Global Palm Resources

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UNAUDITED FINANCIAL STATEMENT ANNOUNCEMENT FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2018 TO 30 SEPTEMBER 2018

Financials Archive

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Profit & Loss

Profit & Loss

Other comprehensive income

Balance Sheet

Balance Sheet

Review of Group performance

3Q2018 versus 3Q2017

Revenue

Our revenue for 3Q2018 decreased Rp40.9 billion or 39%, from Rp105.7 billion in 3Q2017 to Rp64.8 billion in 3Q2018. Crude palm oil ("CPO") sales revenue decreased Rp38.8 billon and palm kernel ("PK") sales revenue decreased Rp2.1 billion.

CPO sales revenue decreased by Rp38.7 billion or 39%, from Rp99.3 billion in 3Q2017 to Rp60.6 billion in 3Q2018. This was mainly due to the decrease in CPO sales volume and CPO average selling price. Sales volume of CPO decreased by 4,000 tons or 31% from 13,006 tons in 3Q2017 to 9,006 tons in 3Q2018. The decrease in CPO sales volume was influenced by unfavorable market and logistics conditions, coupled with lower productions that resulted from the Group's recent replanting programme. CPO average selling price decreased by Rp911 per kilogram or 12%, from Rp7,635 per kilogram in 3Q2017 to Rp6,724 per kilogram in 3Q2018.

PK sales revenue decreased by Rp2.2 billion or 34%, from Rp6.4 billion in 3Q2017 to Rp4.2 billion in 3Q2018. The decrease was mainly due to lower PK average selling price from Rp6,359 per kilogram in 3Q2017 to Rp4,225 per kilogram in 3Q2018. PK sales volume remained at 1,000 tons in both 3Q2018 and 3Q2017.

Costs of sales

Cost of sales decreased by Rp20.6 billion or 26%, from Rp78.3 billion in 3Q2017 to Rp57.7 billion in 3Q2018. The decrease mainly resulted from the decrease in CPO sales volume in 3Q2018.

Gross profit

As a result of the foregoing, gross profit decreased by Rp20.3 billion or 74%, from Rp27.3 billion in 3Q2017 to Rp7.0 billion in 3Q2018. Gross profit margin decreased by 15.0% from 25.9% in 3Q2017 to 10.9% in 3Q2018.

Distribution expenses

Distribution expenses remained stable at Rp0.1 billion in both 3Q2018 and 3Q2017.

Administrative expenses

Administrative expenses increased by Rp0.8 billion or 9% from Rp9.0 billion in 3Q2017 to Rp9.8 billion in 3Q2018. The increase is mainly due to incurrence of professional fees for valuation.

Finance costs

Finance cost remained minimal at below Rp0.1 billion both 3Q2018 and in 3Q2017.

Interest income

Interest income decreased by Rp1.1 billion or 31%, from Rp3.4 billion in 3Q2017 to Rp2.3 billion in 3Q2018, mainly due to lower interest earned from bank deposits and lower interest from the plasma plantation receivables in 3Q2018.

Other income

Other income increased by Rp0.3 billion, mainly due to increase in insurance claim of Rp0.2 billion.

Other expenses

Other expenses decreased by Rp0.4 billion or 60%, from Rp0.6 billion in 3Q2017 to Rp0.2 billion in 3Q2018, as there was a net loss in disposal of property, plant and equipment of Rp0.4 billion during 3Q2017, while there is none in 3Q2018.

Foreign exchange loss, net

Net foreign exchange loss of Rp1.7 billion in 3Q2018 was mainly due to the depreciation of IDR against SGD in relation to the Company's IDR denominated inter-company non-working capital financing for its subsidiary, and the depreciation of IDR against SGD for the Company's IDR bank balances held.

(Loss)/profit before income tax

As a result of the foregoing, there is a loss before income tax of Rp2.3 billion in 3Q2018, compared to a profit before income tax of Rp16.5 billion in 3Q2017.

Income tax expense

Income tax expense decreased by Rp4.3 billion or 88% from Rp4.9 billion in 3Q2017 to Rp0.6 billion in 3Q2018. The decrease is in line with the lower profit generated.

(Loss)/profit after income tax

As a result of the above, there is a loss after income tax of Rp2.9 billion in 3Q2018, as compared to a profit after income tax of Rp11.7 billion in 3Q2017.

9M2018 versus 9M2017

Revenue

Our revenue for 9M2018 decreased Rp109.2 billion or 31%, from Rp354.5 billion in 9M2017 to Rp245.3 billion in 9M2018. This was mainly due to the decrease in crude palm oil ("CPO") sales revenue of Rp104.7 billion and decrease in palm kernel ("PK") sales revenue of Rp4.5 billion.

CPO sales revenue decreased by Rp104.7 billion or 32%, from Rp323.3 billion in 9M2017 to Rp218.6 billion in 9M2018. This was mainly due to the decrease in CPO sales volume and CPO average selling price. Sales volume of CPO decreased by 10,300 tons or 26% from 40,318 tons in 9M2017 to 30,018 tons in 9M2018. The decrease in CPO sales volume was influenced by unfavorable market and logistics conditions, coupled with lower productions that resulted from the Group's recent replanting programme. CPO average selling price decreased by Rp736 per kilogram or 9%, from Rp8,019 per kilogram in 9M2017 to Rp7,283 per kilogram in 9M2018.

PK sales revenue decreased by Rp4.5 billion or 14%, from Rp31.2 billion in 9M2017 to Rp26.7 billion in 9M2018. The decrease was mainly due to the decrease in PK sales volume of 1,002 tons from 6,003 tons in 9M2017 to 5,001 tons in 9M2018. This was offset by higher PK average selling price from Rp5,202 per kilogram in 9M2017 to Rp5,343 per kilogram in 9M2018.

Costs of sales

Cost of sales decreased by Rp56.4 billion or 21%, from Rp265.9 billion in 9M2017 to Rp209.5 billion in 9M2018. The decrease mainly resulted from the decrease in CPO and PK sales volume in 9M2018.

Gross profit

As a result of the foregoing, gross profit decreased by Rp52.8 billion or 60%, from Rp88.6 billion in 9M2017 to Rp35.8 billion in 9M2018. Gross profit margin decreased by 10.4% from 25.0% in 9M2017 to 14.6% in 9M2018.

Distribution expenses

Distribution expenses decreased by Rp0.3 billion or 38%, from Rp0.7 billion in 9M2017 to Rp0.4 billion in 9M2018. This was mainly due to lower freight charges incurred for the transportation of PK, which is in line with the lower PK sales volume in 9M2018 and that there are no levy charges incurred in 9M2018.

Administrative expenses

Administrative expenses increased by Rp4.0 billion or 14% from Rp29.2 billion in 9M2017 to Rp33.2 billion in 9M2018. The increase is mainly due to increase in salaries and wages for the Group and higher professional fees incurred in 9M2018.

Finance costs

Finance cost remained stable at below Rp0.1 billion in both 9M2018 and in 9M2017.

Interest income

Interest income decreased by Rp2.7 billion or 25%, from Rp10.7 billion in 9M2017 to Rp8.0 billion in 9M2018, mainly due to lower interest earned from bank deposits and lower interest from the plasma plantation receivables in 9M2018.

Other income

Other income decreased by Rp10.0 billion or 91%, from Rp11.0 billion in 9M2017 to Rp1.0 billion, mainly due to the fair value gain on derivative financial instruments of Rp7.7 billion and sales of sludge oil of Rp2.0 billion recognized in 9M2017.

Other expenses

Other expenses increased by Rp1.4 billion or 84%, from Rp1.7 billion in 9M2017 to Rp3.1 billion in 9M2018, mainly due incurrence of land permit application expenses of Rp1.6 billion in 9M2018, offset by decrease in loss on disposal of property, plant and equipment of Rp0.4 billion in 9M2018.

Foreign exchange loss, net

Net foreign exchange loss of Rp4.4 billion in 9M2018 was mainly attributable to the depreciation of IDR against SGD in relation to the Company's IDR denominated inter-company non-working capital financing for its subsidiary, and the depreciation of IDR against SGD for the Company's IDR bank balances held.

Profit before income tax

As a result of the foregoing, profit before income tax decreased by Rp64.3 billion or 95%, from Rp68.0 billion in 9M2017 to Rp3.7 billion in 9M2018.

Income tax expense

Income tax expense decreased by Rp15.8 billion or 84% from Rp18.8 billion in 9M2017 to Rp3.0 billion in 9M2018. The decrease is in line with the lower profit generated.

Profit after income tax

As a result of the above, profit after income tax decreased by Rp48.6 billion or 99%, from Rp49.3 billion in 9M2017 to Rp0.7 billion in 9M2018.

Review of Financial Position as at 30 September 2018

Non-current assets

Non-current assets for the Group increased by Rp9.1 billion or 3%, from Rp303.8 billion as at 31 December 2017 to Rp312.9 billion as at 30 September 2018. This was mainly due to the net increase in bearer plants of Rp3.7 billion, increase of Rp3.9 billion from the credit extended to the Plasma farmers for the biological assets transferred and the increase of Rp2.2 billion in property, plant and equipment.

Current assets

Current assets for the Group decreased by Rp9.4 billion or 2%, from Rp452.8 billion as at 31 December 2017 to Rp443.4 billion as at 30 September 2018. This was mainly due to decrease in cash and cash equivalent of Rp74.1 billion from lower cash generated from operating activities of Rp50.3 billion, cash used in investing activities of Rp21.8 billion and cash used in financing activities of Rp23.0 billion. This was offset by increase in inventories of Rp49.6 billion from lower sales in 9M2018, increase in income tax recoverable of Rp9.3 billion and increase in trade and other receivables of Rp5.9 billion.

Current liabilities

Current liabilities for the Group increased by Rp1.4 billion or 3%, from Rp51.1 billion as at 31 December 2017 to Rp52.5 billion as at 30 September 2018. This was mainly due to decrease in current income tax payable of Rp6.8 billion and payment of dividend payable to non-controlling interest of Rp4.2 billion.

Non-current liabilities

Non-current liabilities for the Group decreased by Rp8.6 billion or 18% from Rp47.5 billion as at 31 December 2017 to Rp38.9 billion as at 30 September 2018, mainly due to decrease in provision for post-employment benefits of Rp10.6 billion and offset by increase in deferred tax liabilities of Rp2.1 billion.

Accumulated losses

The accumulated losses of Rp138.0 billion was mainly contributed by the accumulated losses of Rp117.8 billion brought forward from FY2017 and dividend paid to owners of the parent of Rp20.5 billion in 9M2018, offset by the net profit attributable to owners of the parent of Rp0.3 billion in 9M2018.

Review of Consolidated Cash Flows

Net cash used in operating activities of Rp50.3 billion in 9M2018, compared to net cash generated from operating activities of Rp87.0 billion in 9M2017, was mainly due to the decrease in operating profit in 9M2018 and increase in inventories of Rp49.6 billion in 9M2018.

Net cash used in investing activities of Rp21.8 billion in 9M2018 was mainly due to capital expenditure on bearer plants of Rp10.6 billion and purchases of property, plant and equipment of Rp11.4 billion in 9M2018.

Net cash used in financing activities of Rp23.0 billion in 9M2018 mainly due to dividend paid to owners of the parent of Rp20.5 billion, dividend paid to non-controlling interest of Rp4.2 billion, and buyback of Rp0.6 billion of the Company's shares to be held as treasury shares, offset by capital injection from non-controlling interest of subsidiary of Rp2.5 billion.

Commentary On Current Year Prospects

CPO prices are expected to remain within the current price range in the short term, given the supply situation and the uncertainty in the global economy and abnormal weather's affect on market dynamics. However, the demand for palm oil is expected to be well supported in view of rising food requirements from China, India, Indonesia and emerging markets, as well as demand from the biofuel, oleochemicals and compound feed industries. Indonesia's recent implementation of the mandatory use of the expanded B20 biodiesel program, should increase the demand of CPO in the near future.

In view of the current low CPO price, the Group will speed up the replacement of older palm trees with newer breed of higher-yielding palm trees. The management expects to see higher yield per hectare when the replanted palm trees reach maturity. This together with the management continuous effort to increase productivity, should result in a positive sustainable future for the Group.