Third Quarter Financial Statement And Dividend Announcement 2016
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Profit & Loss
NM - not meaningful
Statements Of Comprehensive Income
Review of Performance
Commentary on income statement for the quarter 3 months ("Q3 2016") and 9 months ("9M 2016") ended 30 September 2016
The Group incurred net loss after tax of S$21.6 mil (S$7.5 mil if loss of disposal of SIAT palm oil assets is excluded) in 9M 2016, as compared to a net loss after tax of S$8.0 mil during the 9 months ended 30 September 2015 ("9M 2015"). The 9M 2015 results were restated to reflect the effects of adopting amendments to FRS 41. There was a fair valuation loss of S$0.3 mil in 9M 2015 (S$0.4 mil in 9M 2016) for consumable biological assets, due to falling cuplumps prices and lower inventory levels at the end of September 2015 compared to Dec 2014.
For Q3 2016, there was a S$1.1 mil fair valuation gain on FRS 41 due to higher cuplumps prices and higher inventory levels from our plantations at the end of September 2016 compared to June 2016.
Revenue for Q3 2016 was S$143.8 mil (76,426 tons sold), a decrease of S$29.4 mil compared with S$173.2 mil (81,751 tons sold) for Q3 2015.
The decrease in revenue was due to the lower rubber selling prices which declined from S$2,040 per ton in 9M 2015 to S$1,781 per ton in 9M 2016. The decrease was partially offset by the favourable exchange translation rate. Foreign currency translation favourably impacted sales dues to appreciation of US$ against S$ (Group's reporting currency) during the period from 9M 2015 US$/ S$ rate of 1.3565 to 9M 2016 US$/ S$ rate of 1.3719.
Cost of sales
Cost of sales for Q3 2016 was S$126.6 mil (76,426 tons sold) compared with S$155.4 mil for Q3 2015 (81,751 tons sold).
Cost of sales for 9M 2016 was S$367.5 mil (227,514 tons sold) compared with S$437.2 mil for 9M 2015 (239,751 tons sold).
The decrease in cost of sales was due largely to the lower prices paid for external purchases of raw materials, which moved in tandem with selling prices, which had decreased by approximately 15.9% compared with 9M 2015.
The gross profit margin was lower at 9.3% in 9M 2016 as compared with 10.6% in 9M 2015. This is due to lower selling prices in 2016 which had impacted the gross profit margin for 9M 2016. Gross profit margin was at 12.0% in Q3 2016 as compared to 10.3% in Q3 2015 as selling prices improved by S$75 per ton quarter on quarter.
Other operating income
Other operating income decreased to S$0.7 mil in 9M 2016 from S$1.8 mil in 9M 2015 mainly due to lower interest income earned in 9M 2016, no receipt of insurance subsidy from Thailand government and less proceeds from sale of plantation spare parts and materials in 9M 2015.
The decrease in administrative expenses from S$34.8 mil in 9M 2015 to S$31.7 mil in 9M 2016 was mainly due to the ongoing cost control measures.
Distribution expenses of S$16.5 mil in 9M 2016 was marginally lower compared with S$18.0 mil in 9M 2015 reflecting lower tonnage sold in this period.
Other operating (expenses)/ gain
Other operating gain was S$1.5 mil in 9M 2016 compared to a loss of S$2.2 mil in 9M 2015, mainly due to fair valuation of consumable biological assets and reversal of provision for stock NRV.
A S$0.4 mil loss in fair valuation was recorded for 9M 2016 due to low produce from our plantations at end of September 2016 compared to end of December 2015. A S$1.1 mil gain in fair valuation was recorded for Q3 2016 mainly due to higher price of cuplumps and higher closing inventory levels at the end of September 2016 compared to end of June 2016.
There was a reversal of S$2.4 mil in provision for stock NRV in YTD 2016 compared to a provision of S$0.8 mil expense in YTD 2015.
Share of associates' profit/ (loss)
There was a loss of S$14.1 mil on the sale of SIAT Gabon palm oil assets during Q2 2016. Excluding the loss on disposal, the share of profit of associates in 9M 2016 was S$2.6 mil profit compared with a profit of S$2.2 mil in 9M 2015.
The share of profit of associates in Q3 2016 was S$0.2 mil loss compared with a profit of S$0.7 mil in Q3 2015.
Finance costs in 9M 2016 were S$5.9 mil compared with S$3.5 mil in 9M 2015. The increase in finance costs was due to higher bank borrowings from long term loans undertaken to finance new plantations and operations.
Foreign Exchange Gain/(Loss)
*Based on the Group's in-house rate according to Bloomberg.
The Group registered an unrealised foreign exchange gain of S$4.7 mil in 9M 2016 mainly from Euro balances in sales advances given and bank balances and USD bank loans. Outstanding sale advances given to subsidiaries were mainly Euro denominated while bank loans undertaken by Group were USD denominated.
Net gain on financial derivatives
Realised gain/(loss) from rubber hedging and foreign exchange hedging amounted to (S$0.4) mil and S$0.3 mil respectively in 9M 2016. Unrealised loss from rubber hedging amounted to S$1.2 mil in 9M2016, with unrealised foreign exchange hedging gain of S$0.5 mil. Both rubber and foreign exchange hedging are undertaken to manage against volatility and fluctuations of natural rubber prices and foreign currencies.
Depreciation expenses for 9M 2016 were S$ 13.6 mil compared with S$12.6 mil in 9M 2015. The increase in depreciation was mainly due to plantations in Africa and machineries capital expenditure in our Thai subsidiary.
Income tax (expense)/ credits
Income tax credits in 9M 2016 was S$1.2 mil compared with income tax expense S$0.7 mil in 9M 2015 mainly due to deferred tax assets accrued in 9M 2016.
Commentary on Cash Flow Statement
For 9M 2016, the Group recorded a negative operating cash outflow of S$7.2 mil compared to negative operating cash outflow of S$ 7.9 mil in 9M 2015.
The Group recorded a cash outflow from investing activities of S$32.8 mil in 9M 2016 mainly due to continued investment and expansion of the Group's plantation areas.
Financing activities recorded a cash inflow of S$51.5 mil during 9M 2016 compared to cash inflow of S$60.6 mil in 9M 2015. Higher long term bank borrowings were undertaken in 9M 2016 to finance working capital and new plantations.
Commentary on Balance Sheet as at 30 September 2016
The Group's total assets had decreased by S$2.2 mil from S$1,015.7 mil as at 31 December 2015 to S$1,013.5 mil as at 30 September 2016. The decrease was mainly due to a loss on sale of SIAT Gabon palm oil assets in Q2 2016 of S$14.1 mil.
Trade receivables increased by S$2.0 mil to S$34.8 mil in line with higher revenue as a result of higher selling prices in Q3 2016.
Other receivables decreased by S$8.3 mil to S$61.0 mil mainly due to VAT refunds received by our African operations.
The Group's total liabilities had increased by S$36.8 mil from S$267.3 mil as at 31 December 2015 to S$304.1 mil as at 30 September 2016. The increase was mainly due to additional borrowings for working capital purposes and capital expenditure for plantation investments.
Equity attributable to owners of the Company as at 30 September 2016 was S$680.3 mil as compared to S$715.6 mil as at 31 December 2015. The decrease was largely due to the loss in foreign currency translation reserve arising from the weakening of USD, Euro and CFA Francs against the Singapore dollar and share of associates' foreign currency translation reserve.
As a result of higher loss in currency translation reserve, the Group's net asset value per share has decreased from 93.42 cents per share as at 31 December 2015 to 88.80 cents as at 30 September 2016.
The financial position of the Group as at 30 September 2016 is summarized below:
A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.
The Group's performance is highly dependent on the price of natural rubber and climatic conditions and the changes in foreign currencies namely Euro, United States Dollars, Thai Baht and Indonesia. Barring unforeseen circumstances, we expect rubber prices for 2016 to remain range-bound at current levels which was US$1,391 per ton(S$1,886 per ton) at end September 2016.
We continue to focus on increasing sales volume and sales premium, managing costs and improving on productivity to improve performance. At the same time, the Group continues to strengthen and enhance risk management in order to manage the exposure to foreign exchange and commodity price risks.
On 23 August 2016, Deutsche Bank AG, Singapore Branch ("Deutsche Bank") had announced, for and on behalf of Halycon Agri Corporation Limited (the "Offeror"), the Offeror's firm intention to make a voluntary conditional offer (the "GMG VGO") for all the issued and paid-up ordinary shares in the capital of GMG (the "GMG Shares"), other than those already owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it.
The GMG VGO was declared unconditional in all respects on 9 September 2016, and the closing date of the GMG VGO was extended to 5.30 p.m. (Singapore time) on 8 November 2016 (or such later date(s) as may be announced from time to time by or on behalf of the Offeror).
On 21 October 2016, Deutsche Bank had, for and on behalf of the Offeror, announced that as at 5.00 p.m. (Singapore time) on 21 October 2016 the total number of (i) GMG Shares owned, controlled or agreed to be acquired by the Offeror and (ii) valid acceptances to the GMG VGO, amount to an aggregate of 689,460,749 GMG Shares, representing approximately 90.01% of the total issued GMG Shares (the "Level of Acceptances Announcement"). Further to that, GMG announced on 24 October 2016 that the requirement under Rule 723 of the listing manual of the Singapore Exchange Securities Trading Limited ("SGX-ST") for GMG to ensure that at least 10% of the total number of issued GMG Shares (excluding GMG Shares held in treasury) is at all times held by the public is not satisfied as at 21 October 2016. As stated in the Level of Acceptances Announcement, the Offeror has no intention to support any action or take any steps to maintain the listing status of GMG on the SGX-ST.