-  First Resources Ltd (UNRATED) (FR) held a conference call for its 1HFY13 results yesterday. The group’s annualised net profit was within consensus estimates. FR’s net profit inched up 1.6% YoY to US$101.3mil in spite of a 7.3% fall in turnover.

-  FR is forecasting its FFB nucleus production to grow between 0% and 5% in FY13F. The group’s FFB output was flat in 1HFY13.

-  We understand that the weaker FFB yield is due to tree stress. Most of FR’s oil palm estates in Sumatra, especially those that yielded the highest amount of fruits in FY12, were affected by tree stress.

-  FR plans to export more biodiesel in 2HFY13. Demand for biodiesel has been positive due to low prices of CPO. Biodiesel margins are more attractive than refining margins in Indonesia currently.

-  FR is not affected by provisional anti-dumping duties imposed by the European Union (EU) yet. However, we gather that the rates are still provisional and the final duty rates will be announced at the end of the year. The anti-dumping duties will take effect for five years.

-  Production costs are expected to range between US$250/tonne (RM805/tonne) and US$380/tonne (RM1,223/tonne) in FY13F versus US$238/tonne (RM719/tonne) in FY12. The increase in production costs is mainly due to higher wages.

-  New plantings are forecasted to be between 12,000ha to 15,000ha in FY13F against the initial target of 15,000ha to 20,000ha. New plantings were 6,755ha in 1HFY13. Cost of new plantings is estimated to be between US$6,000/ha and US$7,000/ha.

-  The shortfall in new plantings is due to labour shortage in West and East Kalimantan. We understand that labour turnover has been high.

-  On the outlook for CPO price, we understand that there are headwinds currently. The depreciation of the Indian Rupee may affect demand. There could also be defaults by Indian importers.

-  In addition, we gather that buyers in China faced difficulties in getting letters of credit due to the credit crunch, which took place a few months ago.

Source: AmeSecurities