Lack of buyers dent SIPEF rubber profits
ERJ staff report (TP)
Antwerp, Belgium – Agro-industrial company SIPEF reported a 62.75% decrease in consolidated gross rubber profit for the first half of 2014.
Profits, before IAS41*, fell from €5.1 million in the first six months of 2013 to €1.9 million in H1 2014 due to a lack of buyers and high levels of stock.
SIPEF said: “The previously announced positive production trend in the group’s rubber activities was maintained, except for the Melania plantation in South Sumatra [Indonesia] where an early and more pronounced foliation temporarily disturbed production.
“The group’s volume rose by 5.1% in comparison with last year. This is mainly due to the higher volumes in young plants in Agro Muko [Indonesian subsidiary], as well as the additional efforts in Papua New Guinea.”
In its financial report the company also said that high stocks and the lack of buying interest kept weighing on the rubber market – despite some indication that China’s macro-economic conditions could be turning, it could not spark the rubber market.
SIPEF added: “The price of Sicom RSS3 dropped further from US$2,300 [€1,733] to a low of $1,925. Given the lack of selling interest around these low levels it could indicate that the bottom has been reached.”
Its outlook for the rest of year is fairly positive.
“The first signs that the Chinese economy has turned the corner with positive PMI [Purchasing Managers Index] growth rates could be the spark that the rubber market has been desperately waiting for. Rubber stocks in China have already decreased by 20%, but this is not yet sufficient,” the company said.
“The Thai junta is trying to reduce its stocks by adding rubber to its asphalt, and at the same time trying to stimulate replanting. However, if successful, these factors will only impact the market on medium term. For the time being the market will remain in a narrow trading range, just above the set.”
Rubber forms only a small part (4.4%) of SIPEF’s activities. The majority (87.3%) of its business is based on palm oil production.
Overall, SIPEF reported a consolidated gross profit (before IAS41) of €44 million for H1 2014. For the same period last year it was €35.9 million – a 22.4% increase.
*IAS41: Accounting standard which sets out the accounting treatment and disclosures relevant to agricultural activity. More details here.
Further financial details in 24-page PDF report.
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