Revenue in the period fell to US$366.1 million from US$403.9 million a year earlier, while pretax profit dropped to US$66.4 million from US$121.9 million.
The results were hit by a combination of lower palm oil prices, a 20 percent year-on-year appreciation of the local currency of Papua New Guinea, where its plantations are based, against the US dollar and unseasonably strong rains particularly during the first quarter.
Daniel Stewart’s Edward Hugo already highlighted in a report earlier this year that NBPO is facing a number of headwinds, with the abnormal weather conditions only the latest adverse development.
“Our FY’12 forecasts are already the lowest in the market and we feel the current premium to other palm oil producers is unjustified. With downgrades from other brokers likely, we maintain our SELL recommendation,” Hugo said.
He has a 657 target price on the stock, which plummeted 17.2 percent today to trade at 687 pence by 1.45 pm.
Phil Carroll at Shore Capital acknowledged the disappointing results, but said he continues to be positive on the palm oil story and still has NBPO as a ’hold’.
In the case of NBPO, as stated previously, 2012 is a transition year so it is more about its prospects in 2013 “and to our minds, this remains the case”, the analyst said.
Looking to the full year, following discussions with management Carroll expects to be downgrading his forecast for adjusted pretax profit from US$205.4 million to US$100-105 million.
The company expects production to normalise in the fourth quarter and is looking at streamlining the cost base so NBPO should be in a better position at the beginning of the 2013 full-year, the analyst believes.
In terms of the crude palm oil price, the medium term fundamentals look positive, in his view, with a declining stock-to-use rate and robust demand.