-  Bumitama Agri Ltd (BAL) (S$1.19, UNRATED) held a conference call on its 2QFY14 results yesterday. The group’s results were within consensus estimates. BAL’s net profit grew 96.3% YoY to Rph602.1bil in 1HFY14 as turnover improved by 51.9%.

-  BAL is sticking to its FFB production growth forecast of 25% for FY14F in spite of a 36.8% YoY increase in 1HFY14. This is because it is still too early to conclude if the surge in FFB production in 1HFY14 was due to a catch-up in productivity after slower output in 4QFY13 or the results of its rehabilitation efforts. We understand that weather conditions have been normal in Kalimantan.

-  Size of new plantings of oil palm has been reduced from 13,000 to 15,000ha to a range of 3,000ha to 5,000ha for FY14F. In 1HFY14, the group’s new plantings were only 781ha. Out of these, about 698ha were plantings for plasma farmers. The balance 83ha was new plantings at BAL’s own estates.

-  The slowdown in new plantings was due to compliance with RSPO requirements. This is the first year BAL is adopting RSPO’s standards and guidelines.

-  Currently, BAL has plantable reserves of 53,000ha in Indonesia. However after land surveys and restrictions, it is likely that only 60% to 70% of the land would be plantable. This means that BAL’s plantable reserves would come up to about 31,800ha to 37,100ha.

-  BAL is venturing into biodiesel. The group plans to carry out trial production of biodiesel at its new plant in East Java in October or November 2014. The plant, which is expected to cost US$10mil, will have a capacity of 20,000 tonnes per year upon completion.

-  BAL plans to be ready for biodiesel production when the Indonesian government revises the formula for the selling price of biodiesel. Recall that biodiesel consumption in Indonesia has fallen short of targets this year due to the unattractive selling price of biodiesel.

-  Finally, BAL’s production cost was Rp4,280/kg (RM1,192/tonne) in 2QFY14 compared with Rp3,607/kg in 1QFY14 (RM1,005/tonne). The increase in production cost per tonne was due to higher application of fertiliser. About 50% of full-year’s fertiliser requirements had already been applied in 1HFY14.

Source : AmeSecurities