• Golden Agri Resources (GGR) (UNRATED) has released its 4QFY19 results. The group’s core net profit of US$271.8mil for FY19 was above consensus estimates of a core net loss of US$17.4mil.

• GGR’s core net profit in FY19 was underpinned by the downstream division in 4QFY19. The downstream division recorded a larger EBITDA of US$260mil in 4QFY19 vs. US$38mil in 3QFY19 due to fair value gains on investments in technology and renewable energy assets.

• GGR expects its FFB production to be flat in FY20F (FY19: -6%) due to lagged impact of the dry weather in FY19 and replanting of 20,000ha of ageing oil palm trees (FY19: 17,200ha).

• The group’s cash cost is envisaged to be US$304/tonne (RM1,283/tonne) in FY20F. GGR’s cash costs were US$300/tonne in 4QFY19 and US$304/tonne in FY19.

• Due to the Covid-19 outbreak, GGR thinks that the sales volume of its palm products to China may fall by 25% in FY20F. The group reckons that demand for oleochemical products in China would still be resilient. However, demand from food-based industries such as restaurants may be affected.

• The Indonesian government may hold a meeting this week to discuss the CPO export tax. There is a possibility that the CPO export levy may be eliminated but at the same time, the CPO export tax may be raised. There may also be discussions on the options for biodiesel if energy prices continue to be low.

• In FY19, GGR sold 630,000 tonnes of biodiesel. Out of these, about 85% to 87% were sold to facilitate the domestic B30 biodiesel market.

• GGR is of the view that CPO prices would hover between US$650/tonne (RM2,743/tonne) and US$700/tonne (RM2,954/tonne) in FY20F. This is because palm demand would remain firm but industry palm supply is still tight. GGR’s FFB output were flat YoY in January and February 2020.

Source: AmInvest Research - 2 Mar 2020