Univanich Palm Oil (4)

Financial Performance

Table below summarises key financial metrics of Univanich in the last 4 years. Including also in the Table is the 2003 financial results, the year it was listed. Note that 2008 was the best year for Univanich and palm oil industry as a whole when CPO price rose over RM 4,000 per tonne in a response to crude oil price of $140 per barrel.

Let’s start with the revenue structure of Univanich. More than 90% of total revenues were derived from crude palm oil (CPO) and crude palm kernel oil (PKO) sales. The remaining was from sales of other products such as seeds, seedlings and electricity. Its products were sold domestically or exported through the deepwater seaport nearby its plants depending on the product price.

The annual production of CPO and PKO combined from 2007 to 2010 was relatively constant at approx 140,000 to 150,000 tonne, a 50% increase from 2003 production level as newly built Lamthap factory ramped up its production to its full capacity. Slight variations between 2007 and 2010 were mainly due to weather-related matter.

It is observed the volatility in the average selling price (ASP) of the combined CPO and PKO is high. In 2003, the ASP for combined CPO and PKO was 18.10 Baht/kg. It skyrocketed to a historic high of 39.04 Baht/kg in 2008 and settled at 29.46 Baht/kg in 2010. As a result there is no surprise to observe that its top lines were highly fluctuated as well.

The share of revenue from other products increased steadily from around 5% in 2003 to 8% in 2010 thanks to the ongoing investment in oil palm R&D and three biogas plants. In the Baht term, it rose from approx 100 MB to 343 MB or 18.8% compounded annual growth rate. In the future, added to its revenue would be the carbon credit trading of approx 100,000 Certified Emission Reduction credits (CERs) generated annually from its three biogas plants under the Clean Development Mechanism (CDM) scheme of the United Nations Framework Convention on Climate Change (UNFCCC). I expect the share of revenue from other products would continue to rise and this would help Univanich’s future performance insulated from the fluctuation in CPO price.

Its gross profit margin dwindled from 27.9% achieved in 2003 to 18.7% in 2010. This was attributable to the increase in FFB amount sourced from outside growers (80% to 85%). Although Univanich has constantly increased its oil palm plantation area, it is unable to keep pace with the increase in crushing capacity installed in 2001 and 2004 and still has to rely on FFB from growers nearby its plants. This trend is unlikely to change course and this would probably explain why Univanich invests so much in oil palm R&D. As it has to rely on outside growers, it would be better to supply them with high quality seeds and seedlings.

Its net profit margin declined from 20.4% in 2003 to 12.4% in 2010. This was caused by the reduction in GPM and increase in effective tax rate although offsetting by the improvement in cost control. The effective tax rate is expected to rise to 20% in 2011 because of the expiry of some BOI privileges.

	2003	2007	2008	2009	2010
Revenue (MB)
Domestic
CPO	1,003.25	849.14	1,410.20	2,528.08	2,507.28
PKO	35.07	0.00	28.46	265.42	164.20
Other Products	102.92	187.05	260.42	273.39	291.82
Subtotal-Domestic	1,141.24	1,036.19	1,699.08	3,066.89	2,963.30
Export
CPO	617.23	2,573.60	3,906.61	612.94	746.65
PKO	196.05	862.25	1,202.50	195.27	549.63
Other Products	0.00	25.41	27.64	91.73	51.22
Subtotal-Export	813.28	3,461.26	5,136.75	899.94	1,347.50
Total
CPO	1,620.48	3,422.74	5,316.81	3,141.02	3,253.93
PKO	231.12	862.25	1,230.96	460.69	713.83
Other Products	102.92	212.46	288.06	365.12	343.04
Total Sales	1,954.52	4,497.45	6,835.83	3,966.83	4,310.80
Other Revenues	4.67	8.93	17.99	21.42	18.16
Total Revenue	1,959.19	4,506.38	6,853.82	3,988.25	4,328.96
Cost of Sales	1,409.10	3,819.57	5,084.60	3,147.77	3,505.73
Selling Expenses	n/a	n/a	103.76	101.14	91.53
Administrative Expenses	n/a	n/a	57.66	36.23	52.03
Mgmt Benefit Expenses	n/a	n/a	46.52	39.00	41.12
Total Expenses	134.52	158.36	207.94	176.37	184.68
EBIT	415.57	528.45	1,561.28	664.11	638.55
Finance Cost	0.99	0.00	0.00	0.00	0.00
Income Tax	14.38	23.28	116.62	83.66	102.00
NPAT	400.20	505.17	1,444.66	580.45	536.55
Outstanding shares	94.00	94.00	94.00	94.00	94.00
EPS (Baht)	4.26	5.37	15.37	6.18	5.71
Amortisation		13.77	14.53	14.26	13.12
Depreciation	71.27	96.98	101.57	121.99	143.18
Total CAPEX	96.00	163.82	218.58	245.43	103.88
Free Cash Flow	375.47	452.10	1,342.18	471.27	588.97
FCF/shares (Baht)	3.99	4.81	14.28	5.01	6.27
DPS	3.50	4.00	11.50	4.50	4.50
Dividends	329.00	376.00	1,081.00	423.00	423.00
Dividend payout ratio	82%	74%	75%	73%	79%
Margins (%)
Export/Total Sales	41.6%	77.0%	75.1%	22.7%	31.3%
Gross Profit Margin	27.9%	15.1%	25.6%	20.6%	18.7%
NPAT Margin	20.4%	11.2%	21.1%	14.6%	12.4%
Expenses/Sales	6.9%	3.5%	3.0%	4.4%	4.3%
Tax Rate	3.5%	4.4%	7.5%	12.6%	16.0%
Production
FFB Processed Capacity (t/h)	90	135	135	135	135
Actual FFB Processed (t)	506,806	687,212	867,593	792,250	753,897
Utilisation Rate (%)	67.0%	60.6%	76.5%	69.9%	66.5%
PK Processed Capacity (t/h)	5	8	8	8	8
Palm Kernel Produced (t)	28,817	38,057	48,120	43,162	40,152
Utilisation Rate (%)	68.6%	56.6%	71.6%	64.2%	59.8%
CPO+PKO Production (t)	102,300	133,600	167,700	148,400	134,700
Oil Extraction Rate (%)	20.2%	19.4%	19.3%	18.7%	17.9%
Profitability
CPO+PKO ASP (THB/kg)	18.10	32.07	39.04	24.27	29.46
CPO+PKO Sales/FFB (THB/t)	3,653	6,235	7,547	4,546	5,263
NPAT/FFB (THB/t)	790	735	1,665	733	712