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Financials

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

Financials Archive

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Profit & Loss

Profit & Loss

Other comprehensive income

Balance Sheet

Balance Sheet

Review of Group performance

2Q2018 versus 2Q2017

Revenue

Our revenue for 2Q2018 decreased Rp18.6 billion or 16%, from Rp100.4 billion in 2Q2017 to Rp81.8 billion in 2Q2018. This was mainly due to the decrease in crude palm oil ("CPO") sales revenue of Rp16.8 billion and decrease in palm kernel ("PK") sales revenue of Rp1.8 billion.

CPO sales revenue decreased by Rp16.8 billion or 19%, from Rp88.4 billion in 2Q2017 to Rp71.6 billion in 2Q2018. This was mainly due to the decrease in CPO sales volume and CPO average selling price. Sales volume of CPO decreased by 1,998 tons or 17% from 11,505 tons in 2Q2017 to 9,507 tons in 2Q2018. 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 Rp156 per kilogram or 2%, from Rp7,685 per kilogram in 2Q2017 to Rp7,529 per kilogram in 2Q2018.

PK sales revenue decreased by Rp1.8 billion or 15%, from Rp12.0 billion in 2Q2017 to Rp10.2 billion in 2Q2018. The decrease was mainly due to the decrease in PK sales volume from 3,003 tons in 2Q2017 to 2,000 tons in 2Q2018. This was offset by higher PK average selling price from Rp3,995 per kilogram in 2Q2017 to Rp5,094 per kilogram in 2Q2018.

Costs of sales

Cost of sales decreased by Rp12.6 billion or 15%, from Rp84.1 billion in 2Q2017 to Rp71.5 billion in 2Q2018. The decrease mainly resulted from the decrease in CPO and PK sales volume in 2Q2018.

Gross profit

As a result of the foregoing, gross profit decreased by Rp6.0 billion or 37%, from Rp16.3 billion in 2Q2017 to Rp10.3 billion in 2Q2018. Gross profit margin decreased by 3.6% from 16.2% in 2Q2017 to 12.6% in 2Q2018.

Distribution expenses

Distribution expenses decreased by Rp0.2 billion or 62%, from Rp0.4 billion in 2Q2017 to Rp0.2 billion in 2Q2018. This was mainly due to lower freight charges incurred in 2Q2018 for the transportation of PK, which is in line with the lower PK sales volume in 2Q2018.

Administrative expenses

Administrative expenses increased by Rp1.1 billion or 12% from Rp9.2 billion in 2Q2017 to Rp10.3 billion in 2Q2018. The increase is mainly due to increase in salaries and wages for the Group and higher professional fees incurred in 2Q2018.

Finance costs

Finance cost remained stable in both 2Q2018 and in 2Q2017.

Interest income

Interest income decreased by Rp0.6 billion or 18%, from Rp3.4 billion in 2Q2017 to Rp2.8 billion in 2Q2018, mainly due to lower interest earned from bank deposits and lower interest earned from the plasma plantation receivables in 2Q2018.

Other income

Other income decreased by Rp2.5 billion, mainly due to the decrease in sales of sludge oil of Rp2.0 billion, decrease in sales of kernel shells of Rp0.1 billion, higher net fair value losses from financial assets at fair value through profit or loss of Rp0.2 billion and decrease in fair value gain on derivative financial instruments of Rp0.1 billion.

Other expenses

Other expenses increased by Rp1.2 billion or 809%, from Rp0.2 billion in 2Q2017 to Rp1.4 billion in 2Q2018, mainly due to the provision for Plasma loan impairment of Rp1.1 billion.

Foreign exchange gain, net

Net foreign exchange gain of Rp2.4 billion in 2Q2018 was mainly attributable to the strengthening of USD and SGD against IDR, in relation to the Group's USD and SGD bank balances held.

Profit before income tax

As a result of the foregoing, profit before income tax decreased by Rp8.0 billion or 70%, from Rp11.5 billion in 2Q2017 to Rp3.5 billion in 2Q2018.

Income tax expense

Income tax expense decreased by Rp2.5 billion or 74% from Rp3.4 billion in 2Q2017 to Rp0.9 billion in 2Q2018. 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 Rp5.4 billion or 68%, from Rp8.0 billion in 2Q2017 to Rp2.6 billion in 2Q2018.

1H2018 versus 1H2017

Revenue

Our revenue for 1H2018 decreased Rp68.3 billion or 27%, from Rp248.9 billion in 1H2017 to Rp180.6 billion in 1H2018. This was mainly due to the decrease in crude palm oil ("CPO") sales revenue of Rp65.9 billion and decrease in palm kernel ("PK") sales revenue of Rp2.4 billion.

CPO sales revenue decreased by Rp65.9 billion or 29%, from Rp224.0 billion in 1H2017 to Rp158.1 billion in 1H2018. This was mainly due to the decrease in CPO sales volume and CPO average selling price. Sales volume of CPO decreased by 6,300 tons or 23% from 27,312 tons in 1H2017 to 21,012 tons in 1H2018. 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 Rp680 per kilogram or 8%, from Rp8,202 per kilogram in 1H2017 to Rp7,522 per kilogram in 1H2018.

PK sales revenue decreased by Rp2.4 billion or 10%, from Rp24.9 billion in 1H2017 to Rp22.5 billion in 1H2018. The decrease was mainly due to the decrease in PK sales volume from 5,003 tons in 1H2017 to 4,001 tons in 1H2018. This was offset by higher PK average selling price from Rp4,971 per kilogram in 1H2017 to Rp5,622 per kilogram in 1H2018.

Costs of sales

Cost of sales decreased by Rp35.8 billion or 19%, from Rp187.6 billion in 1H2017 to Rp151.8 billion in 1H2018. The decrease mainly resulted from the decrease in CPO and PK sales volume in 1H2018.

Gross profit

As a result of the foregoing, gross profit decreased by Rp32.6 billion or 53%, from Rp61.3 billion in 1H2017 to Rp28.7 billion in 1H2018. Gross profit margin decreased by 8.7% from 24.6% in 1H2017 to 15.9% in 1H2018.

Distribution expenses

Distribution expenses decreased by Rp0.2 billion or 37%, from Rp0.5 billion in 1H2017 to Rp0.3 billion in 1H2018. 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 1H2018.

Administrative expenses

Administrative expenses increased by Rp3.3 billion or 16% from Rp20.2 billion in 1H2017 to Rp23.5 billion in 2Q2018. The increase is mainly due to increase in salaries and wages for the Group and higher professional fees incurred in 1H2018.

Finance costs

Finance cost remained stable in both 1H2018 and in 1H2017.

Interest income

Interest income decreased by Rp1.6 billion or 22%, from Rp7.3 billion in 1H2017 to Rp5.7 billion in 1H2018, mainly due to lower interest earned from bank deposits and lower interest earned from the plasma plantation receivables in 1H2018.

Other income

Other income decreased by Rp10.2 billion or 92%, from Rp11.1 billion in 1H2017 to Rp0.9 billion, mainly due to the fair value gain on derivative financial instruments of Rp8.2 billion recognized in 1H2017, and the decrease in sales of sludge oil of Rp2.0 billion.

Other expenses

Other expenses increased by Rp1.8 billion or 170%, from Rp1.1 billion in 1H2017 to Rp2.9 billion in 1H2018, mainly due to the provision for Plasma loan impairment of Rp1.1 billion in 1H2018.

Foreign exchange loss, net

Net foreign exchange loss of Rp2.6 billion in 1H2018 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.

Profit before income tax

As a result of the foregoing, profit before income tax decreased by Rp45.5 billion or 88%, from Rp51.5 billion in 1H2017 to Rp6.0 billion in 1H2018.

Income tax expense

Income tax expense decreased by Rp11.1 billion or 82% from Rp13.4 billion in 1H2017 to Rp2.5 billion in 1H2018. 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 Rp34.3 billion or 91%, from Rp37.9 billion in 1H2017 to Rp3.6 billion in 1H2018.

Review of Financial Position as at 30 June 2018

Non-current assets

Non-current assets for the Group increased by Rp6.0 billion or 2%, from Rp303.8 billion as at 31 December 2017 to Rp309.8 billion as at 30 June 2018. This was mainly due to the net increase in bearer plants of Rp2.4 billion, increase of Rp2.6 billion from the credit extended to the Plasma farmers for the biological assets transferred and increase of Rp1.0 billion in property, plant and equipment.

Current assets

Current assets for the Group decreased by Rp33.5 billion or 7%, from Rp452.8 billion as at 31 December 2017 to Rp419.3 billion as at 30 June 2018. This was mainly due to decrease in cash and cash equivalent of Rp52.5 billion from lower cash generated from operating activities of Rp29.2 billion, cash used in investing activities of Rp14.0 billion and cash used in financing activities of Rp22.2 billion. This was offset by increase in inventories of Rp18.3 billion from lower sales in 1H2018.

Current liabilities

Current liabilities for the Group decreased by Rp15.6 billion or 30%, from Rp51.1 billion as at 31 December 2017 to Rp35.5 billion as at 30 June 2018. This was mainly due to decrease in trade and other payables of Rp8.0 billion, decrease in current income tax payable of Rp6.4 billion and payment of dividend payable to non-controlling interest of Rp1.0 billion.

Non-current liabilities

Non-current liabilities for the Group decreased by Rp8.4 billion or 18% from Rp47.5 billion as at 31 December 2017 to Rp39.1 billion as at 30 June 2018, mainly due to decrease in provision for post-employment benefits of Rp10.6 billion and increase in deferred tax liabilities of Rp2.2 billion.

Accumulated losses

The accumulated losses of Rp135.1 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 1H2018, offset by the net profit attributable to owners of the parent of Rp3.2 billion in 1H2018.

Review of Consolidated Cash Flows

Net cash used in operating activities of Rp29.2 billion in 1H2018, compared to net cash generated from operating activities of Rp60.2 billion in 1H2017, was mainly due to the decrease in operating profit in 1H2018.

Net cash used in investing activities of Rp14.0 billion in 1H2018 was mainly due to capital expenditure on bearer plants of Rp7.0 billion and purchases of property, plant and equipment of Rp7.1 billion in 1H2018.

Net cash used in financing activities of Rp22.2 billion in 1H2018 mainly due to dividend paid to owners of the parent of Rp20.5 billion, dividend paid to non-controlling interest of Rp1.0 billion, and buyback of Rp0.6 billion of the Company's shares to be held as treasury shares.

Commentary On Current Year Prospects

CPO prices are expected to remain within the current price range 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 announcement of a 20% biofuel mixed-use diesel to include in all diesel engine vehicles, should increase the demand of CPO when the policy is successfully implemented.

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.

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