-  Bumitama Agri Ltd (BAL) (UNRATED) held a conference call for its 1HFY13 results yesterday.

-  The group’s core net profit fell by 8.4% YoY to Rp321.7bil in 1HFY13 in spite of a 10.4% increase in turnover. Consensus is forecasting a net profit of Rp870.9bil for FY13F.

-  BAL is expecting its FFB production to climb by 25% in FY13F. The group’s FFB output rose by 21.5% YoY in 1HFY13.

-  Production costs rose to Rp3,631/kg (RM1,146/tonne) in 1HFY13 from Rp3,450/kg (RM1,089/tonne) in 1HFY12 due to higher wages and fertiliser costs.

-  Production costs are envisaged to ease in 2HFY13 due to lower selling expenses resulting from the usage of barges. Cost of transporting CPO via barges and sea is lower than trucks.

-  BAL’s barges, which will be used to transport CPO to the refineries, are expected to start operations in 3QFY13.

-  Additionally, as BAL had already applied 60% of its full-year fertiliser requirements in 1HFY13, fertiliser expenses should soften in 2HFY13.

-  We understand that potash cost in Indonesia has yet to decline unlike in Malaysia. However, we gather that this is only a matter of time.

-  Recall that potash prices are expected to fall by as much as 25% due to the break-up of the global fertiliser cartel.

-  Prices of rock phosphate and urea in Indonesia are still the same.

-  BAL normally locks in its fertiliser requirements at the end of the year and just before the middle of the year.

-  Although there has been a shift in weather patterns, this is not a major issue yet. We understand that the dry spell and rainy season have arrived in Kalimantan earlier than expected.

Source: AmeSecurities