Govt will impose export duties on CPO

JAKARTA. The government will impose export duties on CPO (crude palm oil) as much as Rp 3 per ton. This may be a potential pressure for CPO issuer's performance.

"The margin of PT London Sumatra Indonesia Tbk (LSIP) will be under pressure," analyst at UOB Kay Hian Securities, Yasmin Soulisa wrote on a research.

Yasmin predicts that LSIP will still can record net profit margin at around 16.1% in 2017. However, the margin may potentially drop to 13.6%.

The policy appears to affect issuers with a large volume of exports. "Definitely, it will affect to the margin," said Investor Relation of PT Sampoerna Agro Tbk (SGRO) Michael Kesuma, Friday, (6/1).

Recently, the exports' portion of SGRO is lower compared with five years ago. The exports' portion of SGRO only comprised 0.9% of SGRO's revenues, which amounted Rp 1.9 trillion. Therefore, the policy will have insignificant impact to SGRO.

This year, SGRO will remain focus on domestic market. "Domestic market has more attractive demands," Michael added.

The domestic price and demand of CPO will be prospective this year, following the government's policy on increasing the ratio of the using of CPO for biodiesel fuel.

Another CPO issuer LSIP did not allocate their products for export during quarter III of 2016. However, during the same period, LSIP's parent PT Salim Ivomas Pratama Tbk (SIMP) recorded about 7% of consolidation revenues worth Rp 10.27 trillion from exports.

LSIP has never conducted direct export since 2013. At that time, the exports portion amounted around 4% of its total revenues.

Another issuer, PT Sawit Sumbermas Sarana Tbk (SSMS) is actively targeting export markets. This, year the exports portion of SSMS will be ranging at 30%-40%. This issuer will explore the markets of India, Pakistan, and Bangladesh. However, the management of SSMS refused to make comment related this policy.

Meanwhile, PT Sinarmas Agro Resources and Technology Tbk (SMAR) recorded as much as Rp 11.86 trillion export revenues during quarter III of 2016. This comprised about 56% of the total revenues during the period, which amounted to Rp 21,03 triliun.

The export duties as much as US$ 3 per ton will be re-enacted on 17 January 2017, on the grounds that the CPO's price has exceeded US$ 750 per ton. This is the benchmark price for the government to determine the export tariff.

Export tariff policy will suppress the business margin of plantation issuers. "But, the policy will support the downstream businesses," Yasmin said.

However, in general, CPO will remain prospective until semester I-2017. Yasmin predicts, the CPO price may hit the price of RM 2,800-RM 3,300 per ton. (Muhammad Farid/Translator)