Global Palm Resources

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UNAUDITED FINANCIAL STATEMENT ANNOUNCEMENT FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2018 TO 31 DECEMBER 2019

Financials Archive

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Profit & Loss

Profit & Loss

Other comprehensive income

Balance Sheet

Balance Sheet

Review of Group performance

4Q2019 versus 4Q2018

Revenue

The Group's revenue for 4Q2019 decreased Rp37.6 billion or 40%, from Rp93.3 billion in 4Q2018 to Rp55.7 billion in 4Q2019, mainly due to decrease in sales volume of crude palm oil ("CPO") and palm kernel ("PK"). Revenue from CPO and PK decreased Rp35.8 billon and Rp1.8 billion respectively as compared to 4Q2018.

The decrease in CPO sales revenue of Rp35.8 billion or 41%, from Rp87.6 billion in 4Q2018 to Rp51.8 billion in 4Q2019, was mainly due a decrease in CPO sales volume from 16,307 tonnes (4Q2018) to 7,503 tonnes (4Q2019). This represented a decrease of 170% in CPO sales revenue for 4Q2019. However, the increase in CPO average selling price from Rp5,368/kg (4Q2018) to Rp6,899/kg (4Q2019) offset the decrease in 4Q2019 CPO sales revenue by 70%.

The decrease in PK sales revenue of Rp1.8 billion or 31%, from Rp5.7 billion in 4Q2018 to Rp3.9 billion in 4Q2019, was mainly due to a decrease in PK sales volume from 1,500 tones (4Q2018) to 1,198 tonnes (4Q2019). This represented a decrease of 56% in PK sales revenue for 4Q2019. The PK average selling price has also decrease from Rp3,806/kg (4Q2018) to Rp3,280/kg (4Q2019), which further decrease the 4Q2019 PK sales revenue by 44%.

The decrease in sales volume was mainly to lower production from the implementation of the Group's replanting program. As at 31 December 2019, the Group's total mature planted area and immature planted area (excluding the area covered under the Plasma programme) is 6,326 hectares and 2,656 hectares respectively, as compared to 6,689 hectares and 2,246 hectares respectively as at 31 December 2018.

Costs of sales

Cost of sales decreased by Rp44.7 billion or 45%, from Rp98.4 billion in 4Q2018 to Rp53.7 billion in 4Q2019. This was mainly due to the decrease in CPO sales volume in 4Q2019.

Gross profit

As a result of the foregoing, the Group recorded a gross profit of Rp2.0 billion as compared to a gross loss of Rp5.1 billion in 4Q2018. Gross profit margin increased 9.2% points from gross loss margin of 5.5% in 4Q2018 to gross profit margin of 3.7% in 4Q2019.

Net gain from changes in fair value of biological assets

The Group recognized a net gain from changes in fair value of biological assets of Rp1.4 billion in FY2019, as compared Rp6.3 billion in FY2018. The decrease is mainly due to the decline in the selling prices of FFB and lower production estimates, which were used as assumptions for the fair valuation of biological assets as at 31 December 2019.

Distribution expenses

Distribution expenses increased by Rp0.9 billion or 622% from Rp0.2 billion (4Q2018) to Rp1.1 billion (4Q2019). This was mainly due to the increase in freight and stevedoring costs of Rp0.9 billion, as PK was sold CIF to the loading port of Pontianak in 4Q2019 while in 4Q2018, PK was sold FOB from the plantation's bulk storage warehouse in Matan.

Administrative expenses

Administrative expenses increased Rp0.9 billion or 5%, from Rp17.5 billion (4Q2018) to Rp18.4 billion (4Q2019). The was mainly due to increase in depreciation expenses of Rp0.6 billion and provision of postemployment benefit of Rp0.6 billion. The increase in depreciation expense was due to the adoption of SFRS(I) 16 Leases with effect from 1 January 2019. This was offset by a decrease in the Group's salaries and wages of Rp0.6 billion in 4Q2019.

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 Rp0.7 billion or 29%, from Rp2.3 billion (4Q2018) to Rp1.6 billion (4Q2019). 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. Interest earned from the plasma plantation receivables also decreased by Rp0.2 billion from Rp1.2 billion (4Q2018) to Rp1.0 billion (4Q2019).

Other income

Other income increased by Rp0.6 billion in 4Q2019 or 26%, mainly due to gain on disposal of matured plantation under the Plasma program of Rp1.7 billion offset by decrease in fair value gain from financial assets at fair value through profit or loss of Rp0.4 billion, decrease in gain on disposal of club membership of Rp0.2 billion.

Other expenses

Other expenses increased by Rp5.4 billion in 4Q2019, there was no provision for deferred charges being written back in 4Q2019, as compared to Rp3.6 billion being written back in 4Q2018. The increase is also mainly due to plantation written off of Rp2.7 billion, offset by decrease in provision for plasma loan impairment of Rp0.5 billion and areal survey expenses of Rp0.3 billion.

Foreign exchange loss, net

Net foreign exchange loss of Rp2.1 billion in 4Q2019 was mainly due to the depreciation of IDR against SGD in 4Q2019 for the IDR denominated inter-company financing for its subsidiary.

Loss before income tax

As a result of the foregoing, loss before income tax increased by Rp8.0 billion or 99%, from Rp8.2 billion in 4Q2018 to Rp16.2 billion in 4Q2019.

Income tax expense

Income tax expense increased by Rp0.8 billion mainly due to increase in provision of deferred tax in 4Q2019.

Loss after income tax

As a result of the above, loss after income tax increased by Rp8.9 billion or 108%, from Rp8.2 billion in 4Q2018 to Rp17.1 billion in 4Q2019.

Financial Year 2019 ("FY2019") versus Financial Year 2018 ("FY2018")

Revenue

The Group's revenue for FY2019 decreased by Rp76.4 billion or 23%, from Rp338.6 billion in FY2018 to Rp262.2 billion in FY2019, mainly contributed by decrease in CPO sales volume and average selling price and PK average selling price, offset by an increase in PK sales volume. Revenue from CPO and PK decreased Rp70.5 billon and Rp5.9 billion respectively.

The decrease in CPO sales revenue of Rp70.5 billion or 23%, from Rp306.1 billion in FY2018 to Rp235.6 billion in FY2019, was mainly attributable to a decrease in CPO sales volume and average selling price. CPO sales volume decreased from 46,325 tonnes (FY2018) to 36,519 tonnes (FY2019). This contributed to a decrease of 90% in CPO sales revenue for FY2019. CPO average selling price decreased from Rp6,609/kg (FY2018) to Rp6,452/kg (FY2019) and this contributed to a decrease of 10% in CPO sales revenue for FY2019.

The decrease in PK sales revenue of Rp5.9 billion or 18%, from Rp32.4 billion in FY2018 to Rp26.5 billion in FY2019, was mainly attributable to a decrease in PK average selling price, offset by an increase in PK sales volume. PK average selling price decreased from Rp4,988/kg (FY2018) to Rp3,095/kg FY2019) and this contributed to a decrease of 208% in PK sales revenue for FY2019. This was offset by increase in PK sales volume from 6,501 tonnes (FY2018) to 8,568 tonnes (FY2019), which contributed to an increase of 108% in PK sales revenue for FY2019.

The decrease in sales revenue is mainly due to unfavourable market conditions coupled with lower production from the implementation of the Group's replanting program. As at 31 December 2019, the Group's total mature planted area and immature planted area (excluding the area covered under the Plasma programme) is 6,326 hectares and 2,656 hectares respectively, as compared to 6,689 hectares and 2,246 hectares respectively as at 31 December 2018.

Costs of sales

Cost of sales decreased by Rp46.8 billion or 15%, from Rp307.9 billion in FY2018 to Rp261.1 billion in FY2019. This was mainly attributable to the decrease in CPO sales volume in FY2019.

Gross profit

As a result of the foregoing, gross profit decreased by Rp29.6 billion or 97%, from Rp30.7 billion in FY2018 to Rp1.1 billion in FY2019. Gross profit margin decreased by 8.7% points from 9.1% in FY2018 to 0.4% in FY2019.

Net gain from changes in fair value of biological assets

The Group recognized a net gain from changes in fair value of biological assets of Rp1.4 billion in FY2019, as compared Rp6.3 billion in FY2018. The decrease is mainly due to the decline in the selling prices of FFB and lower production estimates, which were used as assumptions for the fair valuation of biological assets as at 31 December 2019.

Distribution expenses

Distribution expenses increased by Rp1.3 billion or 228% from Rp0.6 billion (FY2018) to Rp1.9 billion (FY2019). This was mainly due to the increase in freight and stevedoring costs of Rp1.3 billion, as PK was sold CIF to the loading port of Pontianak in FY2019 while in FY2018, PK was sold FOB from the plantation's bulk storage warehouse in Matan.

Administrative expenses

Administrative expenses decreased Rp0.6 billion or 1% from Rp50.7 billion in FY2018 to Rp50.1 billion in FY2019. The was mainly due to decrease in salaries and wages for the Group of Rp2.9 billion, offset by increase in provision of post-employment benefit of Rp0.6 billion, representation and entertainment expenses of Rp0.4 billion, transportation and travelling expenses of Rp0.3 billion, professional fees of Rp0.2 billion, repairs and maintenance of Rp0.2 billion and medical expenses of Rp0.2 billion.

Finance costs

Finance cost increased by Rp0.3 billion mainly due to the adoption of SFRS(I) 16 Leases with effect from 1 January 2019.

Interest income

Interest income decreased by Rp3.1 billion or 30%, from Rp10.3 billion (FY2018) to Rp7.2 billion (FY2019). This was mainly due to decrease in interest earned from bank deposits of Rp2.3 billion attributable to the decrease in cash and cash equivalents. Interest earned from the plasma plantation receivables decreased by Rp0.8 billion from Rp5.1 billion (FY2018) to Rp4.3 billion (FY2019).

Other income

Other income increased by Rp3.4 billion or 100% from Rp3.4 billion in FY2018 to Rp6.8 billion in FY2019. This was mainly due to increase in sales of sludge oil of Rp2.9 billion and gain on disposal of matured plantation under the Plasma program of Rp2.1 billion, offset by decrease in sales of kernel shells of Rp1.0 billion.

Other expenses

Other expenses increased Rp3.4 billion or 382%, as there was no provision for deferred charges being written back in FY2019, as compared to Rp3.6 billion being written back in FY2018. The increase is also mainly due to plantation written off of Rp2.7 billion, offset by a decrease in land application expenses of Rp1.5 billion and provision for plasma loan impairment of Rp1.6 billion.

Foreign exchange gain/(loss), net

Net foreign exchange gain of Rp0.9 billion in FY2019 was mainly due to the appreciation of IDR and USD against SGD in relation to the Company's IDR and USD bank balances held as well as the IDR denominated inter-company financing for its subsidiary.

Loss before income tax

As a result of the foregoing, loss before income tax increased Rp34.6 billion or 775% in FY2019, from Rp4.5 billion in FY2018 to Rp39.1 billion in FY2019.

Income tax expense

Income tax expense decreased by Rp1.4 billion mainly due to the lower profit generated.

Loss after income tax

As a result of the above, loss after income tax increased Rp33.2 billion or 442%, from Rp7.5 billion in FY2018 to Rp40.7 billion in FY2019.

Review of Financial Position as at 31 December 2019

Non-current assets

Non-current assets for the Group increased by Rp55.3 billion or 18%, from Rp309.7 billion as at 31 December 2018 to Rp365.0 billion as at 31 December 2019. This was mainly due to increase in deferred charges of Rp25.7 billion which mainly resulted from the acquisition of PT Bumi Raya Agro. There was also an increase in bearer plants of Rp9.5 billion, property, plant and equipment of Rp14.9 billion, right-of-use assets of Rp3.7 billion due to the adoption of SFRS(I) 16 Leases with effect from 1 January 2019 and increase in the credit extended to the Plasma farmers for the biological assets transferred of Rp1.5 billion.

Current assets

Current assets for the Group decreased by Rp77.8 billion or 19%, from Rp415.0 billion as at 31 December 2018 to Rp337.2 billion as at 31 December 2019. This was mainly due to the decrease in inventories of Rp27.3 billion from lower production in FY2019, decrease in trade and other receivables of Rp26.5 billion, decrease in prepayments of Rp1.6 billion and decrease in cash and cash equivalents of Rp26.0 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 FY2019. This was offset by an increase in income tax recoverable of Rp3.8 billion in FY2019.

Current liabilities

Current liabilities for the Group increased Rp19.9 billion or 62%, from Rp32.2 billion as at 31 December 2018 to Rp52.1 billion as at 31 December 2019. This was mainly due to increase in trade and other payables of Rp19.5 billion.

Non-current liabilities

Non-current liabilities for the Group increased Rp11.0 billion or 28% from Rp39.7 billion as at 31 December 2018 to Rp50.7 billion as at 31 December 2019, mainly due to increase in provision for post-employment benefits of Rp4.7 billion, increase in lease liabilities of Rp2.7 billion with the adoption of SFRS(I) 16 Leases and increase in deferred tax liabilities of Rp3.4 billion.

Accumulated losses

The accumulated losses of Rp180.8 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 Rp38.5 billion and remeasurement of post-employment benefits of Rp1.7 billion, offset by income tax relating to components of other comprehensive income that will not be reclassified subsequently to profit or loss of Rp0.4 billion in FY2019.

Review of Consolidated Cash Flows

Net cash generated from operating activities of Rp30.8 billion in FY2019 was mainly due to the sell-down of inventories from FY2018 of Rp27.3 billion, recovery from trade and other receivables of Rp14.6 billion and increase in trade and other payables of Rp14.9 billion. This was offset by operating cash flows used before working capital changes of Rp22.6 billion in FY2019 and utilization of post-employment benefits of Rp3.0 billion.

Net cash used in investing activities of Rp47.2 billion in FY2019 was mainly due to the capital expenditure on bearer plants of Rp21.2 billion, purchases of property, plant and equipment of Rp25.5 billion and payments for deferred expenditure of Rp2.6 billion. This was offset by receipt from disposal of financial assets at fair value through profit or loss of Rp1.8 billion in FY2019.

Net cash used in financing activities of Rp2.5 billion in FY2019 was mainly due to the repayment of lease liabilities and lease liabilities interest of Rp1.2 billion, buyback of the Company's shares to be held as treasury shares of Rp0.8 billion, and repayment of obligations under finance leases of Rp0.4 billion.

Commentary On Current Year Prospects

By mid-January 2020, CPO prices have increased by about 45% from its recent low to RM 3,200 per metric ton, supported by less than anticipated increases in supply and a significant increase in demand, as Indonesia implements the B30 mandatory biodiesel policy. However, due to the fear of the COVID-19 virus on world economic growth, CPO prices have since the January high, retreated to the current price of RM 2,500 per metric ton. The big question is to what extend the COVID-19 will become a global pandemic. This will impact world economic growth negatively and in turn will have a big impact on the price of CPO.

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.