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Bumitama Harvests Positive FY13 Results, Plans For Production Increase
Corporate Digest | 28 February 2014
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By: Peter Ng
Articles (81) Profile

For the fourth quarter ended 31 December 2013, revenue for Bumitama Agri surged 30.4 percent to IDR1.3 trillion, compared to IDR1 trillion in the corresponding quarter last year. This was due to an increase in the selling prices of crude palm oil (CPO) and palm kernel (PK), partly attributed to the favourable movement in foreign exchange. Coupled with lower overall expenses, notably a more than 60 percent shrinkage in finance costs, has led the company to recognise earnings of IDR380.4 billion in 4Q13, a 65.9 percent increase compared to 4Q12. For the full year, revenue registered a 15.2 percent growth to IDR4.1 trillion, while earnings in FY13 went up 8.6 percent to IDR855.5 billion.

During the earnings announcement session, the management has commented that Bumitama remains as a member of the Roundtable on Sustainable Palm Oil (RSPO), a non-profit organisation with an objective of promoting growth and the use of sustainable oil palm products while adhering to credible global standards. This was in view of the alleged complaint filed on the company’s subsidiary in April 2013 for the violation of RSPO principles and criteria by clearing high conservation value forest as well as endangering the wildlife found there. The management has elaborated that auditors were sent by RSPO to perform audit checks on the company’s planting practices where they have found no evidence of such violations and “are confident that planting activities will not be stopped again moving forward”.

The company has indicated that production of CPO and PK in 2014 is expected to grow 13 percent from a combined volume of 620.9 million tonnes in 2013. Secondly, a method known as ‘hedge and carry’, which involves shifting the location of insects used during plantation, particularly from West Kalimantan to Central Kalimantan and vice-versa, will be put on trial to spur pollination and in turn expected to increase production. At the current juncture, the company sits on an unplanted bank of 54,000 hectares which is projected to last for another four years before they are completely depleted. As such, it is not likely to consider any merger and acquisition activities for production growth.

Indonesia’s government has recently strengthened the biodiesel mandate in August 2013 by making it compulsory for power utilities companies to use gasoil blended with 20 percent biodiesel for power generation. The move could have potentially induced more demand for CPO, sending the commodity to spike 12.2 percent upwards from RM2,490 in August 2013 to close at RM2,794 on 28 February 2014. According to a leading industry analyst Dorab Mistry at Godrej International, CPO prices are expected to hover in the zone of RM2,800 but cautioned that further rise in CPO price could dent demand and lead to declines after 1H14. Along with its sound performance in FY13, potential increase in palm oil production and having cast aside the complaint involving RSPO, will more good news unfold for Bumitama in 2014?

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

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Bumitama Agri  0.565 -- --   
Business: Co produces and trades in crude palm oil (CPO), palm kernel (PK), and related products for refineries in Indonesia.

Insight: Feb-19, FY18 revenue increased 3.1% mainly due to ... Read More

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