I didn't look at the highest point and lowest point, that will be meaningless, as all assets ( commodity) will be up in the long term. If u are looking at GFC , u should look at the peak before GFC and not after GFC. U cannot look at the recent peak and look backwards to the past, if that is the case, it will be a few hundred percent fall from 20 years ago. But I agree it could go lower, but that history has not yet allow a fall of more than 40percent from its last peak not highest peak, give me some margin of safety ... Will share more numbers wen I get home
18-05-2013, 09:37 PM (This post was last modified: 18-05-2013, 09:41 PM by Greenrookie.)
Here is the numbers for the work i did (I consolidate the work after my kid go to sleep, cannot guaranteed the accuracy)
Important numbers:
1) Take away the fair value gains and looking solely at net core profits, it show resilience in profitability even during GFC or periods of low CPO prices.
2) % of products besides crude palm oil (CPO) is increasing.
3) trend of CPO price is always a higher high after a trough.We are now at the trough (NOt sure if it is bottom)
4) Ever- increasing production capabilities
5) MArket is valuing it at retained earnings (retained earnings appx = market capitalism)
Negatives/ risks?
1) fair valuation gains/loss--most prob will be in the red this year, given the av. 3 cpo prices is dipping from a high base
2) Profile of plantation is mature, and will continue to age, since they can't grow as fast in the short term as compared to the past
3) But they have concession to half of what they have in indonesia 22000 hectares in Liberia as compared to 46000 in indonesia, and for 65 years,
4)I have problems tracking the verdant fund in their financial numbers, hence my earlier question to forummers in the forum. How to track the profitability of the Verdant fund, which golden agri is the sole investor which in turn own golden veroleum that operates liberia consessions
5) YOu can argue that diversification into CHina is diworsification since profitabilty is volatile and margins dismal.
NOte: It is still work in progress, so pardon some of the messiness
18-05-2013, 10:26 PM (This post was last modified: 18-05-2013, 10:29 PM by freedom.)
the future of palm oil as edible oil is limited as it is really low end unhealthy edible oil. It is mostly popular in developing markets such as India, China, Indonesia, etc. These developing markets are also abandoning palm oil, such as China, as their GDP per capita increases. It is not really a substitute for soybean oil. It is a substitute only if there is really not enough soybean in the world.
as for the oleochemical market, I am not sure how big it is. but apparently, palm oil plays a large role there.
palm oil could be used as bio-diesel, but recently, it seems that both US and EU determine that palm oil does not fit their clean fuel requirements as most palm oil is produced where it used to be rainforest or peatlands. They even go further saying that palm oil is as bad as tar sands(oil sands, worse than crude oil). It could have a better future if palm oil can be used as clean fuel in US and EU, but there is a lot of work to be done to convince them.
(18-05-2013, 10:26 PM)freedom Wrote: the future of palm oil as edible oil is limited as it is really low end unhealthy edible oil. It is mostly popular in developing markets such as India, China, Indonesia, etc. These developing markets are also abandoning palm oil, such as China, as their GDP per capita increases. It is not really a substitute for soybean oil. It is a substitute only if there is really not enough soybean in the world.
as for the oleochemical market, I am not sure how big it is. but apparently, palm oil plays a large role there.
palm oil could be used as bio-diesel, but recently, it seems that both US and EU determine that palm oil does not fit their clean fuel requirements as most palm oil is produced where it used to be rainforest or peatlands. They even go further saying that palm oil is as bad as tar sands(oil sands, worse than crude oil). It could have a better future if palm oil can be used as clean fuel in US and EU, but there is a lot of work to be done to convince them.
my 2 cents.
Its not unhealthy. Nobody has ever died from consuming palm oil. All those research that shows palm oil is unhealthy is an agenda propogated by the west to get people to consume soybean and corn oil instead.
The "noise" of news, with one bullish and the other bearish.
Freedom, thank you for your comments, on soy oil, kept me busy for a few days reading up on it.
Generally, I feel that the risk of Soybean oil replacing CPO is low mainly because of pricing. Soybean price is about 40% higher than CPO now, and in the 15 years history, is never cheaper than palm oil, although there are short periods of time when the gap really closed.
I think CHIna and India will use CPO for the near future, there are many who are still not as rich to be choosy about edible vegetable oil, and there are many other uses for palm besides being used as vegetable oil.
Europe might be reducing palm oil consumption though, as there is greater awareness of not health problems (there is another article by a professor that demyth the health concerns about CPO http://thestar.com.my/health/story.asp?f...sec=health) but more of deforestation concerns in indonesia and malaysia.
Golden agri and the major oil producers and members of RSPO and golden agri is a very active member. It is definitely for commercial and not altruistic reasons that golden agri is taking the lead with greenpeace in developing sustainable palm oil production, but as long as something good come out of it, I am happy. Hence, the RSPO might effectively block out smaller producers who might not have the clout for such sustainability exercise (restrict on fertillizers, etc)
All in all, still happy with the risk I am taking with golden agri...
Golden Agri Q2 profit falls, flags tough outlook in China
SINGAPORE – Golden Agri-Resources reported on Friday a plunge in its second-quarter net profit, hurt by lower palm oil prices, and said the operating environment in China remains challenging due to intense competition.
The company posted net profit of US$45 million (S$57.3 million) for the three months ended June, down 58 percent from a year earlier. The earnings were also 60 per cent lower than the previous quarter, mainly due to weaker production and higher plantation costs. REUTERS
02-08-2013, 09:45 PM (This post was last modified: 02-08-2013, 10:11 PM by Greenrookie.)
(02-08-2013, 07:56 PM)CityFarmer Wrote: Golden Agri Q2 profit falls, flags tough outlook in China
SINGAPORE – Golden Agri-Resources reported on Friday a plunge in its second-quarter net profit, hurt by lower palm oil prices, and said the operating environment in China remains challenging due to intense competition.
The company posted net profit of US$45 million (S$57.3 million) for the three months ended June, down 58 percent from a year earlier. The earnings were also 60 per cent lower than the previous quarter, mainly due to weaker production and higher plantation costs. REUTERS
Lower CPO price is always a convenient excuse for poor results, but for this case CPO price is just a scapegoat.
Compared QoQ, CPO price is more of less the same, but GP margin for indonesia operation fallen from 30% to 20%! 10% drop!
Main reason is the fall in yield, production fall 11%, coupled that with high inflation and costs of fertillizers and etc, the results is as above.
Hopefully Q3 margin will improve since management believe production will improve in coming quarters.
As for China operations, although volatile and still challenging,
GP and NP margins have improved 6 to 7% and 1.9 to 3.6% repectively. Although rev drop 5%.
Q3 av. CPO price(July CPO is bad, and demand will remain weak after ramandan) is worse, so I expect worse profits in 2H.
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