Indofood Agri Resources Ltd., a subsidiary of Indofood, reported on Feb. 26 a 78% drop in net profit after tax (NPAT) for the year ended Dec. 31, 2015, due to the global economic slowdown and weak market sentiments putting significant pressure on agriculture crops.
The company reported NPAT of Rp299 billion ($22.3 million), down 78% from Rp1.3 trillion in the previous year. For the fourth quarter, the company reported NPAT of Rp310 billion, a drop of 23% from Rp404 billion in the same period a year earlier.
Consolidated revenue for the year dropped 8% to Rp13.8 trillion due to lower revenue contribution from the Edible Oils & Fats (EOF) Division, partially offset by higher external sales from the Plantation Division. For the quarter, revenue was off 10% to Rp3.8 trillion.
“Lower commodity prices for agriculture crops and the weakened Indonesian Rupiah have affected negatively our FY2015 results. In light of this, the Group tightened its cash flow and focused its strategies on cost control initiatives, prioritizing on the maintenance of immature plantings and the expansion of capacity to support the increased production,” the company said.
Revenue from the EOF Division declined 4% in the fourth quarter mainly attributable to lower average selling prices, which were offset by higher sales volume of edible oil products. The sales decline of 14% for the year was attributable to both lower selling prices and sales volume of edible oil products.
On a positive note, the EOF Division achieved higher EBITDA earnings in the year and fourth quarter on lower raw material costs.
Looking ahead, the company said the market conditions remain challenging for commodity sectors. The persistent slump in commodity prices and slower growth in some key markets like China have led to a prolonged period of volatility and uncertainty, Indofood said.
“As a diversified and vertically integrated agribusiness with a dominant presence in Indonesia, our operations continue to be supported by positive market drivers that include good demographics, increasing urbanization and a fast-growing middle class with rising discretionary incomes,” the company said. “Our outlook for the agribusiness remains optimistic but we are cautiously managing our activities during this challenging period to mitigate risks and exposures. We will place a stronger emphasis on extracting the optimal from our value chain, and proactively improve operations, increase yields, raise productivity and control costs.”