Indonesian companies engaged in the production of crude palm oil (CPO) recorded impressive financial figures in the first quarter of 2014. Combined, 13 CPO companies that are listed on the Indonesia Stock Exchange posted IDR 3 trillion (USD $260.9 million) in net profits over the first quarter of 2014, a 116.1 percentage growth from the same period last year. Main reasons for this growth are the sharply depreciated Indonesian rupiah exchange rate in combination with the rising global CPO price and looming new El Niño cycle.
New El Niño Cycle 2014
El Niño is a weather phenomenon which occurs once every five years on average. The phenomenon involves warm water in the Pacific Ocean that can cause droughts in some regions (possibly leading to famine), while it can cause floods due to high rainfall in other places. Once every twenty years, the impact of El Niño on the environment is extra strong. The last time the world witnessed an extra strong El Niño cycle was in 1997-1998 resulting in the deaths of around 2000 people and damages worth of tens of billions US dollars. Forecasts of the aforementioned institutions suggest that this year's El Niño may be rather strong.
Two weeks ago, Australia's Bureau of Meteorology said that it is convinced that the world needs to prepare for a new El Niño cycle, the impact of which will be felt starting from July 2014. Also the European Center for Medium range Weather Forecasting (ECMWF) and the US Climate Prediction Center forecast high chances of a new El Niño cycle in 2014.
El Niño is capable of causing floods in Southeast Asia because of high rainfall, thus threatening local palm oil plantations (Indonesia and Malaysia account for almost 90 percent of global CPO production). This then causes demand for CPO to rise considerably as country's want to safeguard stockpiles of the commodity.
Particularly Dharma Satya Nusantara is expected to secure high revenue for the remainder of 2014. Analyst at Indosurya Securities William Suryawijaya stated that this company still owns large unplanted land banks compared to the other companies.
Listed Indonesian CPO Companies Financial Results Q1-2014 (in Billion Rupiah):
|Revenue|| Net Profit
||% Growth|| Q1-2014
|Astra Agro Lestari||3,725||2,723||36.7||784.6||356.3||120.2|
|Austindo Nusantara Jaya||398.2||409.2||2.7||44.6||44.2||0.9|
|Dharma Satya Nusantara||1,238||799.2||54.9||149||21.6||589.8|
|Jaya Agra Wattie||214.7||164.9||30.2||30.3||27.6||9.7|
|PP London Sumatra Indo.||1,279||912||40.2||223.6||100.5||122.4|
|Salim Ivomas Pratama||3,171||3,096||2.4||192||99.8||92.3|
|Sawit Sumbermas Sarana||524.2||435.3||20.4||196.1||148.8||31.7|
|Tunas Baru Lampung||1,158||873||32.6||131.9||77.8||69.5|
|Bakrie Sumatera Plant.||659.2||481.3||36.9||296.8||-62.9||571.8|
Source: Investor Daily
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