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Financials

UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS & RELATED ANNOUNCEMENT FOR THE SIX MONTHS & FULL YEAR ENDED 31 DECEMBER 2023

Financials Archive

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Condensed Interim Consolidated Statement of Comprehensive Income

Condensed Interim Statements of Financial Position

Review of performance of the Group

Financial Performance

Overview: : Prices of most agricultural commodities increased sharply in the first half of 2022, driven by the disruption of Ukraine’s sunflower oil supply due to Russia’s invasion and the Indonesian government's ban on palm oil exports. However, commodity prices started to ease from July 2022 following the lifting of the export ban, along with the increased availability of competing vegetable oils. 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) declined by 29% to an average of US$972 per tonne in 2023 from US$1,370 per tonne in 2022.

The Group delivered an improved set of 2H2023 results with net profit after tax increasing 9% over the same period last year. This was mainly due to improved profit contribution from the Plantation Division on stable CPO prices and higher sales volume of CPO, lower other operating expenses and net changes in fair value of biological assets.

The Group’s profitability for FY2023 remained lower than previous year mainly due to lower selling prices of palm products (i.e. crude palm oil (CPO) down 11% and palm kernel (PK) down 37%) and EOF products, which more than offset the increase in sales volume of palm products. Net profit after tax contracted by 29% to Rp936 billion mainly due to lower gross profit. This was partly offset by lower other operating expenses, net changes in fair value of biological assets and lower income tax expenses.

Segment Overview: The Plantation Division’s FFB nucleus production recovered in 2H2023 with a 2% increase over the same period last year, but full year production remained flattish over previous year. This, coupled with lower purchases of FFB from external parties, led to a 4% decline in CPO production for FY2023. This Division’s revenue increased 2% in 2H2023 mainly due to stable CPO prices and higher sales volume of CPO, whilst operating profit improved 44% to Rp1,151 billion on higher revenue, lower other operating expenses and net changes in fair value of biological assets. Full year plantation revenue declined by 7% mainly due to lower palm selling prices, but partly offset by higher sales volume of palm products from the realisation of last year’s CPO stock. This Division reported lower full-year operating profit of Rp1,372 billion, a 34% decline over previous year.

The EOF Division’s refinery operations demonstrated resilience in 2023 despite cooking oil policy changes. This was driven by competitive pricing strategies that allowed for regular reviews and adjustments to maintain a certain level of profitability. Revenue declined 18% in 2H2023 mainly due to lower sales volume and selling prices, whereas the 11% revenue decline in FY2023 was mainly due to lower selling prices. This division remained profitable with operating profit of Rp314 billion and Rp647 billion in 2H2023 and FY2023, albeit at a lower level than the same periods last year.

Revenue: The Group’s consolidated revenue (after elimination of inter-segment sales) in 2H2023 and FY2023 decreased 14% and 10% over the same periods last year. Both Plantation and EOF Divisions recorded lower external revenue due to lower selling prices.

Cost of sales: Lower cost of sales in 2H2023 and FY2023 was mainly due to lower CPO input costs by the EOF Division in line with lower CPO prices.

Gross profit: The Group’s gross profit declined by 15% in 2H2023 and 28% in FY2023 mainly due to lower average selling prices of palm and EOF products. This was partly offset by higher sales volume of palm products.

Selling and distribution expenses (S&D): S&D expenses declined 12% in 2H2023 mainly due to lower export levy/duty arising from lower export sales volume of EOF products. S&D for FY2023 came in close to last year.

Foreign Exchange (Loss)/Gain: The Group recognised a foreign currency loss of Rp2 billion in FY2023 mainly due to the translation of US dollar-denominated assets (i.e. cash) as of 31 December 2023. The foreign currency loss was mainly due to the strengthening of the Indonesia Rupiah against the US Dollar to Rp15,416/US$ as of 31 December 2023 versus Rp15,731/US$ last year-end.

Other Operating Expenses: The significant decrease in other operating expenses in 2H2023 and FY2023 was mainly due to lower provision for plasma receivables and lower impairment of goodwill.

Share of Results of Associate Companies: The Group reported higher share of losses from its associate companies in 2H2023 and FY2023 mainly due to FPNRL which recognised an impairment loss for its underlying investment of sugar operation in the Philippines.

Share of Results of Joint Ventures (JVs): The Group recognised higher share of JV profit in 2H2023 and FY2023 mainly due to higher raw sugar sales volume and prices, partly offset by reduced ethanol sales volume and prices and higher income tax expenses.

Gain/(Loss) arising from Changes in Fair Values of Biological Assets: In FY2023, the Group reported a gain from changes in fair value of biological assets of Rp13 billion due to higher sugar cane prices and partly offset by lower FFB prices. The loss of Rp136 billion in FY2022 was mainly due to lower FFB prices and higher production costs compared to the year before.

Impairment of Goodwill: In FY2023, management performed an impairment assessment and recorded an impairment loss of Rp6 billion for a CGU (i.e. PT MLI) as the recoverable amount was lower than the carrying value. The impairment loss of Rp127 billion in FY2022 was related to five CGUs (i.e. PT SBN, PT CNIS, PT SAIN, PT RAP and PT JS).

Profit from Operations: In 2H2023, the Group’s profit from operations decreased 3% to Rp1,480 billion on lower gross profit, but partly offset by lower other operating expenses as explained above. For the full year, profit from operations decreased by 28% to Rp1,948 billion for similar reasons.

Financial income: Higher finance income in 2H2023 and FY2023 was mainly due to higher fixed deposits at higher deposit rates.

Net Profit After Tax (NPAT):Despite lower profit from operations in 2H2023, the Group reported a 9% increase in NPAT to Rp844 billion mainly due to higher finance income and lower income tax expenses. FY2023 NPAT declined by 29% to Rp936 billion mainly due to a 28% decline in operating profit. This was partly offset by higher finance income and lower income tax expenses.

Attributable Profit to the Owners of the Company: The Group’s FY2023 attributable profit to owners of the Company was Rp614 billion, declining 20% over previous year

Review of Financial Position

As of 31 December 2023, the Group’s total non-current assets stood at Rp27.2 trillion, compared to Rp27.7 trillion in the previous year. The decrease was mainly due to the depreciation of property, plant and equipment, lower right-of-use assets and carrying value of investment in associate companies. However, this was partly offset by higher carrying value of investment in joint ventures.

The Group recorded total current assets of Rp9.9 trillion as of 31 December 2023, compared to Rp10.6 trillion in the previous year. The decrease was mainly due to lower CPO inventories, reduced trade receivables in line with lower EOF sales and lower advances for the purchase of raw materials. However, this was partly offset by higher cash levels.

The Group’s total liabilities decreased by 13% to Rp13.2 trillion mainly due to higher loan repayment in 2023, lower employee benefits liabilities which were determined based on actuarial calculations in accordance with the Indonesian Labour Law, and lower trade and other payables and accruals. The decrease was partly offset by higher deferred tax liabilities.

As of 31 December 2023, the Group recorded net current assets of Rp0.4 trillion compared to Rp0.7 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-equity ratio improved, decreasing from 0.20 times as of 31 December 2022 to 0.11 times as of 31 December 2023.

Review of Cash Flows

Despite lower cash flows from operating activities, the Group generated higher operating cash flows of Rp3.8 trillion in 2023 compared to Rp3.6 trillion in the previous year. This was mainly due to improved working capital and lower income tax paid.

Net cash flows used in investing activities were lower than last year’s level at Rp1.3 trillion mainly due to lower additions of property, plant and equipment, along with lower investment in JV and associated companies. This was partly offset by higher investment in biological assets and plasma projects.

In terms of financing activities, the Group recorded net cash usage of Rp1.7 trillion in 2023 compared to Rp1.6 trillion in last year. This was mainly due to the net repayment of loans and dividend payments during the year.

As of 31 December 2023, the Group’s cash levels increased to Rp5.2 trillion from Rp4.4 trillion as of 31 December 2022. This was largely due to positive operating free cash flows.

Commentary

Commodity prices are expected to remain highly volatile amid uncertainties from weather conditions and geopolitical conflicts. Demand growth is likely to remain subdued due to weaker economic growth and challenging macroeconomic factors, such as high inflation and interest rates.

The Plantation Division will maintain its emphasis on crop management activities to raise FFB yields, as well as focus on cost control improvements, pursuing innovations that elevate plantation productivity, and prioritising capital investments in critical areas.

In the year ahead, we will continue to focus on the growth and recovery of EOF sales volumes through competitive pricing strategies. We are confident that the EOF market in Indonesia will expand, in line with the increasing population and per capita income growth trends.


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