8 Mar 2019 (The Motley Fool Singapore) : One of the worst-performing industries in the last five years (other than the oil and gas industry) has been the palm oil industry. During this period, companies like First Resources Ltd (SGX: EB5) and Bumitama Agri Ltd. (SGX: P8Z) saw their market capitalizations decline in excess of 30%.
Nevertheless, there are still plenty of reasons to like plantation companies. For one, their main product, crude palm oil (CPO), is an important food ingredient. Moreover, they generate rental-like income since palm oil trees can produce fruit for 20-25 years.
Those looking for investment ideas in this sector should keep reading as we compare First Resources and Bumitama Agri, two companies with significant palm oil businesses in Indonesia.
In part 1, we’re looking at the latest full-year performances of both companies to find out which one delivered a stronger financial performance in 2018.
Let’s begin with First Resources. For the year ended 31 December 2018, First Resources reported that sales fell by 2.1% year on year to US$633.5 million. Similarly, profit attributable to shareholders declined by 12.9% year on year to US$120.0 million. As a result, earnings per share (EPS) reduced by 12.8% year on year to 7.58 U.S. cents.
Next up is Bumitama Agri. For the year ended 31 December 2018, Bumitama Agri reported that sales revenue improved by 3.1% year on year to IDR 8,381 billion. Gross profit was flat at IDR 2,391 billion. Yet, net profit attributable to shareholders was flat at IDR 2,391 billion. Consequently, EPS dropped by 8.1% to IDR 627.
Both companies delivered weaker performances in 2018. Bumitama’s performance is marginally ahead given its growth in revenue and smaller decline in net profit attributable to shareholders. Stay tuned on to the second round of our showdown