GAR continued to be affected by declining crude palm oil prices, which had a negative impact on its two core businesses: “Plantations and Palm Oil”, as well as “Palm, Laurics and Others”. Nevertheless, the “Palm, Laurics and Others” segment managed to post an increase in its FY 2018 EBITDA due to other factors, while its “Plantations and Palm Oil” segment achieved a record high in plantation production.

Performance Drivers (Positive Factors)

• Palm, Laurics and Others Segment

The Palm, Laurics and Others segment refers to all processing and merchandising of palm and oilseed based products, comprising bulk and branded products, biodiesel, oleo-chemicals and other vegetable oils, as well as production and distribution of other consumer products in China and Indonesia.

For FY 2018, revenue from this segment dropped by 4% to USD 7.1 billion on the back of declining crude palm oil prices, as well as lower sales and crushing volume for oilseeds in China. This drop was partially offset by a strong demand for biodiesel. GAR’s margins in FY 2018 were also impacted by the government’s intervention in commodity markets, such as in India and Malaysia, as well as the changes in US-China trade tariffs.

Nevertheless, the company’s FY 2018 EBITDA from this segment rose by 11% year-on-year to USD 184 million, as result of additional contribution from biodiesel and destination sales, the removal of export levy, and fair value gain recorded during the year.

• Net Other Operating Income

Net other operating income increased from the USD 44 million in FY 2018 to USD 125 million in FY 2018. This was mainly due to a fair value gain on financial assets following the adoption of IFRS 9. GAR adopted IFRS 9 at beginning of the year where all their financial assets are required to be stated at fair value instead of cost. The fair value of the assets was mainly based on external valuation reports.

Performance Drivers (Negative Factors)

• Plantations and Palm Oil Segment

The Plantations and Palm Oil segment was the main factor behind GAR’s weaker performance for the year. FY 2018 revenue for this segment dropped by 13% year-on-year to USD 1.5 billion, as it continued to be plagued by declining crude palm oil prices, which was in turn caused by a strong global plantation output. The drop was partially offset by recovery in palm product output. EBITDA for FY 2018 also declined by 22% year-on-year to USD 391 million, while EBITDA margin decreased to 27%.

Nevertheless, GAR achieved a record high in plantation production for FY 2018. Although replanting activities reduced the mature area to 467 thousand hectares – fresh fruit bunch production increased from 9.61 million tonnes in FY 2017 to 10.53 million tonnes this year. Further, a new record of 3.05 million tonnes in palm product output of the mills was achieved. This record output was made up of 2.44 million tonnes of crude palm oil, as well as 613 thousand tonnes of palm kernel. In addition, average palm product yield rose to 6.2 tonnes per hectare in FY 2018, compared to the 5.7 tonnes per hectare last year.

• Share of Results of Joint Ventures

In FY 2018, GAR suffered a share of loss in joint ventures of USD 40 million. This was in contrast to the USD 0.4 million share of profit recorded in FY 2017. The decline was primarily attributed to losses by a joint venture that just started commercial operations in the last quarter of 2017, and is still in the market development phase.