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Financial Performance
Overview: After the extreme volatilities experienced in 2022, the prices of vegetable oils (including palm oil) showed signs of stabilisation, with fluctuations moving within a much narrower range in 2023. CPO prices (CIF Rotterdam) was stable at an average of US$972 per tonne in 2023. It recovered slightly in 1H2024, increasing 3% to an average of US$1,021 per tonne from US$991 per tonne in 1H2023. In line with the higher commodity prices, the Group delivered an improved set of results in 1H2024.Net profit after tax came in significantly higher at Rp631 billion in 1H2024 compared to Rp93 billion in 1H2023. The improved profitability was mainly due to higher gross profit from the Plantation Division, higher gain on biological assets, foreign exchange gain and lower financial expenses. This was partly offset by higher share of JV losses and higher income tax expenses.
Segment Overview: The Plantation Division’s 1H2024 revenue declined 1% mainly attributable to lower sales volume of palm products arising from CPO stock build-up of 7,000 tonnes due to timing in shipments. The decline was partly offset by higher selling prices of palm products (i.e. CPO up 4% and palm kernel (PK) up 14%). Despite this, segment operating profit increased significantly to Rp745 billion from Rp222 billion in 1H2023 on higher commodity prices and stable palm production costs, as well as gain on fair value of biological assets.
Despite lower average selling prices, the EOF Division’s 1H2024 results remained resilient with revenue and segment operating profit at a similar level to last year of Rp5.8 trillion and Rp338 billion, respectively.
Revenue: The Group’s consolidated revenue (after elimination of inter-segment sales) declined 7% to Rp7,053 billion in 1H2024. The decline was mainly due to lower sales volume of CPO and PK-related products and lower selling prices of EOF products.
Cost of sales: Lower cost of sales was mainly due to lower sales volume of palm products and lower purchase costs of raw materials (i.e. CPO) by the EOF Division.
Gross profit: The Group’s 1H2024 gross profit improved by 27% compared to 1H2023 mainly contributed by Plantation Division on higher selling prices and stable palm production costs.
Foreign Exchange (Loss)/Gain: In 1H2024, the Group recognised a foreign currency gain of Rp102 billion mainly due to the translation of US dollar-denominated cash as of 30 June 2024. This was mainly due to the weakening of Indonesia Rupiah against US Dollar to Rp16,421/US$ as of 30 June 2024 compared to Rp15,416/US$ as of 31 December 2023.
Selling and distribution expenses (S&D): S&D expenses reduced 2% to Rp231 billion in 1H2024 mainly due to lower export levy/duty and lower freight costs.
General and administrative expenses (G&A): G&A expenses were within control, increasing slightly by 2% to Rp402 billion in 1H2024.
Other Operating Expenses: Higher Other operating income of Rp89 billion in 1H2024 compared to Rp58 billion in 1H2023 was mainly due to sales of export allocation rights and land compensation income.
Share of Results of Associate Companies: The Group reported lower losses from its associate companies of Rp4 billion in 1H2024 versus Rp40 billion in 1H2023. The lower losses were mainly because this Group has discontinued recognition of FPNRL’s losses beyond the carrying amount since December 2023.
Share of Results of Joint Ventures (JVs): The Group recognised higher JV losses of Rp83 billion in 1H2024 compared to Rp15 billion in 1H2023. The higher losses were mainly due to a one-off lease writeoff in a JV.
Gain/(loss) arising from Changes in Fair Values of Biological Assets: In 1H2024, the Group reported a gain from changes in fair value of biological assets of Rp91 billion mainly due to higher FFB prices. 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 1H2024 increased 131% to Rp1,079 billion mainly due to higher gross profit, higher foreign exchange gain and gain arising from changes in fair value of biological assets. This was partly offset by higher share of JV losses.
Finance Income: Higher finance income in 1H2024 was mainly due to higher fixed deposits at higher deposit rates.
Financial Expenses: The Group’s 1H2024 financial expenses declined by 12% mainly due to lower loans and lower blended interest rates.
Income Tax Expenses: The Group recognised higher income tax expenses in 1H2024 mainly attributable to higher corporate income tax in line with higher profit.
Net Profit After Tax (NPAT): The Group reported significantly higher NPAT of Rp631 billion in 1H2024. This was mainly due to higher profit from operations as explained above and lower net financial expenses, but partly offset by higher income tax expenses.
Attributable Profit to the Owners of the Company: 1H2024 attributable profit came in 236% higher than the same period last year.
Review of Financial PositionAs at 30 June 2024, the Group reported total non-current assets of Rp26.5 trillion compared to Rp27.2 trillion as at 31 December 2023. The decrease was mainly due to the depreciation of property, plant and equipment, lower plasma receivables and lower carrying value of investments in joint ventures. This was partly offset by higher advances for asset purchases.
The Group’s total current assets were Rp11.1 trillion as at 30 June 2024 compared to Rp9.9 trillion as at 31 December 2023. The increase was mainly due to higher CPO inventories due to timing in shipments, higher advances for raw material purchases and prepayment of expenses, higher biological assets and higher cash levels.
As at 30 June 2024, the Group’s total liabilities increased 2% to Rp13.5 trillion mainly due to higher trade and other payables and dividend payable. Total interest-bearing loans and borrowings (current and noncurrent) declined slightly to Rp7.7 trillion as the Group continued to focus on reducing its gearing level.
As of 30 June 2024, the Group recorded net current assets of Rp0.9 trillion compared to Rp0.4 trillion at the last year-end. The Group’s financial position continued to strengthen with higher cash and lower interest-bearing loans and borrowings. The Group’s net debt to total equity ratio decreased from 0.11 times in prior year to 0.09 times as at 30 June 2024 due to the combined effects of higher cash and lower gross debts.
Review of Cash FlowsThe Group reported higher operating cash flows before working capital of Rp1,876 billion in 1H2024, compared to Rp1,517 billion in 1H2023. However, cash flows from operation in 1H2024 came in lower than 1H2023 mainly due to higher inventories, higher trade and other receivables and higher advances to suppliers. This was partly offset by lower trade and other payables during the period.
Net cash flows used in investing activities were Rp405 billion in 1H2024 compared to Rp568 billion in 1H2023 mainly due to lower additions of biological assets and positive net change in plasma receivables.
The Group recorded net cash used in financing activities of Rp226 billion in 1H2024 mainly attributable to net repayment of loans during the period.
The Group’s cash level increased from Rp5,226 billion as at 31 December 2023 to Rp5,589 billion as at 30 June 2024 largely due to positive operating free cash flows.
Commodity prices are expected to remain highly volatile amid uncertainties from weather conditions and geopolitical conflicts. The global outlook and demand growth are likely to remain subdued due to weaker economic growth and challenging macroeconomic factors.
The Plantation Division will continue to focus on crop management activities to raise FFB yields, cost control improvements, pursuing innovations that elevate plantation productivity, and prioritising capital investments in critical areas. Our refinery operation will continue to focus on the growth and recovery of EOF sales volumes through competitive pricing strategies and the increasing population and per capita income growth trends in Indonesia.
