Here Are 2 Palm Oil Plantation Companies That Recently Reported Strong Growth In Their Latest Earnings
We’re more or less at the end of the earnings season!
As is common with every earnings season, there will be some companies posting growth, some companies posting flat numbers, and some companies experiencing declines. Recently, two palm oil plantation companies reported strong growth in their latest earnings. Here they are:
1. Two weeks ago, Wilmar International Limited (SGX: F34) reported its 2017 first quarter earnings. The company has a plantation size of over 240,000 hectares. Beyond palm oil, Wilmar also has business interests in oilseeds and grains, sugar, and more.
In the first quarter of 2017, Wilmar’s revenue was up 17.4% year-on-year to US$10.6 billion while net profit grew 51% to US$361.6 million. The company’s results were driven partly by growth in its palm oil business, which benefitted from higher CPO (crude palm oil) prices.
Wilmar’s chairman and chief executive officer, Kuok Khoon Hong, shared his thoughts on the company’s outlook in the earnings release:
“The Group has shown strong results in the first quarter, particularly from our Tropical Oils and Oilseeds & Grains segments. We expect our Flour business to continue its growth, while volume for Consumer Products is expected to recover from the seasonal reduction in 1Q2017. Although lower CPO prices will impact our Plantation and Palm Oil Mills operations, we believe that this will be partially offset by anticipated higher palm oil production.”
2. Next up we have First Resources Ltd (SGX: EB5), which has a higher concentration toward the palm oil industry than Wilmar. The company is an integrated palm oil producer and runs over 200,000 hectares of oil palm plantations.
The company released its 2017 first quarter results last week. It was a good report from First Resources. Quarterly revenue surged 71.6% year-on-year to US$194 million while net profit spiked by 807% to US$48.5 million. Moreover, the company generated nearly US$45 million in free cash flow for the quarter, which is significantly higher than the US$13 million seen a year ago. First Resources had benefitted from higher sales volumes and higher CPO prices during the quarter.
Commenting on the future, First Resources said:
“The Group’s strong performance in the first quarter of 2017 has been aided by higher palm oil prices in early 2017 and strong production growth. However, prices have moderated since on improving supply prospects for palm oil and other edible oils as well as muted demand from importing countries such as India and China. Lower prices are expected to persist as both our own as well as the industry’s production continue to recover especially in the second half of 2017.
The Group’s production growth has been strong since the fourth quarter 2016, and barring any weather shocks, this yield recovery is expected to continue for the rest of the year. However, after the strong production in the first quarter of 2017, production in second quarter is expected to slow down before recovering in the second half of 2017.
Amidst the short term volatility in palm oil prices, the longer term fundamentals of the industry remain positive, underpinned by the Indonesian biodiesel mandate and underlying demand growth from emerging markets.