price and 4.1% slide in internal FFB production.

• BAL is now guiding for its internal FFB production (nucleus and plasma) to be flat in FY19E compared with the original guidance of a 5% to 8% growth. 2H is expected to make up for about 55% of BAL’s FFB production in FY19E while 1H is envisaged to account for another 45%.

• BAL does not have any guidance for its FFB production growth for FY20F yet. The group is currently carrying out a second round of bunch census.

• BAL reckoned that there could be a slight impact on FFB production in FY20F as the haze in September had affected not only the moisture but the amount of sunlight at its oil palm estates. So far, BAL is unable to quantify the exact impact on FFB output growth in FY20F yet.

• We understand that rainfall was good at BAL’s oil palm estates in October. There has not been any adverse weather condition except for the drought in the first half of 3QFY19.

• BAL’s CPO cash cost per kg is expected to rise by 10% in FY19E (FY18: Rp3,796/kg) due to a lower volume of CPO production and higher costs of fertiliser and wages. The group recorded CPO cash costs of Rp4,482/kg (RM1,308/tonne) in 9MFY19 and Rp3,952/kg (RM1,165/tonne) in 3QFY19.

• BAL applied 83% of its full-year fertiliser requirements in 9MFY19. The group plans to complete the balance 17% of its full-year fertiliser requirements in 4QFY19. There is no outlook on fertiliser costs for FY20F yet as BAL is still finalising its budget.

• In spite of rising CPO prices, BAL has not carried out any forward sales. The group only locks to sell the volume of its CPO production and not prices. The group is expected to be a beneficiary of the uptick in CPO prices in 4QFY19.

Source: AmInvest Research - 13 Nov 2019