10
INDOFOOD AGRI RESOURCES LTD
ANNUAL REPORT 2014
CHAIRMAN’S
STATEMENT
DEAR SHAREHOLDERS,
Global economic conditions presented us with a challenging
year in 2014. The Eurozone failed to perform to expectations.
China went into a managed economic slowdown. Japan was
still trapped in recession. Fossil fuel fell by some 60% since
mid
-
2014 to below USD50 per barrel by year
-
end. Only
the US market was upbeat with significant rise in GDP and
employment.
As a diversified agribusiness, we are a price taker in the
highly competitive commodity market. We feel the effects
of the global demand contraction as declining soy bean
oil prices, on the back of a record US harvest, exerted
downward pressure on palm oil prices.
The falling crude oil prices had reduced the demand for
discretionary biodiesel, and further dampened the overall
demand for vegetable oils. Although price volatility is expected
in the vegetable oil markets as a result of a number of price
influencing factors, demand for palm oil for food, which is our
primary market, should nevertheless remain robust.
Despite the decline in US$ international CPO prices, our
average selling price in Rupiah increased 14% year
-
on
-
year
due to the declining Rupiah exchange rate. The fuel price shock
has insulated some of our margins from inflationary pressures
caused by imports and government policies. Indonesia’s policy
of zero export tariff on palm oil when prices fall below US$750
per tonne, has also helped to make exports more competitive
and draw down the inventory.
Profitability for downstream edible oils and fats products has
fallen due to the narrowing of domestic palm olein and CPO
prices, and the increased refining capacity in Indonesia.
Price pressure was felt also by our other crops, mainly sugar
and rubber. However, despite lower sugar prices, we are
pleased with the performance of our sugar business in Brazil.
Our 50% share of profit in CMAA was Rp29 billion in 2014.
In Indonesia, a new President was elected with a fresh agenda.
President Joko Widodo removed fuel subsidies and freed up
much
-
needed budget for infrastructural development and
social programmes, particularly for health and education. Our
goals are consistent with the direction of the new government
with a focus on priorities such as food security. Indonesia’s
economy is forecast to grow at a healthy rate between 5.2%
and 5.5% over the next two years.
We monitor our
strategy and its
implementation for
optimal outcomes.
We continue to
improve on the
management of our
estates, enhancing
productivity and
infrastructural
development.
