27th Aug 2014 13:14
LONDON (Alliance News) - Anglo-Eastern Plantations PLC Wednesday posted a jump in first half pretax profit on the back of improved crude palm oil prices, higher production and a revaluation of its biological assets, but gave a gloomy outlook for the future.
The company warned of challenging times ahead, both for the company and the palm oil industry in general, as the crude palm oil price has weakened due to the prospect of record soybean production in North and South America due to favourable weather expectations and increased planting. The situation is being exacerbated by a good supply of sunflower oil at competitive prices, and the deflating energy market has undermined expectations that biodiesel would absorb surplus crude palm oil.
The company posted a pretax profit of USD66.3 million for the six months to June 30, up from USD18.3 million in the previous year, as revenue rose to USD130.0 million, from USD83.5 million, and it saw a USD23.1 million gain from the revaluation of its biological assets.
Its Gross margin improved to 35%, from 25%, due to the increase in the price of crude palm oil. The average price of crude palm oil was USD895 per metric tonne, compared with USD847 per metric tonne in the first half of 2013.
Fresh fruit bunch production in the first half was up 17% to 393,900 metric tonnes, from 335,900 metric tonnes a year earlier.
The company said it remains cautiously confident of reporting a satisfactory level of profitability, and noted that cash generation is expected to remain strong, even though its outlook is uncertain.
It noted reports suggesting that refined palm oil buyers in China were struggling for funding after the country cracked down on commodity financing in the face of slowing domestic demand. However, it said the industry thinks the crude palm oil price is expected to be resilient due to concerns about lower fresh fruit bunch production in Malaysia and parts of Indonesia in the fourth quarter of 2014 due to a dry spell in the first three months of the year.
The El Niño weather phenomenon is also forecast to occur this year, which could cause droughts that would curb production and yield, it added.
Shares in Anglo-Eastern Plantations were trading down 0.5% at 641.00 pence Wednesday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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