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Financial Performance
Overview: Prices of most agricultural commodities increased sharply in the first half of last year with the loss of Ukraine’s sunflower oil due to Russia’s invasion and the Indonesian government's palm oil export ban. Commodity prices had eased since July 2022 following the lifting of the export ban, along with ample supplies of competing vegetable oils and the resumption of exports of food commodities through the Black Sea Grain Initiative. CPO prices (CIF Rotterdam) declined 39% to an average of US$991 per tonne in 1H2023 from US$1,638 per tonne in 1H2022.The Group recorded lower profitability in 1H2023 despite higher sales volume of palm products and edible oils products. Net profit after tax declined 83% to Rp 93 billion in 1H2023 mainly due to lower profit from the Plantation Division on lower selling prices of palm products. The decline was partly offset by higher profit contributions from the Edible Oils and Fats (EOF) Division.
Segment Overview: The Plantation Division’s 1H2023 revenue declined 17% mainly attributable to lower selling prices of palm products (i.e. crude palm oil (CPO) down 21% and palm kernel (PK) down 52%), partly offset by higher sales volume of palm products. Segment operating profit declined to Rp222 billion from Rp1,291 billion in 1H2022.
The EOF Division’s 1H2023 revenue declined by 3% on lower selling prices. This Division reported improved segment operating profit of Rp334 billion in 1H2023 compared to Rp196 billion in 1H2022.
Revenue: Despite higher sales volume of palm products and EOF products, the Group’s consolidated revenue (after elimination of inter-segment sales) declined 6% to Rp7,608 billion in 1H2023. The decline was mainly due to lower selling prices of palm products and EOF products.
Cost of sales: Higher cost of sales was mainly due to higher sales volume of palm products and higher purchases of CPO by the EOF Division in line with higher sales volume of EOF products.
Gross profit: The Group’s 1H2023 gross profit declined 43% compared to 1H2022 mainly due to Plantation Division on lower selling prices of palm products. This was partly offset by higher sales volume of palm and EOF products.
Foreign Exchange (Loss)/Gain: In 1H2023, the Group recognised a foreign currency loss of Rp42 billion mainly due to the translation of US dollar-denominated net assets position (i.e. cash and loans) as of 30 June 2023. The foreign currency loss was mainly due to the strengthening of Indonesia Rupiah against US Dollar to Rp15,026/US$ as of 30 June 2023 versus Rp15,731/US$ as of 31 December 2022.
Selling and distribution expenses (S&D): S&D expenses increased 14% to Rp235 billion in 1H2023 mainly due to higher export levy/duty and freight charges arising from higher sales volume of EOF products.
Other Operating Expenses: Other operating expenses decreased to Rp53 billion in 1H2023 from Rp268 billion in 1H2022 mainly due to lower allowance for plasma receivables.
Share of Results of Associate Companies: The Group reported higher loss from its associate companies in 1H2023 of Rp40 billion versus Rp24 billion in 1H2022. The higher losses was due to the sugar operation in Philippines.
Share of Results of Joint Ventures (JVs): Brazil’s sugar milling and harvesting season commences in April, and CMAA will usually carry out its factory maintenance and upkeep in the first quarter of the year. Thus it is normal for the sugar business to incur losses during this period. The Group recognised lower JV losses of Rp15 billion in 1H2023 compared to Rp36 billion losses in 1H2022. The lower losses were mainly due to gains arising from changes in fair value of biological assets and positive foreign exchange impacts.
Loss arising from Changes in Fair Values of Biological Assets: In 1H2023, the Group reported a lower loss from changes in fair value of biological assets of Rp45 billion compared to Rp108 billion in 1H2022. The loss in 1H2023 was mainly due to lower FFB prices but partly offset by higher volume.
Profit from Operations: The Group’s profit from operations in 1H2023 declined 61% to Rp468 billion mainly due to lower gross profit and higher foreign exchange loss. This was partly offset by lower allowance for plasma receivables and lower loss arising from changes in fair value of biological assets.
Financial Expenses: Despite lower loans than last year, the Group’s 1H2023 financial expenses increased by 10% mainly due to higher blended interest rates.
Income Tax Expenses: The Group recognised lower income tax expenses in 1H2023 mainly attributable to lower corporate income tax in line with lower profit.
Net Profit After Tax (NPAT):The Group reported lower NPAT of Rp93 billion, decreasing 83% from 1H2022. This was mainly due to lower profit from operations as explained above, but partly offset by lower income tax expenses.
Attributable Profit to the Owners of the Company: 1H2023 attributable profit came in 65% lower than the same period last year.
Review of Financial PositionAs at 30 June 2023, the Group reported total non-current assets of Rp27.5 trillion compared to Rp27.7 trillion as at 31 December 2022. The decrease was mainly due to the depreciation of property, plant and equipment and lower carrying value of investments in associate companies and joint ventures.
The Group’s total current assets were Rp10.2 trillion as at 30 June 2023 compared to Rp10.6 trillion as at 31 December 2022. The decrease was mainly due to lower trade and other receivables, and lower CPO inventories. However, this was partly offset by higher prepayment of expenses and higher cash levels.
As at 30 June 2023, the Group’s total liabilities decreased 3% to Rp14.7 trillion mainly due to higher loan repayment in 1H2023 and lower income tax payable in line with lower profit.
The Group’s net debt to total equity ratio decreased from 0.20 times in prior year to 0.18 times as at 30 June 2023 due to the combined effects of higher cash and lower gross debts.
Review of Cash FlowsDespite lower cash flows from operating activities, the Group’s 1H2023 net cash flows from operation after changes working capital of Rp1,408 billion came in close to 1H2022 mainly due to lower inventories, lower receivables, lower advances to supplies, and lower income tax paid. This was partly offset by higher payables during the period.
Net cash flows used in investing activities were Rp638 billion in 1H2023 compared to Rp588 billion in 1H2022 mainly due to higher plasma projects, higher additions of biological assets and lower dividend received from a joint venture.
The Group recorded higher net cash used in financing activities of Rp548 billion in 1H2023 compared to 1H2022 mainly attributable to higher net repayment of loans during the period.
The Group’s cash level increased from Rp4,422 billion as at 31 December 2022 to Rp4,585 billion as at 30 June 2023 largely due to positive operating free cash flows.
The global vegetable oil market outlook remains uncertain driven by global economic developments, geopolitical conflicts and rising protectionism. Climate change and weather patterns will have an adverse impact on plantation crops and operations and continue to drive commodity price volatility.
The Group will continue prioritising capital expenditure on critical infrastructure and tighten cost controls. We will also continue to focus on crop management activities and explore relevant innovations and mechanisation programmes to raise plantation productivity. Our refinery operations will be focusing on the growth and recovery of EOF sales volumes through competitive pricing strategies.
