Golden Agri-Resources Ltd

SGX:E5H

Q2-2025 Earnings Call

[Richard Fung, executive]

So good morning, everyone, and thank you for joining this presentation, where we will discuss the first half results of Golden Agri first half 2025. And so we look here at the executive summary, and we are very pleased with the excellent first half results with especially stronger contribution from the upstream business. Revenue increased by 20% to USD 6.15 billion, and that was primarily driven by stronger CPO prices, which more than offset the slightly lower sales volume.

The EBITDA increased by 14% to USD 566 million, and that was because of stronger upstream margin and a continued healthy downstream margin as well. The underlying profit increased by 23% to USD 232 million, and that was further supported by the lower interest expenses that we enjoyed.

If you look at the graph on the right-hand side, the segmental EBITDA, you can see the largest contribution coming from the upstream, the red part of the bar. And if you compare it to first half 2024, you can see that it was actually the downstream providing the largest contribution to our EBITDA. So we believe this is evidence of the resilience of our vertically integrated business model, where both the upstream and downstream are significant contributors to our earnings.

Then we have the financial highlights. And as I already mentioned, if you look at the first half this year compared to first half last year, strong increases, top line and bottom line. The net profit is here given as well, which increased by as much as 56%, further supported by a lower foreign exchange loss and reached USD 160 million for the first half. Quarter-on-quarter, we also saw a positive growth in terms of revenue, reaching USD 3.1 billion and a strong increase in EBITDA to USD 307 million and underlying profit to USD 144 million. And net profit for the quarter -- for the second quarter increased by 93% compared to the previous quarter to USD 106 million.

Then we come to our balance sheet, which remains strong with a healthy cash position, as you can see, and a reduction in our debt. So net debt reduced by 54% to USD 258 million, while the interest-bearing debt decreased by 9% to USD 3.37 billion. So the strong earnings combined with the deleveraging gives us strong financial ratios. Current ratio remained strong at 1.4x, and we saw improvement in the debt to total equity to 0.61x, net debt over EBITDA to 0.22x and EBITDA over interest increased to 5.11x.

Then we come to the segmental performance, starting with the upstream, the plantations and palm oil mills. And as I already mentioned, this was the largest contributor to our earnings for the first half. And this was driven by more favorable weather conditions, which gave us more production, more than compensating for the replanting process that we're going through, where we are preparing all estates for replanting.

So we can see here revenue increasing by 30% to USD 1.2 billion and EBITDA by 51% to USD 320 million with an EBITDA margin increased to 27.1%. So of course, the financials were helped by the higher CPO prices, as I mentioned, you see here the 19% increase compared to first half last year to USD 1,090 per tonne, but we do pay a higher levy to support the biodiesel program. And therefore, the increase in the first half was 13% compared to last year, net of these taxes and levy to USD 900 per tonne.

Fruit production, as mentioned because of the better weather, we saw a 10% increase and fruit yield increased by 9%. The total palm product output increased by 9% to 1.3 million tonnes. And we saw increases -- improvements in both the oil extraction rate and kernel extraction rate as well to 20.7% and 5.5%, respectively, resulting in a palm product yield of 2.3 tonnes per hectare for the first half, a 10% increase over last year.

So some details about our oil palm plantations, and we continue to focus on securing the future growth through our replanting program and as well as the innovation in the fields. So if you look at the mature area, we saw a slight increase, while planted area saw a slight decrease. This is because of the replanting activities. And we replanted 6,000 hectares in the first half of this year with a target of 20,000 hectares for the full year.

Our -- the average age of our nucleus plantations was sustained at 15 years old. And you can see the age profile on the right-hand side. 7% of our trees are immature and 11% are young. So that is where the production growth will come from in the coming years as these trees mature. Then the mature trees -- sorry, the prime trees, 45% and 19%, they are at their peak production. And then we have 18% of all trees over 25 years old that we are replanting. And we are replanting with high-yielding seeds, which will give us higher production per hectare in the future years.

So then we come to the downstream. And here, we experienced a more competitive market environment. Nevertheless, we were able to maintain a healthy EBITDA margin of 4%. Revenue increased by 20% to over USD 6 billion, and that was primarily because of the higher CPO price.

Sales volume, as I mentioned, decreased slightly by 2%. We did see some recovery in the market environment in the second quarter. So we hope to see good results for the full year.

So then we come to our business strategy and outlook. Golden Agri focuses on fortifying its position as an innovative and leading integrated agribusiness and food player with a superior at-scale upstream and resilient value-adding downstream business. In the upstream business, the plantations, the focus is on operational excellence. And the key drivers there are maximizing yield potential, consistent high-quality replanting, optimizing manpower productivity. That's also through the mechanization and automation, upscaling precision agriculture platform and advancing research for superior planting materials.

In the downstream, the focus is on value-add enhancements, selling the high value-added refined products with a focus on a large product portfolio that differentiates on quality, healthier alternatives and sustainably produced products, advanced R&D on oils and fats, full-service global logistics and distribution network and strong relationships with our destination customers.

Underpinning these are leveraging cutting-edge technology and Agri-science innovation, ESG commitment for responsible production, maximizing asset utilization through new product initiatives and effective and efficient management with streamlined business processes and talent development.

So then we have the business outlook, and the industry fundamentals remain robust. We see a modest recovery in palm oil plantation output, especially in Indonesia this year. But we believe that this supply growth will be easily absorbed by the continued growing demand, including from the Indonesian B40 biodiesel program.

The capital expenditure budget for this year is USD 350 million. And in the upstream, this is mainly for the replanting and in the downstream for expansion of the processing plants, the enhancement of other downstream facilities, including for traceable products and carbon emission reduction initiatives.

And this slide about our ongoing sustainability initiatives will be presented by Anita.

[Anita Neville, executive]

Thank you, Richard, and good morning, everybody. We've had a busy quarter in relation to ongoing sustainability initiatives, starting, of course, with our commitment to responsible supply chains. This quarter, we published our Responsible Agri-Commodity Sourcing Policy, which extends responsible sourcing to non-palm products that we trade.

In addition, we've continued our work on EUDR readiness, piloting our SmartTrace system with key EU-based customers to enhance supply chain transparency and support supply chain compliance. We've maintained active dialogue as well with regulators in Indonesia and the EU as well as stakeholders and customers to follow EUDR developments.

In terms of our ambitions, looking forward for sustainability, we launched our new sustainability framework Collective for Impact in May, focusing on 3 pillars: Sourcing Responsibly, Caring for Our Planet, which includes our net zero by 2050 commitment and Empowering People where we're strengthening our commitments and in human rights due diligence. We've set clear time-bound targets to drive long-term impact for the environment, our people and the communities where we operate. We can do more if we do it together with others, and that's why we're focused on driving impact through partnerships, together with ADM, a key customer in Tzu Chi Indonesia, we've launched a program to improve food security and prevent stunting to key issues in Indonesia and enhance early childhood education in Lubuk Gaung in Indonesia. This expands on an earlier partnership that has trained over 600 caregivers and upgraded education facilities in more than 350 early childcare centers reaching over 8,000 children. That's all from me. Thank you.