First Resources has reported underlying net profit of US$52.8 million ($71.4 million) for the 3QFY2021 ended September, an increase of 44.9% from the previous year.
The higher underlying net profit follows an 89.2% surge in sales to US$314.2 million for 3QFY2021, driven by higher average selling prices and stronger sales volume, which was also contributed by a net inventory drawdown of 48,000 tonnes in 3Q2021 as compared to a net build-up of 5,000 tonnes in 3Q2020.
EBITDA grew 52.4% y-o-y to $108.8 million for the 3QFY2021. Both EBITDA and underlying net profit continue to reflect the impact of higher export taxes from the progressive export levy structure implemented in Indonesia since December 2020.
See: RHB downgrades First Resources to 'neutral', sees earnings prospects already reflected in share price
Nonetheless, First Resources highlights that the reduction in export levies for palm oil products effective July 2 has benefitted the group’s results in 3Q2021 and will continue doing so going forward.
Under the revised levy structure, the incremental levy on crude palm oil (CPO) payable by exporters for every US$50 per tonne of increase in market CPO price was reduced from US$30 per tonne to US$20 per tonne, whilst the maximum levy payable for every tonne of CPO exported was lowered by US$80 per tonne.
See also: ESR plans to simplify business, "evaluate" Cromwell, monetise sub-scale REITs
The group’s cash and bank balances stood at US$265.5 million as of Sept 30, with net gearing ratio at 0.10 times.
Ciliandra Fangiono, CEO of First Resources, says that demand for palm oil has been fuelled by India’s reduced import duties to contain rising domestic vegetable oil prices. In addition, China’s power supply issues hampered soybean crushing activities and drove substitution demand for palm oil.
The supply of palm oil, on the other hand, has been impeded by labour shortages in Malaysia. As a result, palm oil prices were propelled to historical highs recently.
See also: Second Chance set to report higher 1HFY2023 net profit
“Price movements in energy and other vegetable oils will continue to exert an influence on the direction of palm oil prices going forward,” Fangiano says.
“On the production front, 3Q2021 is shaping up to be the peak production quarter for the group this year as output for 4Q2021 is expected to taper off quarter-on-quarter,” he adds.
For more stories about where the money flows, click here for our Capital section
Shares in First Resources closed up 3 cents or 1.91% higher at $1.60 on Nov 12.