• Bumitama Agri Ltd’s (BAL) (UNRATED) 9MFY15 results were below consensus estimates of an Rp1.063trillion net profit for the full year. BAL’s net profit fell by 32.5% YoY to Rp598.4bil in 9MFY15 as revenue contracted by 2.2%.
• We understand that Kalimantan has been receiving rains in the past few weeks. The haze is still around but it has been dissipating. Bumitama reckons that its FFB production in FY16F will be affected. Initial estimates are that FFB output growth may be reduced by 5-percentage points in FY16F. The group would only be able to give clearer guidance in early-FY16F.
• Bumitama expects its 4QFY15 FFB production to be flat or slightly higher compared to 3QFY15. Comparing 4QFY15 against 4QFY14, the group’s FFB output is forecast to be lower. The group is anticipating a 15% increase in FFB output in FY15F. In spite of the 15% rise in FFB output, CPO production is expected to climb by a stronger 20% in FY15F due to an increase in FFB purchases. Bumitama’s nucleus FFB production expanded 6.5% YoY in 9MFY15.
• Bumitama’s CPO cash cost is expected to increase 10% in FY15F. The group’s CPO cash cost was Rp2,932/kg (RM857/tonne) in 3QFY15 compared with Rp3,448/kg (RM936/tonne) in 3QFY14. CPO cash cost was Rp3,944/kg (RM1,123/tonne) in 9MFY15 versus Rp3,802/kg (RM1,050/tonne) in 9MFY14. Bumitama’s cost-cutting initiatives, coupled with less fertiliser application, had contributed to the fall in production costs in 3QFY15 compared with 3QFY14. Bumitama had applied 71% of its full-year’s fertiliser requirements in 1HFY15.
• Bumitama will be delivering 20,000 tonnes of biodiesel to Pertamina in six months. The selling price is based on the summation of CPO price, operating margin of US$125/tonne and transportation costs. The CPO price used in the formula is based on the Indonesia Government’s price release for the previous month. Bumitama’s biodiesel plant is in Gresik.
• New plantings of oil palm amounted to 4,143ha in 9MFY15. Of this, about 3,467ha are nucleus plantations while the balance 676ha is for plasma farmers. Bumitama’s new plantings target is 4,000ha (nucleus) for FY15F.
• CPO inventory was high at 50,000 tonnes as at end-3QFY15. We understand that this was due to a delay in the timing of the delivery. As at end-October 2015, CPO inventory had declined to the normal levels of 20,000 tonnes to 30,000 tonnes.
• Due to the implementation of FRS41, Bumitama’s depreciation expense is expected to increase by Rp110bil in FY16F. There will not be a fair valuation of biological assets in the P&L in FY16F.

Source: AmeSecurities Research - 13 Nov 2015