Global Palm Resources

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UNAUDITED FINANCIAL STATEMENT ANNOUNCEMENT FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019

Financials Archive

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Profit & Loss

Profit & Loss

Other comprehensive income

Balance Sheet

Balance Sheet

Review of Group performance

2Q2019 versus 2Q2018

Revenue

Our revenue for 2Q2019 decreased Rp35.9 billion or 44%, from Rp81.8 billion in 2Q2018 to Rp45.9 billion in 2Q2019. Crude palm oil ("CPO") sales revenue decreased Rp32.5 billon and palm kernel ("PK") sales revenue decreased Rp3.4 billion.

CPO sales revenue decreased by Rp32.5 billion or 45%, from Rp71.6 billion in 2Q2018 to Rp39.1 billion in 2Q2019. This was mainly due to the decrease in CPO average selling price and decrease in CPO sales volume. CPO average selling price decreased by Rp1,018 per kilogram or 14%, from Rp7,529 per kilogram in 2Q2018 to Rp6,511 per kilogram in 2Q2019. The decrease in CPO average selling price resulted in a decrease of Rp9.7 billion or 30% of the CPO sales revenue. Sales volume of CPO decreased by 3,504 tons or 37% from 9,507 tons in 2Q2018 to 6,003 tons in 2Q2019. The decrease in CPO sales volume resulted in a decrease of Rp22.8 billion or 70% of the CPO sales revenue.

PK sales revenue decreased by Rp3.4 billion or 33%, from Rp10.2 billion in 2Q2018 to Rp6.8 billion in 2Q2019. This was mainly due to the decrease in PK average selling price offset by increase in PK sales volume. PK average selling price decreased Rp1,924 per kilogram or 38%, from Rp5,094 per kilogram in 2Q2018 to Rp3,170 per kilogram in 2Q2019. The decrease in PK average selling price resulted in a decrease of Rp3.8 billion or 114% of the PK sales revenue. PK sales volume increased 154 tons or 8% from 2,000 tons in 2Q2018 to 2,154 tons in 2Q2019. The increase in PK sales volume resulted in an increase of Rp0.5 billion or 14% of the PK sales revenue.

The decrease in sales volume is mainly due to unfavourable market conditions coupled with lower production from the implementation of the Group's replanting program.

Costs of sales

Cost of sales decreased by Rp21.0 billion or 29%, from Rp71.5 billion in 2Q2018 to Rp50.5 billion in 2Q2019. This was mainly attributable to the decrease in CPO sales volume in 2Q2019.

Gross (loss)/profit

As a result of the foregoing, the Group incurred a gross loss of Rp4.6 billion in 2Q2019, as compared to a gross profit of Rp10.3 billion in 2Q2018. Gross profit margin decreased by 22.6% from 12.6% in 2Q2018 to gross loss margin of 10.0% in 2Q2019.

Distribution expenses

Distribution expenses remained stable at Rp0.2 billion in both 2Q2019 and 2Q2018.

Administrative expenses

Administrative expenses increased Rp0.2 billion from Rp10.4 billion in 2Q2018 to Rp10.6 billion in 2Q2019. The was mainly due to increase in transportation, travelling and accommodation costs.

Finance costs

Finance cost increased by Rp0.2 billion mainly due to the adoption of SFRS(I) 16 Leases with effect from 1 January 2019.

Interest income

Interest income decreased by Rp0.8 billion or 27%, from Rp2.8 billion in 2Q2018 to Rp2.0 billion in 2Q2019. This was mainly due to decrease in interest earned from bank deposits of Rp0.5 billion attributable to the decrease in cash and cash equivalents, and decrease in interest earned from the plasma plantation receivables of Rp0.2 billion in 2Q2019.

Other income

Other income increased by Rp1.2 billion in 2Q2019 mainly due to increase in sales of sludge oil of Rp1.0 billion and fair value gain from financial assets at fair value through profit or loss of Rp0.2 billion in 2Q2019.

Other expenses

Other expenses decreased by Rp0.7 billion or 50%, as there was no loss allowance made in 2Q2019 for impairment of plasma receivables compared to a loss allowance for impairment of plasma receivables of Rp1.1 billion in 2Q2018. This was offset by an increase in areal survey expenses of Rp0.3 billion and increase in miscellaneous expenses of Rp0.1 billion in 2Q2019.

Foreign exchange gain, net

Net foreign exchange gain of Rp0.02 billion in 2Q2019 was mainly due to the appreciation of IDR against SGD in relation to the Company's IDR bank balances held and IDR denominated inter-company non-working capital financing for its subsidiary, offset by the depreciation of USD against IDR for the Company's USD bank balances held.

(Loss)/profit before income tax

As a result of the foregoing, the Group incurred a loss before income tax of Rp12.8 billion in 2Q2019, compared to a profit before income tax of Rp3.5 billion in 2Q2018.

Income tax expense

Income tax expense increased by Rp0.5 billion to increase in deferred tax liability offset by decrease in income tax liability from the lower profit generated.

(Loss)/profit after income tax

As a result of the above, the Group incurred a loss after income tax of Rp14.2 billion in 2Q2019 compared to a profit after income tax of Rp2.6 billion in 2Q2018.

1H2019 versus 1H2018

Revenue

Our revenue for 1H2019 decreased Rp57.8 billion or 32%, from Rp180.5 billion in 1H2018 to Rp122.7 billion in 1H2019. CPO sales revenue decreased Rp49.0 billon and PK sales revenue decreased Rp8.8 billion.

CPO sales revenue decreased by Rp49.0 billion or 31%, from Rp158.0 billion in 1H2018 to Rp109.0 billion in 1H2019. This was mainly due to the decrease in CPO average selling price and decrease in CPO sales volume. CPO average selling price decreased Rp1,116 per kilogram or 15%, from Rp7,522 per kilogram in 1H2018 to Rp6,406 per kilogram in 1H2019. The decrease in CPO average selling price resulted in a decrease of Rp23.4 billion or 48% of the CPO sales revenue. Sales volume of CPO decreased by 4,000 tons or 19% from 21,012 tons in 1H2018 to 17,012 tons in 1H2019. The decrease in CPO sales volume resulted in a decrease of Rp25.6 billion or 52% of the CPO sales revenue.

PK sales revenue decreased by Rp8.8 billion or 39%, from Rp22.5 billion in 1H2018 to Rp13.7 billion in 1H2019. This was mainly due to the decrease in PK average selling price offset by increase in PK sales volume. PK average selling price decreased Rp2,397 per kilogram or 43%, from Rp5,623 per kilogram in 1H2018 to Rp3,227 per kilogram in 1H2019. The decrease in PK average selling price resulted in a decrease of Rp9.6 billion or 109% of the PK sales revenue. PK sales volume increased 254 tons or 6% from 4,000 tons in 1H2018 to 4,254 tons in 1HQ2019. The increase in PK sales volume resulted in an increase of Rp0.8 billion or 9% of the PK sales revenue.

The decrease in sales volume is mainly due to unfavourable market conditions coupled with lower production from the implementation of the Group's replanting program.

Costs of sales

Cost of sales decreased by Rp23.2 billion or 15%, from Rp151.8 billion in 1H2018 to Rp128.6 billion in 1H2019. This was mainly attributable to the decrease in CPO sales volume in 1H2019.

Gross (loss)/profit

As a result of the foregoing, the Group incurred a gross loss of Rp5.9 billion in 1H2019, as compared to a gross profit of Rp28.8 billion in 1H2018. Gross profit margin decreased by 20.7% from 15.9% in 1H2018 to gross loss margin of 4.8% in 1H2019.

Distribution expenses

Distribution expenses remained stable at Rp0.3 billion in both 1H2019 and 1H2018.

Administrative expenses

Administrative expenses decreased Rp1.8 billion from Rp23.5 billion in 1H2018 to Rp21.7 billion in 1H2019. The was mainly due to decrease in salaries and wages for the Group of Rp2.2 billion and offset by increase in depreciation expenses of Rp0.3 billion in 1H2019.

Finance costs

Finance cost increased by Rp0.4 billion mainly due to the adoption of SFRS(I) 16 Leases with effect from 1 January 2019.

Interest income

Interest income decreased by Rp1.6 billion or 29%, from Rp5.7 billion in 1H2018 to Rp4.1 billion in 1H2019. This was mainly due to decrease in interest earned from bank deposits of Rp1.2 billion attributable to the decrease in cash and cash equivalents, and decrease in interest earned from the plasma plantation receivables of Rp0.4 billion in 1H2019.

Other income

Other income increased by Rp2.5 billion or 277% from Rp0.9 billion in 1H2018 to Rp3.4 billion in 1H2019. This was mainly due to increase in sales of sludge oil of Rp2.9 billion and fair value gain from financial assets at fair value through profit or loss of Rp0.5 billion, offset by decrease in sales of kernel shell of Rp0.9 billion in1H2019.

Other expenses

Other expenses decreased by Rp2.0 billion or 69%, as there was no loss allowance made in 2019 for impairment of plasma receivables compared to a loss allowance for impairment of plasma receivables of Rp1.1 billion in 1H2018. There was also a decrease in land application expenses of Rp1.2 billion in 1H2019. The decrease was offset by an increase in areal survey expenses of Rp0.2 billion and increase in miscellaneous expenses of Rp0.1 billion in 1H2019.

Foreign exchange gain/(loss), net

Net foreign exchange gain of Rp0.03 billion in 1H2019 was mainly due to the appreciation of IDR against SGD in relation to the Company's IDR denominated inter-company non-working capital financing for its subsidiary.

(Loss)/profit before income tax

As a result of the foregoing, the Group incurred a loss before income tax of Rp21.3 billion in 1H2019, compared to a profit before income tax of Rp6.0 billion in 1H2018.

Income tax expense

Income tax expense decreased by Rp1.7 billion mainly due to the lower profit generated.

(Loss)/profit after income tax

As a result of the above, the Group incurred a loss after income tax of Rp22.0 billion in 1H2019 compared to a profit after income tax of Rp3.6 billion in 1H2018.

Review of Financial Position as at 30 June 2019

Non-current assets

Non-current assets for the Group increased by Rp40.3 billion or 13%, from Rp309.7 billion as at 31 December 2018 to Rp350.0 billion as at 30 June 2019. This was mainly due to goodwill recognised of Rp2.4 billion and increase in deferred charges of Rp21.5 billion, which resulted from the acquisition of PT Bumi Raya Agro in 1H2019. There was also an increase in bearer plants of Rp6.0 billion, increase in property, plant and equipment of Rp5.3 billion, increase in rights of use assets of Rp0.8 billion with the adoption of SFRS(I) 16 Leases and increase of Rp4.2 billion from the credit extended to the Plasma farmers for the biological assets transferred.

Current assets

Current assets for the Group decreased by Rp62.2 billion or 15%, from Rp415.0 billion as at 31 December 2018 to Rp352.8 billion as at 30 June 2019. This was mainly due to decrease in cash and cash equivalents of Rp24.4 billion, decrease in trade and other receivables of Rp30.1 billion, decrease in inventories of Rp10.6 billion, and decrease in financial assets at fair value through profit or loss of Rp1.6 billion. The decrease in cash and cash equivalents was mainly due to the acquisition of PT Bumi Raya Agro for the purchase consideration of Rp23.6 billion and lower profit generated in 1H2019. The decrease in inventories was mainly due to lower production in 1H2019. The decrease is offset by an increase in income tax recoverable of Rp3.8 billion.

Current liabilities

Current liabilities for the Group increased by Rp6.1 billion or 19%, from Rp32.2 billion as at 31 December 2018 to Rp38.3 billion as at 30 June 2019. This was mainly due to increase in trade and other payable of Rp6.9 billion and increase in lease liabilities of Rp0.3 billion with the adoption of SFRS(I) 16 Leases. This was offset by a decrease in income tax payable of Rp1.3 billion in 1H2019.

Non-current liabilities

Non-current liabilities for the Group decreased by Rp0.7 billion or 2% from Rp39.7 billion as at 31 December 2018 to Rp39.0 billion as at 30 June 2019, mainly due to decrease in provision for post-employment benefits of Rp2.1 billion. This was offset by increase in lease liabilities of Rp0.7 billion with the adoption of SFRS(I) 16 Leases, increase in finance lease payables of Rp0.5 billion and increase in deferred tax liabilities of Rp0.3 billion.

Accumulated losses

The accumulated losses of Rp161.9 billion was mainly contributed by the accumulated losses of Rp141.0 billion brought forward from FY2018, and loss attributable to owners of the parent of Rp20.9 billion in 1H2019.

Review of Consolidated Cash Flows

Net cash used in operating activities of Rp0.4 billion in 1H2019 was mainly due to operating losses in 1H2019, offset by sales from inventories of Rp10.6 billion.

Net cash used in investing activities of Rp18.5 billion in 1H2019 was mainly due to the purchases of property, plant and equipment of Rp11.0 billion, capital expenditure on bearer plants of Rp9.2 billion and payments for deferred expenditure of Rp0.4 billion, offset by cash receipt from disposal of financial asset at fair value through profit or loss of Rp1.8 billion.

Net cash used in financing activities of Rp1.1 billion in 1H2019 was mainly due to the buyback of the Company's shares to be held as treasury shares of Rp0.7 billion, repayment of lease liabilities of Rp0.2 billion and repayment of obligations under finance leases of Rp0.2 billion.

Commentary On Current Year Prospects

CPO prices are expected to remain volatile given the increase supply situation. The demand for palm oil is expected to be well supported in view of rising food requirements from China, India (despite the tariff increase for CPO), Indonesia and emerging markets, as well as demand from the biofuel, oleochemicals and compound feed industries. Indonesia's recent successful implementation of the mandatory use of the expanded B20 biodiesel program, should continue support the demand of CPO in the near future.

The Group will continue the replanting of older palm trees with newer breed of higher-yielding palm trees to ensure long-term sustainability for the Group. We expect production of CPO and kernel to drop for the next few years due to the replanting program. 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.