Singapore Corporate News - 26 Feb 2008

Golden Agri rides high on palm oil prices

GOLDEN Agri Resources, the world's second-largest planter of palm oil by area, has reported a 147.5 per cent rise in net profit to US$1.16 billion for the year ended Dec 31, 2007, thanks largely to a net fair value gain in its plantation assets of more than US$800 million.

Excluding net fair value gains - which came to US$373 million in 2006 - core earnings were more modest at US$353 million, though this was still more than three times the US$98 million earned in FY2006.

Revenue grew 65.8 per cent to US$1.87 billion, helped by record crude palm oil prices.

International selling prices in 2007 averaged US$775 a tonne, some 63 per cent higher than in 2006, when the average selling price was US$475 per tonne, according to Golden Agri.

'It's a golden era for Golden Agri,' said Franky Oesman Widjaja, its chairman and chief executive. 'Every day is a new record (in palm oil prices).'

Food-related demand from China and India is increasing about 20 per cent a year, he said. Shortage of supplies is exacerbated by the transfer of soya and rapeseed oil to biofuel production, helped by heavy subsidies.

The price difference between crude palm oil and soybean oil is now more than US$200 a tonne, and almost double that amount in China, said Mr Widjaja.

Demand is also rising for palm-based oleo-chemicals, or chemicals derived from biological sources, as opposed to petrochemicals. Used to make soap, cosmetics and lubricants, oleo-chemicals are more environment-friendly than oil-based products, as the manufacturing discharge is water-soluble, Mr Widjaja said.

Sales of crude palm oil, which Golden Agri produces in Indonesia at a running cost of US$200 a tonne, according to Mr Widjaja, accounted for 85 per cent of Golden Agri's profit in FY2007.

The remainder came from selling cooking oil and oleo-chemical products in Indonesia and China.

The group owns some 1.3 million hectares of land in Kalimantan and Papua, which is equivalent to 18.5 times the land area of Singapore. It has some 360,000 ha of plantation under management, almost 70 per cent of which has trees in the prime yielding ages of 7-18 years.

Golden Agri, which produced about 1.6 million tonnes of crude palm oil and 360,000 tonnes of palm kernel in 2007, aims to plant another 60,000 ha this year.

It also plans two refineries that will lift its palm oil refining capacity to about 1.4 million tonnes a year, from 840,000 tonnes now.

The group projects 2008 capital expenditure of between US$350 million and US$500 million, depending on whether it can complete certain acquisitions, Mr Widjaja said.

Golden Agri has proposed a final dividend of half a Singapore cent per share.

Earnings per share were US$0.24 for FY2007. The stock closed three cents higher at $1.17 yesterday.

Courts faces another loss for FY2008

FURNITURE, furnishings and IT retailer Courts (Singapore) is headed for another year of losses as it will book provisions of $11-15 million for the year ending March 31, 2008 from shutting down its remaining six stores in Thailand, which are in the southern part of the country.

This will be the second consecutive year of losses for Courts, which posted a $17.4 million net loss for the year ended March 2007, because of provisions relating to closing its four stores in north-eastern Thailand last year.

The remaining six outlets in Thailand to cease operations are in places like Phuket, Pang-Nga and Krabi.

This will bring to an end the group's Thai retail venture, which began in 2003. 'We traded successfully for the first year, year-and-a-half. Unfortunately the economic and political situation dampened consumer sentiment. There were also credit issues' relating to Courts' Thai customers' ability to pay hire-purchase instalments, Courts (Singapore) CEO Terry O'Connor said in a brief telephone interview yesterday.

'After a couple of years of significant losses, it's in our best interest as a listed company to cut our losses and pull back from our Thai retail operations and concentrate on our successful Singapore business,' Mr O'Connor added.

The group, which is 79 per cent owned by a joint venture between a unit of Kuwait's The International Investor and a Baring private equity fund, will now concentrate on its successful retail operations in Singapore, where it has nine stores, including Courts Megastore in Tampines which opened in December 2006.

That store, which is being operated under the Economic Development Board's Warehouse Retail Scheme, is already profitable and Courts is on the lookout for more opportunities in Singapore. However, the challenge is in being able to find large sites, Mr O'Connor said.

In its announcement to the Singapore Exchange yesterday, Courts said it will cease retail operations in southern Thailand by end-April 2008.

'This decision was reached and agreed by the board after extensive deliberation in view of the difficult trading conditions and the unstable political situation in Thailand,' the company said.

The group will set up six collection centres near the current outlets in southern Thailand to facilitate the recovery of receivables from customers. Courts subsidiary Courts Megastore (Thailand) Ltd will continue to operate in the country, with its main activity being the collection of outstanding debts. The leases of all retail outlets in southern Thailand will also be terminated upon the end of retail operations.

Taking into account the losses to date on the southern Thailand retail operations and the estimated realisable value of the assets of the Thai subsidiary, the group will have to reflect a provision ranging from $11 million to $15 million in the profit and loss account for the financial year ending March 31, 2008.

Straits Asia to quadruple coal-mining capacity

STRAITS Asia Resources (SAR) plans to grow its coal-mining capacity fourfold to 20 million tonnes per annum (mtpa) within three to four years, SAR chief executive Richard Ong told BT.

'Coal, coal, coal' - that will effectively be the company's motto going forward, said Mr Ong, who took charge only last year.

That's a different cry from last year, when former chief David Toms announced in May the company's planned involvement in oil and gas exploration and production. However, the next day Mr Toms announced he was leaving the company, making way for Mr Ong, who co-founded the company in 1994 and had served as its chief operating officer until then, to take the helm.

With the focus on coal, Mr Ong halted trading activities in gold, silver and copper, which accounted for 40 per cent of SAR's US$250 million revenues for FY2007.

'We were just buying from our parent (Australia-listed Straits Resources) and selling. It wasn't a thrilling business, wasn't adding to the bottom line; it was just something from our legacy,' explained Jeremy Figgins, who manages the firm's investor relations.

In contrast, its gross margins on the coal business for 2007 were nearly 40 per cent.

Sebuku is the lowest cost coal mined in the world, with production cost of less than US$25 per tonne, said Mr Ong. Situated on an island off Kalimantan, the mine is located just 15 km from a jetty to the south, indicating low transport costs. SAR is building another jetty to the east of the mine, which will reduce transport distance to 7 km and cut production costs by another US$1 per tonne.

Sebuku, which produced 3.4 mt of coal in 2007, will increase this to its maximum capacity of 6 mtpa by 2009, though its large resource base could support a significantly higher rate, according to SAR. Mr Ong said it will spend up to US$90 million on the jetty and other infrastructure that will raise capacity to 9 mtpa.

Meanwhile, the firm has acquired other coal mining assets. Chief among them is Jembayan, a mine in East Kalimantan it bought for US$350 million last year.

Jembayan produced about 4 mtpa in 2007, and SAR wants to push this up to over 5 mtpa this year. The mine has a capacity of 7.5 mtpa.

Still, it is 80 km inland and on top of hills, which raises transport costs to the coast, meaning cost per tonne is over US$30, said Mr Ong.

He expects SAR to more than double coal output for 2008 to up to 9.5 mtpa. To get to his 20 million tpa target, Mr Ong said he is eyeing another acquisition, which is already in production and could be comparable to Jembayan in size.

Sebuku alone is 'too small', he said, explaining his decision to focus on growing coal assets. 'We don't want to put all our eggs in one basket,' said Mr Ong, yet the cashflow from the mine would not be sufficient to support ventures into oil and gas.

SAR's declaration of force majeure last July illustrates this point. Extremely heavy rainfall flooded Sebuku, an open pit mine, causing severe production shortfalls. To tackle the problem, SAR has installed dewatering systems that will reduce the impact of future storms, said Mr Ong. Meanwhile, Jembayan, though also an open pit mine, has a different geological structure and will be less affected by rains, he said.

Mr Ong also wants to develop PT Indo Straits, a SAR subsidiary that helps ship coal to customers. He plans to spend up to US$30 million on another four tugs and barges, and a transhipment crane, to help raise capacity.

Indo Straits now has assets of less than US$20 million, but Mr Ong wants to build this up to US$150 million, upon which SAR could spin it off to the market in two years time, he said.

Straits Asia earnings slide 40.7% to US$28.6m

INDONESIAN coal miner Straits Asia Resources, which was listed in November 2006, yesterday reported a 40.7 per cent slide in 2007 net profit to US$28.56 million, due to higher administrative costs and lower revenue.

Revenue fell 10 per cent to US$250.96 million. This was due to the cessation by the fourth quarter of trading activity in gold, silver and copper, which made up more than half of group revenue but only a small fraction of profit.

Revenues from coal sales, which account for most of the group's profit, increased marginally to US$135.3 million.

This was due to higher selling prices, despite slightly lower sales volume of 3.47 million tonnes. The sales target was 4 million tonnes, but actual sales fell due to bad weather in the second and third quarters.

However, mine output for the final quarter of 2007 was 1.21 million tonnes, about 20 per cent higher year on year.

'The mine has recovered extremely well.' said chief executive Richard Ong. 'The record production in Q4 shows the mine is capable of producing at rates well in excess of four million tonnes annually.'

Straits Asia, which plans to up its coal output to between 8.5 and 9.5 million tonnes this year, said it is 'witnessing a rapid strengthening in coal prices in our region'.

Part of its production increase will come from Jembayan, an operating mine it bought last year for US$350 million.

'The Straits Asia story is no longer restricted just to the Sebuku mine. The results from Jembayan since we took over operations have been good and signs are that we should significantly exceed the mine's 2007 production of 3.96 million tonnes,' Mr Ong said.

Straits Asia will explore the Jembayan site 'as fast as possible' and expects an increase in reserves to be announced this year, he said.

The group's revenue from subsidiary PT Indo Straits - which transports coal - rose 167 per cent to US$13.43 million. This was due to new agreements with several resource companies in Kalimantan.

However, administrative, corporate and technical support costs rose 157 per cent to over US$20 million, due to high expenditure to support growth and additional costs related to being a public company.

The cost of coal sales also rose, due to higher fuel prices and higher labour costs and contract mining rates.

Directors have recommended a final tax-exempt cash dividend of 0.75 US cents per share. This will take the total dividend for the year to 1.75 US cents per share or 61 per cent of group earnings.

Straits Asia shares closed eight cents lower at $3.89 yesterday.

CAE's Q4 net rises 49.6% to 16.9m yuan

CHINA Auto Electronics Group (CAE) posted a 49.6 per cent year-on-year rise in net profit to 16.9 million yuan (S$3.32 million) for its fourth quarter ended Dec 31, 2007, as revenue rose 24.4 per cent to 199 million yuan. The main revenue boost came from wire harness products.

Fourth-quarter revenue from China and Australia increased by 41.4 million yuan and 2.2 million yuan respectively, although sales in the United States dropped 4.6 million yuan.

The quarter's net margin was also up at 8.5 per cent compared with 7.1 per cent for last year's corresponding three months.

CAE signed an agreement in December last year to dispose of Snowcity Group. The fourth-quarter results from the sale reflected as 'loss from discontinued operations' amounted to 157,000 yuan.

CAE said an increase in bank borrowings of about 170.8 million yuan in Q4 was 'due to the need to establish a reason to remit foreign funds into China'.

CAE became the legal parent of Tianhai Electric Corporation Ltd (TEC) on Sept 21, 2007, by acquiring the entire issued and paid-up share capital of TEC from the shareholders of TEC.

The substance of the business combination meant that TEC acquired CAE in a reverse acquisition.

As a consequence of applying the guidance of reverse acquisition accounting, the results up to the third quarter ended Sept 30, 2007, comprised the results of TEC and those of the TEC Group from Jan 1, 2007, to Sept 30, 2007.

Comparative figures of the consolidated financial statements thus reflected those of TEC for the period from Jan 1, 2006, Dec 31, 2006.

Cash and bank balances increased by about 390.1 million yuan due mainly to net proceeds from share placement of some 325.3 million yuan.

CAE ended fiscal year 2007 with revenue up 56.9 per cent at 830.4 million yuan from 529.1 million yuan.

Net profit for the year more than trebled to 117.3 million yuan from 33.2 million yuan.

Ascott offer: CapitaLand hits compulsory acquisition level

CAPITALAND said it intends to exercise its right of compulsorily acquiring the outstanding shares in The Ascott Group after it reached the 90 per cent compulsory acquisition acceptance level yesterday. Ascott will be delisted from the Singapore Exchange. As at 5 pm yesterday, CapitaLand received valid acceptances for its offer which, together with market purchase shares, amount to 90.14 per cent of Ascott shares that it or its concert paties did not own before the general offer.

CapitaLand and its concert parties now own a total 96.73 per cent of Ascott. The closing date of the offer has been extended to 5.30pm on March 11, the final closing date.

Advance SCT reviews stake acquisition

COPPER recycling group Advance SCT yesterday said its proposed acquisition of the remaining 20 per cent stake that it does not own in Malaysian copper smelter TTM Industries (TTMI) from Tembusu Growth Fund is currently under review after an audit of TTMI's accounts showed that TTMI's net profits for its maiden operation and for the year ended Dec 31, 2007 are expected to be significantly lower than the earlier announced unaudited net profit figure. 'Due to the above circumstances, the guidance provided by the group in the interim result announcement on 30 July 2007, that barring unforeseen circumstances, the group expects its financial performance to improve in 2H 2007, is no longer applicable,' the company said.

China Energy profit up 38%

CHINA Energy posted a 38 per cent jump in full-year net profit to 264.97 million yuan and said it expects to achieve better profitability in the current year ending Dec 31, 2008.

Metal Component back on profit path

METAL Component Engineering returned to profitability in FY2007 with a net profit of $3.6 million after two consecutive years of net losses of $3.8 million and $2.6 million in FY2006 and FY2005, respectively. This was achieved on the back of a 2 per cent growth in group turnover to $102.3 million in FY2007. The turnaround was attributed to efforts to focus on better margin projects, lower operating costs and restructuring efforts at its Thailand operations.

Thakral turns around with $5.3m Q4 profit

THAKRAL Corporation has turned around, posting net earnings of $5.3 million for the fourth quarter ended Dec 31, 2007, against a $7 million net loss in the same year-ago period. The group also posted net earnings of $5.45 million for the year ended December 2007, a reversal from a $19.2 million net loss in the preceding year. Fourth-quarter revenue increased 53 per cent year-on-year to $73.4 million while revenue for the year ended December 2007 rose 20 per cent to $288.4 million.

Yangzijiang Shipbuilding earnings surge

YANGZIJIANG Shipbuilding (Holdings) posted a 91 per cent jump in full-year net profit to 869.5 million yuan on the back of a 66 per cent increase in revenue to 3.86 billion yuan. The group has a strong order book of about US$7 billion as of Jan 31, 2008, of which US$5 billion was secured last year. The vessels in the order book are slated for completion and delivery till first-half 2012. The group remains confident of its business prospects for the current year. Shareholders will receive a 1.565-cent per share first-and-final dividend.

Sihuan Pharmaceutical profit almost doubles

SIHUAN Pharmaceutical Holdings Group's full-year net earnings nearly doubled to 179.3 million yuan. Sales leapt 77 per cent for the year ended Dec 31, 2007 to 286.3 million yuan.