SINGAPORE (May 8): Halcyon Agri Corporation sunk into a loss of US$5.7 million ($7.8 million) for the 1Q ended March as opposed to US$1.3 million in 1Q18 earnings, due to lower revenue and higher finance costs.

Revenue fell 16% to US$399.7 million from US$475.7 million a year ago due to a 7.5% decline in revenue per metric tonnes (mT), coupled with a 9.2% decline in sales volumes which contracted to 278,355 mT in the latest quarter from 306,499 mT in 1Q18.

In its filing on Wednesday, Halcyon Agri says the decline in 1Q sales volume is largely due to the group’s migration of its sale strategy away from long-term contract sales towards spot sales – in line with its commitment to shift the majority of its tyre-focused sales volumes to the new digital platform, HeveaConnect.

Gross profit nonetheless grew 11.3% to $31.7 million from $28.5 million previously, mainly due to a higher gross profit per tonne of US$114 compared to US$93 in 1Q18.

This comes despite the lower sales volume, with overall gross profit growth underpinned by improvements in the procurement process in the Africa subsidiaries and better results of their operations.

Finance costs grew 73.2% to US$8.8 million from just US$5.1 million a year ago, mainly due to increased working capital utilisation and higher interest rates.

The group also recorded a 71.8% lower foreign exchange gain of US$1.2 million compared to a gain of US$4.6 million a year ago.

As at end-March, cash and cash equivalents stood at US$133 million as opposed to US$122.9 million in the previous year.

Noting a modest recovery in rubber prices over the quarter under review, Halcyon Agri says it expects the supply side to experience more difficulties in the near future, which should lend a degree of support to prices going forward.

“In view of the tight raw material situation in Indonesia and Thailand during the quarter, we decided to reduce output and to focus on margins. Absent any material improvement in weather conditions at key origins, we expect the supply side to experience more difficulties in the quarters to come, which should lend a degree of support to prices. On the demand side, China is contracting lower volumes and seems to be focused on reducing domestic inventory,” comments Robert Meyer, executive director and CEO of the group.

Shares in Halcyon Agri closed flat at 50 cents on Wednesday.