CLSA Astra Agro (AALI IJ)

Astra Agro (AALI IJ) FY08 results, comment from Wilianto

Astra Agro net profit of Rp2.63tn in FY08 is 6% better than our forecast of Rp2.48tn. However, stripping off the one off gain from asset sales, core profit is 5% below our expectation.
Ebit in 4Q08 was sharply lower, down -65% qoq due to lower CPO price of Rp4,836/kg in 4Q08 vs. Rp7,363/kg in 3Q08. The low profitability in 4Q08 is mainly a function of lower CPO price.
Production remains relatively stable. CPO production is at 246k tons in 4Q08 vs. 241k in 3Q08. FFB production from nucleus plantation was slightly lower at 716k tons in 4Q08 vs. 732k tons in 3Q08.
Astra Agro booked Rp403bn (Rp282bn after tax) gain from asset sale. It sold 7k hectares of its rubber and palm oil estates to Adaro for US$60m in Apr08 but still keep the right to harvest until 2012. Astra Agro did not book the gain from asset sale until 4Q08.

Given CPO price has bounce from the low in 4Q08, we expect a recovery in earnings in 1Q09. However, as the average price in 2009 is likely to be much lower than Rp7,134/kg achieved in FY08, earnings will still be sharply lower in 2009 vs. 2008. We remain cautious on Astra Agro (AALI IJ - Rp13,000 - SELL).