FR has a relatively young plantation profile (8.3 yrs avg. age). Hence, unlike most planters, negative impact of so-called biological slowdown from the more mature trees was cushioned by the yield improvement of its maturing trees. CPO production volume increased 7.4% YoY to 77.3k tons. (22.3% Citi FY09E).
In accordance to the group's policy, the group performs valuation of its biological assets on a half-yearly basis. Hence, no gain/losses arising from changes in valuation of bio assets in 1Q08 and 1Q09.
Selling expenses decreased by 83.3% to Rp7.9bn following Indo's government decision to scrap the CPO export tax towards the end of 08.
As the rupiah weakened from Rp10,950/US$ at end 2008 to Rp11,575/US$ at end of Mar-09, FR incurred forex losses of US$ Notes of Rp46.4bn and Rp26.6bn market-to-market losses from cross-currency swap. The cross-currency swap was done in Nov-07 to convert IDR bond to a synthetic USD obligation with competitive interest expense of 7.4% fixed for 5 years.
Given above factors, overall NP declined 81.8% YoY to Rp57.4bn (7% of Citi's FY09E; 8.7% consensus). But at the EBITDA level, FR's 1Q09 EBITDA of Rp217.8bn accounts for 16.4% of Citi's FY09E and 17.7% Consensus.
We enter 2Q with more optimism against a backdrop of a firmer CPO price environment and a stronger rupiah. Low stock inventory in Malaysia, soybean prod'n/export issue in Argentina etc should provide support to CPO prices. To put things into perspective, Apr avg. CPO price stood at US$692/t vs. Mar avg. of US$556/t vs. YTD avg. of US$592/t vs. 4Q08 avg. of US$450/t. Current CPO price still hovers at >US$800/t level. As for the rupiah, 1Q08 avg. of Rp9,258/US$ vs. 1Q09 avg. of Rp11,614/US$ vs. current ave. rate of Rp10,840 (since Apr-09).
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