by Ulisari Eslita
Palm oil and sugar producer, PT Tunas Baru Lampung (TBLA) posted a positive performance during the first quarter of 2020. TBLA booked net sales of Rp2.76 trillion or increased by 27.3% compared to last year's first quarter. Palm oil and its derivative products mainly drove the increase, which contributed Rp 1.96 trillion, while sugar products contributed Rp 802 billion to the company. However, TBLA's net profit decreased by 50% to Rp101.4 billion due to increases in several expense posts and exchange rate changes.
Last month, Moody's Investors Service had affirmed TBLA Ba3 corporate rating and had revised the outlook on the ratings from stable to negative. "The change in TBLA's outlook to negative from stable reflects our expectation that its credit metrics and liquidity position will remain stretched over the next 12 months, amid a challenging operating environment," said Maisam Hasnain, an analyst at Moody's. In line with that, the Ba3 ratings reflect the favorable long-term domestic demand fundamentals of its dual commodity business of palm oil and sugar.
While palm oil and sugar sales could temporarily increase in 1Q-2020 as customers stockpile inventory, earnings growth over the next 12 months will be tempered by slowing economic growth due to the coronavirus outbreak, which will weigh on domestic consumption and disrupt economic activity.
Yet, given the considerable decline in petroleum prices, demand for TBLA's biodiesel, which generated 27% of consolidated revenue in 2019, could decline as the price differential between biodiesel and diesel increases.
This risk is partly mitigated by the contract TBLA has with the state-owned oil and gas company PT Pertamina (Persero) to sell around 340,000 tons of biodiesel in 2020, up considerably from 217,000 tons sold in 2019.
Founded in 1973, TBLA is a producer of palm oil and sugar products. As of last year, TBLA was 28%-owned by PT Sungai Budi and 27%-owned by PT Budi Delta Swakarya. These two major shareholders are equally owned by Widarto, who serves as the executive chairman of TBLA, and Santoso Winata, who is the president commissioner of TBLA.