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Strengthened palm oil prices support Golden Agri-Resources’s improved third quarter 2020 performance

Posted: Nov 13, 2020 4 minute read Investor Relation GAR 0 Likes
  • Third quarter 2020 palm product output seasonally grew by ten percent quarter-on- quarter to 666,000 tonnes
  • EBITDA1 for the nine month period January to September 2020 expanded to US$314 million contributed mostly from upstream business

FR-2020

Singapore, 13 November 2020 – Golden Agri-Resources Ltd (“GAR” or the “Company”) grew its revenue by six percent during the nine-month period of 2020, reaching almost US$5 billion, primarily attributable to higher average selling prices. However, third-quarter revenue saw a quarter-on-quarter decrease by seven percent due to lower sales volume.

Increasing CPO market prices resulted in continued recovery of EBITDA1 in the third quarter to US$124 million, contributing to year-to-date EBITDA1 of US$314 million. Underlying profit2 followed the same trend, reaching US$21 million in the third quarter. However, foreign exchange translation loss and deferred tax expense, which are mostly non-cash, led to a net loss of US$162 million recorded during the period January to September 2020.

Its upstream business benefitted from the uptrend in CPO market prices in the third quarter, making a larger contribution to the Company’s consolidated EBITDA1. In the nine-month period of 2020, CPO market prices (FOB Belawan) averaged at US$636 per tonne, an increase of 29 percent from the same period last year. However, the downstream business experienced a volatile market environment impacted by the COVID-19 pandemic, especially during the first quarter 2020.

On the outlook, Mr. Franky O. Widjaja, GAR Chairman and Chief Executive Officer commented: “Although the industry is in its peak production season, global palm oil supply and demand positions remain tight. The water deficits experienced last year combined with less fertiliser applied by small farmers have resulted in current year palm oil output lagging behind expectation. The ongoing La Niña is another risk factor that can impact supply. Extremely high rainfall in South East Asia hinders the oil palm harvesting process, whilst the drought in South America can reduce soybean production. Together these factors result in an extremely tight supply situation for vegetable oils. Demand remains strong as key consuming countries have continued to replenish their stocks whilst Indonesia biodiesel consumption further strengthened demand fundamentals. These factors provide short-term support to CPO prices amidst low crude oil prices. However, price volatility can be expected, especially with the uncertainties coming from COVID-19.”

As at 30 September 2020, GAR’s planted area stood at almost 500 thousand hectares, of which 21 percent is owned by plasma smallholders. Third quarter fruit yield recovered seasonally, reaching close to 5.0 tonnes per hectare, 12 percent higher than in the previous quarter, resulting in a nine-month yield of 13.9 tonnes per hectare. The fruits were extracted into 1.89 million tonnes of palm product for the nine-month period of 2020, 11 percent lower year-on-year mainly impacted by the dry weather conditions in 2019. We expect peak harvest to shift to the fourth quarter this year, from the third quarter normally.

Despite the challenging situation due to the global pandemic, GAR continued its sustainability programmes and initiatives. As of third quarter 2020, GAR has achieved over 88 percent Traceability to the Plantation (TTP) for its entire palm supply chain. GAR maintained engagement with third-party suppliers during the pandemic through remote and virtual channels. Nevertheless, the pandemic has impacted some of its suppliers’ ability to conduct on-the-ground surveys due to compliance with health and social distancing regulations. Due to this, GAR may make allowances for those suppliers who are unable to complete TTP by end-2020 due to COVID-19. However, companies that have not shown any progress or interest in carrying out TTP will not be granted similar leeway.

GAR also continued to work with communities on long-term fire prevention. Earlier this year, GAR launched an educational initiative targeting school children in fire-prone villages. We are using a children’s book that we created, entitled Rumbun and Jungle Friends, to help teachers educate elementary school students on the importance of preventing forest and land fires. To date, we have carried out dedicated remote training workshops for nearly 400 teachers and reached around 700 participants through online podcasts. This initiative demonstrates the Company’s firm commitment to long-term fire prevention.

About Golden Agri-Resources Ltd (GAR)
GAR is one of the leading palm oil plantation companies with a total planted area of 499,770 hectares (including plasma smallholders) as at 30 September 2020, located in Indonesia.  It has integrated operations focused on the production of palm-based edible oil and fat.

Founded in 1996, GAR was listed on the Singapore Exchange in 1999 and has a market capitalisation of US$1.3 billion as at 30 September 2020. Flambo International Limited, an investment company, is currently GAR’s largest shareholder, with a 50.52 percent stake. GAR has several subsidiaries, including PT SMART Tbk which was listed on the Indonesia Stock Exchange in 1992.

GAR is focused on responsible palm oil production. In Indonesia, its primary activities include cultivating and harvesting of oil palm trees; processing of fresh fruit bunch into crude palm oil (CPO) and palm kernel; refining CPO into value-added products such as cooking oil, margarine, shortening, biodiesel and oleo-chemicals; as well as merchandising palm products throughout the world. It also has operations in China and India including a deep-sea port, oilseed crushing plant, production capabilities for refined edible oil products as well as other food products such as noodles.

For media enquiries, please contact:
Wulan Suling
Mobile: +62 818 909 900
Email: [email protected]

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