New Britain Palm Oil reports ‘disappointing results’
NBPO reported revenue down by 17.5% to $558.7M, reflecting lower palm oil prices.
Profit before tax plummeted 78.8% to $17.3M, compared with $81.6M in the previous year. The result excludes the changes in fair value of biological assets, while including the net gains of $8.2M on agricultural products transferred to inventories.
Panmure Gordon analyst Graham Jones said: “NBPO endured a difficult year with exceptional wet weather meaning lower production, which when combined with a steep fall in CPO [crude palm oil] and PKO [palm kernel oil] prices meant that profits fell significantly.”
Slumping sales
In addition to slumping sales, oil production fell from from 545.2kt to 507.8kt. Average realised prices for CPO fell from $1,062/t to $868/t and for PKO from $1,337/t to $965/t.
The result was a 40.3% fall in earnings before interest, tax, depreciation and amortisation from $162.1M to $96.8M.
On a brighter note, Jones predicted much improved prospects for 2014 – particularly if the significant rally in prices seen over the past three weeks was sustained. CPO prices rose to more than $930/t, due to a drought in South America, lower soyabean crop forecasts and stronger demand for palm oil.
“We see significant upside pressure on forecasts at current CPO prices,” said Jones. “The weaker Kina [currency of Papua New Guinea] exchange rate, $35M of cost savings, and a better management of another wet start to the year, all points to a much more positive outlook.”
While the analyst had forecast 12% production growth this year, that might need to be scaled back modestly, although that could be offset by rising prices.
‘Buy’ recommendation
Panmure Gordon repeated its ‘buy’ recommendation on NBPO stock.
New Britain Palm Oil chairman Antonio Monteiro De Castro acknowledged the past year had proved “very challenging”, with palm oil prices remaining subdued in the first half.
“We endured another exceptionally wet first quarter in our biggest production location, West New Britain, which hampered crop harvesting and collection,” said De Castro. “At most of our production sites, and regionally across South East Asia as a whole, FFB [fresh fruit bushes] production was reportedly lower than expected in the second half of the year, suggesting this to be a biological yield effect.”
But the group had benefited from cutting its US dollar based production costs and a devaluation of the Kina. “The group is well positioned to capitalise on an improving palm oil pricing environment with lower production costs and strong demand for sustainable and traceable palm oil products,” he added.
