CLSA Gozco 1H10 result below expectation

Gozco (GZCO IJ) result below expectation due to poor harvest as bad weather hit production in early 2Q10. Please see comments by analyst Wilianto:

Although production has pick up strongly in Jul10, it will still hard for Gozco to meet FFB production expectation of 175k tons (vs. 153k tons in FY09), thus we are reviewing our forecast for potential downgrade.

Net profit came in at Rp43bn, down 43% yoy and down 30% qoq. The net profit of Rp43bn in 6m10 only accounts for 22% of our full year profit, below our comfort zone of 30%-40% of full year. Harvest remains relatively poor in 2Q10 at 26,293 tons of FFB from nucleus estates (-2.3% qoq and -29% yoy). Thus FFB production in 6M10 only reaches 53,200 tons (-18.7% yoy) or only amounted to 30% of target of 175k tons.

In addition, the performance of its 50% owned Indotruba Tengah that accounts for half of its profit in 2H09 is also less impressive with 26% qoq increase in profit contribution vs. a 106% qoq increase in profit of Sampoerna Agro and +34% qoq increase of Astra Agro. The concentrated estates areas (all mature areas are in South Sumatra) has made its production more volatile than companies with more diversified areas.