SINGAPORE (Nov 14): Golden Agri-Resources has managed to narrow its losses in 9M19 to US$45.6 million ($62.1 million), from US$81.1 million in 9M18.

The improvement was led by foreign exchange gains and gains from changes in fair value of biological assets.

During the period, the group recorded foreign exchange gains of US$23.9 million, compared to a loss of US$45.8 million in the previous year, mainly attributable to the translation gain on net monetary assets as Indonesian Rupiah strengthened against USD during the current period, and fair value gain on forward foreign currency contracts entered to hedge the currency exposure.

Meanwhile, net other operating income, which comprised mainly changes in fair value of biological assets (agricultural produce) and financial assets, income from sales of seedlings and other materials, as well as rental income, increased by US$27.9 million to US$37.5 million. This was mainly due to gain from changes in fair value of biological assets of US$0.5 million in 9M19 as compared to loss of US$16.8 million in 9M18.

The group's bottom line was also boosted by a US$11.5 million gain on disposal of subsidiaries.

However, revenue for the nine months ended September was 14.2% lower at US$4.7 billion, compared to US$5.5 billion in the previous year, affected mainly by decreasing crude palm oil (CPO) prices, but partially offset by better performance of the group’s palm, laurics and others segment during the current period.

Revenue for plantation and palm oil mills segment dropped 15.5% y-o-y to US$929.6 million, mainly due to lower CPO prices, partially offset by the higher sales volume due to sell-down of inventory. The average international CPO price for 9M19 was US$494 per tonne, 17.7% lower than US$600 per tonne in 9M18.

Fresh fruit bunch (FFB) and palm product output for 9M19 also decreased, primarily affected by the tree’s biological cycle after a bumper crop in 2018.

On the other hand, revenue for the group’s palm, laurics and others segment declined by 14.1% y-o-y to US$4.7 billion, mainly attributable to softer CPO prices and lower sales volume for oilseeds in China, which was offset by the strong demand for biodiesel in Indonesia.

Gross profit for 9M19 came in at US$532.4 million, 28.5% lower than US$745.1 million in 9M18, with cost of sales falling some 12.0% to USUS$4.2 billion.

Total operating expenses declined by 21.4% y-o-y to US$498.3 million, due to lower selling expenses, as well as general and administrative expenses.

Franky O Widjaja, chairman and CEO of Golden Agri says, “We expect the positive trend in CPO prices to continue in the fourth quarter 2019 and onwards. On the supply side, production growth will still be slow in 2020 as impacted by the very dry conditions in 2019. On the demand side, GAR welcomes the B30 biodiesel programme that will be implemented starting January 2020.

“We also see demand from large consuming countries, such as China and India, continue to be strong. We expect that additional demand combined with the slowing down of CPO production growth will create strong support for CPO prices. We remain positive on the long-term industry prospects on the back of the resilient supply and demand fundamentals of palm oil,” he adds.

As at 11.30am, shares in Golden Agri are trading 5.66% lower at 25 cents.