CILIANDRA PERKASA GROUP MANAGEMENT DISCUSSION AND ANALYSIS FULL YEAR RESULTS ENDED 31 DECEMBER 2009 ( FY2009 ) FOR PT CILIANDRA PERKASA AND ITS SUBSIDIARIES ( Group ) Financial Highlights FY2009 Income Statement Highlights In Rp million FY2009 FY2008 Change Net sales 2,054,124 2,541,211 (19.2%) Gross profit 1,106,711 1,489,224 (25.7%) Income from operations 970,704 1,218,348 (20.3%) EBITDA (1) 1,133,831 1,345,750 (15.7%) Income before taxation 1,124,628 946,352 18.8% Income after tax before minority interest 806,381 681,207 18.4% Net income 610,443 438,366 39.3% (1) Consolidated net income before minority interests before provision for tax expenses, financial charges, depreciation, amortisation, interest income, earnings from associate companies and non-cash items (as defined in Company s USD Notes Offering Memorandum) Lower income from operations mainly due to lower average selling prices of crude palm oil Despite lower average selling prices, operating margins are still high; gross margin of 53.9% and EBITDA margin of 55.2% FY2009 Balance Sheet Highlights In Rp million 31 Dec 2009 31 Dec 2008 Change Total Assets 4,603,617 4,543,331 1.3% Cash and cash equivalents 560,700 597,935 (6.2%) Total Liabilities 2,316,567 2,770,580 (16.4%) Total indebtedness (1) 1,890,435 2,014,571 (6.2%) Total Stockholders Equity 1,684,935 1,157,547 45.6% (1) Sum of notes payable, bonds payable, bank loan, capital lease obligations and consumer financing loans (as defined in Company s USD Notes Offering Memorandum) Cash balances and liquidity remained strong Low near-term refinancing risk as majority of debt matures in late 2011 and 2012 PT Ciliandra Perkasa & its subsidiaries Management Discussion and Analysis of FY2009 Results Page 1 of 6
Review of Financial Performance Net Sales Net sales decreased by 19.2% from Rp2,541.2 billion in FY2008 to Rp2,054.1 billion in FY2009 due to the decrease in average selling prices of crude palm oil ( CPO ) and palm kernel ( PK ). Although the sales volume of CPO has increased in line with higher production volumes, this increase was insufficient to offset the decline in average selling prices. The following tables provides breakdown of our sales, sales volume and average selling prices: Sales FY2009 FY2008 Change Rp million Rp million % CPO 1,844,762 2,269,013 (18.7%) PK 209,362 272,198 (23.1%) Total Sales 2,054,124 2,541,211 (19.2%) Sales Volume FY2009 FY2008 Change Ton Ton % CPO 327,715 316,828 3.4% PK 74,084 69,517 6.6% Average Price/kg FY2009 FY2008 Change Rp Rp % CPO 5,629 7,162 (21.4%) PK 2,826 3,916 (27.8%) Cost of Goods Sold Cost of goods sold comprises mainly harvesting costs, plantation maintenance costs, FFB purchases from plasma farmers, CPO purchases, plantation general expenses and mill processing costs. Cost of goods sold decreased by Rp104.6 billion or 9.9% from Rp1,052.0 billion in FY2008 to Rp947.4 billion in FY2009. There were decreases in the value of FFB purchases from plasma farmers due to lower market prices of CPO as compared to FY2008. These were offset by increases in maintenance cost (due to larger mature hectarage), harvesting costs (due to larger production volume and increase in minimum wage rate). As FY2009 CPO sales volume increased by 3.4% over FY2008, cost of goods sold per ton of CPO sold decreased in FY2009 as compared to FY2008. Gross Profit Gross profit decreased by 25.7% from Rp1,489.2 billion in FY2008 to Rp1,106.7 billion in FY2009. Gross margin decreased from 58.6% in FY2008 to 53.9% in FY2009. PT Ciliandra Perkasa & its subsidiaries Management Discussion and Analysis of FY2009 Results Page 2 of 6
Operating Expenses Selling expenses comprises mainly freight charges and export taxes. Selling expenses decreased by 84.0% from Rp159.0 billion in FY2008 to Rp25.4 billion in FY2009. This significant decrease was mainly due to lower export taxes incurred as a result of Indonesia s progressive export tax structure on CPO. The export taxes levied is referenced off international CPO prices which declined in FY2009 versus prices in FY2008. General and administrative expenses comprise mainly remuneration of office staff, technical assistance fees paid to parent company and professional fees. General and administrative expenses decreased by 2.9% from Rp113.9 billion in FY2008 to Rp110.6 billion in FY2009, mainly due to a decrease in professional fees. The decrease in selling expenses and general and administrative expenses caused operating expenses in FY2009 to decrease by 50.2% to Rp136.0 billion. Income from Operations Income from operations decreased by 20.3% from Rp1,218,3 billion in FY2008 to Rp970.7 billion in FY2009. Other Income / Charges There was other income (net) of Rp153.9 billion in FY2009 as compared to other charges (net) of Rp272.0 billion in FY2008. There was a significant decrease in financial charges in FY2009 due to translational effects of our USD Notes. In FY2009, there was a translation gain of Rp218.2 billion, as the IDR appreciated during the year, versus a translation loss of Rp238.2 billion in FY2008. There was also an improvement in the mark-to-market position of the cross currency swap that the Group entered into in November 2007 to swap both the principal and interest payments of our IDR bond into USD liabilities. This led to gains of Rp188.6 billion in FY2009 versus a loss of Rp164.9 billion in FY2008. Tax expense Tax expense increased by 20.0% from Rp265.1 billion in FY2008 to Rp318.2 billion in FY2009. This increase was mainly due to a higher taxable profit. Net Income Net income increased by 39.3% from Rp438.4 billion in FY2008 to Rp610.4 billion in FY2009. Net income margin increased from 17.3% in FY2008 to 29.7% in FY2009. PT Ciliandra Perkasa & its subsidiaries Management Discussion and Analysis of FY2009 Results Page 3 of 6
Review of Balance Sheet and Financial Condition Assets Total assets grew by 1.3% from Rp4,543.3 billion as at 31 December 2008 to Rp4,603.6 billion as at 31 December 2009. This increase was mainly due to the increase in our non-current assets of Rp185.1 billion. Plantation assets grew by Rp154.2 billion due to continued investments by the Group in new plantings. Current assets decreased by Rp124.8 billion to Rp801.3 billion as at 31 December 2009. Inventories decreased mainly due to lower fertilizer and chemical inventories. There was also a decrease in cash and cash equivalents as a result of our capital expenditure programme during the year. As at 31 December 2009, our cash and cash equivalents stood at Rp560.7 billion as compared to Rp597.9 billion as at 31 December 2008. Liabilities Total liabilities of the Group decreased by Rp454.0 billion from Rp2,770.6 billion as at 31 December 2008 to Rp2,316.6 billion as at 31 December 2009. Non-current liabilities decreased by Rp373.4 billion and this is mainly due to the decrease in cross currency swap payable of Rp173.1 billion and notes payable of Rp208.0 billion. Current liabilities also decreased by Rp80.6 billion mainly due to the decreases in other payable, advance from customers and taxes payable, although these were partially offset by an increase in bank loan for working capital purposes. Equity Stockholders equity increased by Rp527.4 billion from Rp1,157.5 billion as at 31 December 2008 to Rp1,684.9 billion as at 31 December 2009. This increase is primarily a result of the strong financial performance recorded since FY2008. Debt Profile The following table summarises our existing debt profile: (In Rp million) 31 Dec 2009 31 Dec 2008 10.75% USD Notes due Dec 2011 1,298,246 1,506,233 11.50% IDR bond due Nov 2012 481,768 493,685 Bank loan 90,578 - Total capital lease obligations and consumer financing loans 19,843 14,653 Total indebtedness 1,890,435 2,014,571 We have entered into a cross currency swap to convert our 11.50% Rp500 billion bond (issued in November 2007) into a 7.40% US$53.4 million liability. We have low refinancing risk in the short-term as a significant portion of our debt matures on and after Dec 2011. PT Ciliandra Perkasa & its subsidiaries Management Discussion and Analysis of FY2009 Results Page 4 of 6
The following table summarises several key credit metrics: (times) 31 Dec 2009 31 Dec 2008 Fixed Charge Coverage Ratio (1) 4.24 5.58 Consolidated Leverage Ratio (2) 1.67 1.50 Net Debt (3) / EBITDA 1.17 1.05 Net Debt (3) /Equity (4) 0.79 1.22 (1) EBITDA / consolidated interest expense where (i) consolidated interest expense is the sum of interest expense on notes payables, bond payable, bank loans, consumer financing loans, capital lease obligations and amortisation of debt issuance costs (as defined in Company s USD Notes Offering Memorandum) (2) Total indebtedness / EBITDA where total indebtedness is sum of notes payable, bonds payable, bank loans, consumer financing loans and capital lease obligations (as defined in Company s USD Notes Offering Memorandum) (3) Total indebtedness less cash and cash equivalents (4) Stockholder s equity Review of Operational Performance The following tables summarises the production volumes and operational efficiency of: - PT Ciliandra Perkasa and its subsidiaries ( Ciliandra and Subsidiaries ) - PT Ciliandra s 32%-owned associate company, PT Meridan Sejatisurya Plantation ( PT MSSP ) Production Volume Ciliandra and Subsidiaries PT MSSP FY2009 FY2008 Change FY2009 FY2008 Change Total FFB (tons) 1,367,093 1,232,591 10.9% 177,239 171,203 3.5% Nucleus 1,216,145 1,072,544 13.4% 177,239 171,203 3.5% Plasma 150,948 160,047 (5.7%) - - - CPO(tons) 323,536 281,319 15.0% 45,095 41,359 9.0% PK (tons) 74,006 66,525 11.2% 10,387 9,807 5.9% Efficiency Ciliandra and Subsidiaries PT MSSP FY2009 FY2008 FY2009 FY2008 FFB Yield (tons/ha) 21.8 23.0 19.2 19.2 CPO Extraction Rate (%) 23.6 22.7 24.0 23.5 PK Extraction Rate (%) 5.4 5.4 5.5 5.6 CPO Yield (tons/ha) 5.2 5.2 4.6 4.5 In FY2009, Ciliandra and subsidiaries delivered strong organic growth of 10.9% in FFB production, mainly due to an increase in mature hectarage in FY2009. Ciliandra Group s CPO extraction rate rose to 23.6% as a result of better mill efficiency and the continued maturing of its oil palms. The FFB production growth and better CPO extraction rates led to an increase in CPO production of 15.0%. PT Ciliandra Perkasa & its subsidiaries Management Discussion and Analysis of FY2009 Results Page 5 of 6
The following table summarises our plantation area profile: Plantation Area Profile Ciliandra and Subsidiaries PT MSSP 31 Dec 09 31 Dec 08 31 Dec 09 31 Dec 08 Total Planted (ha) 89,699 85,401 9,267 9,267 Mature 62,678 53,675 9,249 8,941 Immature 27,021 31,726 18 326 Planted Nucleus (ha) 77,640 74,236 9,267 9,267 Mature 54,435 45,974 9,249 8,941 Immature 23,205 28,262 18 326 Planted Plasma (ha) 12,059 11,165 - - Mature 8,243 7,701 - - Immature 3,816 3,464 - - Ciliandra and subsidiaries planted 4,298 hectares of new oil palms in FY2009, of which 3,404 hectares are nucleus-owned and 894 hectares are under the plasma/kkpa scheme. The age profile of its plantations remains very favourable with an average weighted age of 8 years. Only 49% of its trees are in their prime production years, indicating high potential for future production growth. Outlook The long-term fundamentals of the palm oil industry remain favourable. In the near term, especially in 1Q2010, CPO production in Malaysia and Indonesia is expected to slow due to seasonality, allowing their inventory levels to fall. In addition, there are further uncertainties on the supply-side due to weather effects and continued replanting programmes in Malaysia. On the other hand, the impending South American soybean harvest is expected to be strong. Coupled with risks to global economic recovery and continued volatility in the financial markets, CPO prices could remain volatile in 2010. The Group has maintained one of the most competitive cost structures in the industry through our disciplined cost management and focus on production efficiencies. We believe this low-cost structure will help to cushion the Group s earnings and cashflows in the event of CPO price volatility. Looking ahead, the Group can expect increased production volumes as more of our trees enter into their prime producing years. This, coupled with our low-cost and high-yielding operations, will continue to drive earnings and shareholder returns over the long run. ********************************************************************************************************************* To subscribe/unsubscribe, change mailing address or request for more information, please contact: Ms. Serene Lim Tel: (65) 6333 6788 Email: serene.lim@first-resources.com or investor@first-resources.com Website: www.first-resources.com PT Ciliandra Perkasa & its subsidiaries Management Discussion and Analysis of FY2009 Results Page 6 of 6