21 February 2019

JAKARTA - A number of crude palm oil (CPO) producers have started to spur production in line with warming prices and shrinking inventories at the beginning of this year.

CPO issuer from North Sumatra, PT Mahkota Group Tbk (MGRO) posted an increase in CPO production by 11.5% year-on-year from 14,455 tons in January 2018 to 16,131 tons in January 2019.

Elvi, Corporate Secretary of Mahkota Group, revealed that the increase in CPO production volume automatically boosted the company's profit.

In January 2018, MGRO still recorded a loss and managed to book a profit in January 2019. He hopes this positive condition will continue until the end of the year.

“In terms of net profit there was an increase, January 2018 lost IDR 670 million, and in January 2019 managed to book a profit of IDR 9.67 billion,” he told Bisnis, Wednesday (20/2).

Mahkota Group projects sales this year to potentially reach IDR 5 trillion, or equivalent to 2.5 times last year's target of IDR 2 trillion.

The ambitious target is in line with the completion of the new refinery plant in June 2019.

Elvi said that the refinery plant's contribution to sales will begin in July 2019. This new plant will produce CPO derivative products such as olein or cooking oil and sterin, as raw material for margarine or oleochemicals.

According to him, to obtain higher profits, the company must create products with added value. In 2018, the profit target of the issuer coded as MGRO shares is IDR 50 billion and the target in 2019 is IDR 123 billion.

Similarly, CPO production of PT Austindo Nusantara Jaya Tbk. also increased by 11% year-on-year to 18,332 tons in January 2019.

“The first quarter is generally a low production cycle. The end of the second quarter and the third quarter are generally the peak. However, if there are extreme weather changes, then there is a possibility that the harvest peak will shift,” Austindo Nusantara Jaya Finance Director Lucas Kurniawan told Bisnis on Tuesday (19/2).

In terms of price, he continued, the increase in CPO prices in January 2019 and February 2019 helped increase sales value compared to December 2018.

However, the sales price in January 2019 was lower than the sales price in January 2018.

PT Eagle High Plantations Tbk also recorded an increase in CPO production. According to Eagle High Plantations Investor Relations Sebastian Sharp, the company's CPO production in January 2019 rose 85% to 27,971 tons.

Sharp considers that CPO prices that have begun to creep up are good news for producers. “Starting from the beginning of 2019, demand will be above production. This is good, because prices will definitely rise,” he said.

In addition, demand from China is predicted to rise sharply by 8%, after stagnating in recent years.

Head of Investor Relations of PT Sampoerna Agro Tbk. Michael Kesuma revealed that CPO prices at the beginning of this year increased from the position in the fourth quarter of 2018. Based on the company's data, the CPO price at the end of 2018 was around IDR 6,000 per kg. However, in early 2019 the price increased by around 20% to IDR 7,100 per kg.

This condition made the issuer coded SGRO stock release its CPO inventory to the market. As of September 2018, the company's CPO inventory reached 50,000 tons and is targeted to drop to 25,000 tons by March or April 2019.

“We decided to release inventory in the first quarter of 2019 and the surprise price has become IDR 7,100 per kg. Yes, the margin automatically increased,” he told Bisnis, Tuesday (19/2).

In 2019, SGRO projects that production volume will increase by around 5%-10% or to 407,400 tons-426,800 tons. However, production this year is still heavily influenced by weather factors.

SEASONAL CYCLES

On the other hand, PT Sawit Sumbermas Sarana Tbk. projects that its performance in the first quarter of 2019 will not be as good as other quarters given the seasonal pattern of oil palm plantations.

Sawit Sumbermas Sarana Corporate Secretary Swasti Kartikaningtyas revealed that CPO production in January 2019 reached 27,641 tons, down 6% from the same position last year. She revealed, this decline is fairly normal.

“[January 2019 production] is normal, because production throughout 2018 was very high. If compared to 2018, it will look down,” he said.

In 2019, the SSMS-branded issuer set a CPO production capacity target of 560 tons per hour. The target comes from the operation of 9 palm oil mills owned by the Citra Borneo Indah Group company.

Currently, SSMS is in the process of completing 3 new palm oil mills. The capacity of these 3 mills reaches 480 tons per hour. However, the three unfinished mills have contributed 180 tons per hour.

A number of analysts argue that the performance of plantation issuers this year has the potential to be better than in previous years due to CPO prices and B20.

Panin Sekuritas analyst William Hartanto revealed that the influencing factors were the strengthening sentiment of B20 and the additional sentiment from President Joko Widodo regarding the B100 program.

“The factor of CPO prices is currently on the mend,” he told Bisnis, Wednesday (20/2).

The CPO price at the close of trading on Wednesday (20/2), fell 19 points to 2,241 ringgit per ton for the May 2019 contract. Meanwhile, during the year, the agribusiness index managed to rise 2.35% to 1,612.27.

Artha Sekuritas Vice President Research Frederik Rasali said that the performance of plantation issuers will depend more on price and demand sentiment. “CPO catalysts await more in terms of price and demand,” he said.

According to Frederik, the price of CPO in the first quarter of 2019 has increased, but not so well. This was due to the issue of Europe planning to stop using CPO. In addition, the lowering of CPO import tariffs to India in early 2019 was a positive catalyst. E2​

Source : Harian Bisnis Indonesia Terbit 21 Februari 2019