Golden Agri-Resources Ltd. (GGR), the second-biggest palm plantations operator, expects to maintain profitability at its China unit as a drop in soybeans and higher selling prices improve earnings in oilseed processing.
“Currently the environment there is quite stable and therefore we should be able to continue with the positive performance that we achieved in the first quarter,” Chief Financial Officer Rafael Buhay Concepcion Jr. said in an interview.
The Singapore-based company reported first-quarter profit at its China unit of $6 million, after losses at the business in the preceding three quarters. Industry overcapacity, state imposed price caps and record soybean prices hurt earnings in 2012 at Golden Agri’s China operations and at peers such as Wilmar International Ltd. (WIL)
Soybeans, which are processed into meal and oil, are down 15 percent from a peak of 17.89 cents a bushel reached in September. Prices may extend declines to below $10 a bushel by July as U.S. farmers switch some acres from corn, the U.S. Soybean Export Council said in May.
“The price of beans has come down significantly and we were also able to steadily increase our selling price,” Concepcion said in the May 30 interview in Singapore. “That enabled us to improve in our performance and the first quarter in China was back to a profit.”
Golden Agri’s China unit posted a full-year loss of $48 million in the 12 months ended Dec. 31, the company said in a Feb. 28 presentation.
The company expects China’s contribution as a percentage of revenue to stay roughly the same in the next three years, Concepcion said. Golden Agri completed its first expansion of the business, since entering China in 2005, by starting a new crushing and refining plant in Tianjin last year, he said.