InfoSAWIT, SINGAPORE – Indonesia-based palm oil company Kencana Agri Limited (Kencana) has reported a 12% drop in revenue for the first half of 2024 compared to the same period in 2023. This decline is attributed primarily to lower average selling prices (ASP) for crude palm oil (CPO) and palm kernel (PK) in global markets.
The ASP for CPO in H1 2024 was recorded at USD 706 per ton, down 12% from USD 798 per ton in the same period in 2023. Similarly, the ASP for PK decreased from USD 407 per ton in 2023 to USD 384 per ton in 2024.
Despite declining prices, Kencana Agri managed to increase its PK sales volume by 5%, from 13,047 tons in H1 2023 to 13,715 tons in H1 2024. Meanwhile, CPO sales volume remained stable year-on-year.
The company achieved a 22% reduction in production costs, which dropped from USD 51.9 million to USD 40.2 million in H1 2024. This was largely due to more moderate fertilization and plantation maintenance activities compared to the previous year. The cost-saving measures contributed to an improved gross margin, which rose from 16% to 26%, even as CPO prices declined.
During the six months ending June 30, 2024, Kencana Agri posted a pre-tax profit of USD 2.2 million. However, the company faced higher tax expenses of USD 1.6 million—exceeding Indonesia’s corporate tax rate of 22%—due to non-deductible expenses and losses from non-operational subsidiaries.
Kencana Agri’s net profit for H1 2024 fell 70% to USD 0.6 million, down from USD 1.9 million in H1 2023. This significant drop was largely driven by a foreign exchange (forex) loss of USD 2.1 million, in stark contrast to a forex gain of USD 4.5 million in the same period last year.
The forex losses stemmed from USD-denominated bank loans, as the Indonesian rupiah depreciated by approximately 7% against the USD, from IDR 15,416 to IDR 16,421 per USD.
Partially offsetting the forex losses was an increase in the value of biological assets, which rose by USD 1.8 million. This was supported by positive trends in CPO prices, providing some cushion against the adverse impact of currency fluctuations.
Despite challenges from declining selling prices and forex pressures, Kencana Agri's operational efficiency and the rise in biological asset value offer a degree of resilience. These factors are expected to help the company navigate the uncertainties of the fluctuating market. (T2)
