CGSI downgrades Delfi, cuts target price as high cocoa prices sour sentiment
'We think weaker consumer sentiment, coupled with elevated cocoa prices and a weaker Indonesian rupiah against the US dollar, could pressure profitability in the near term,' said CGSI analysts Tay Wee Kuang and Tan Jie Hui in a report on Wednesday (May 21).
The analysts have trimmed their revenue expectations, and cut their earnings per share (EPS) forecasts for FY2025 to FY2027 by 15.5 to 17.4 per cent.
The new target price – lowered from S$0.88 previously – is still pegged to a price-to-earnings ratio of 11 times for FY2026, which is at 0.5 standard deviation below the mean due to expectations of weaker profitability.
This also accounts for a negative translation impact from the weakening greenback against the Singapore dollar.
Despite the gloomier outlook as Delfi braces for 'macroeconomic headwinds', the analysts noted that its revenue for the first quarter ended March was largely in line with consensus estimates.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
Delfi's Q1 revenue dipped 0.5 per cent year on year to US$149.8 million, from US$150.7 million previously.
Revenue from Indonesia fell 4 per cent to US$99.3 million. However, on a constant currency basis, excluding the impact of a weaker rupiah against the US dollar, net sales would have been flat.
Delfi attributed the resilient sales in Indonesia to better sales for its own brands as a result of its increased promotional spending.
This helped offset decreased sales of its agency brands, where they saw a cut in promotional spending from agency partners.
Earnings before interest, taxes, depreciation and amortisation dropped 27 per cent to US$17 million in Q1.
This suggests, the analysts said, 'an increase in operating expenses that resulted in poorer operating leverage'.
Despite the declining profitability, the research house noted that Delfi's cash flow generation still remained healthy.
In the first quarter, the chocolate confectionery generated a free cash flow of US$34.4 million, up from US$23.1 million in the same year-ago period.
It also saw an improvement in its cash balance to US$70.4 million.
As at 2.30 pm on Thursday, shares of Delfi are trading flat at S$0.715.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
19 minutes ago
- Business Times
Indonesia's mining quota U-turn risks raising operational costs and hurting investment: analysts
[JAKARTA] Indonesia's plan to shorten the validity of mining output quotas from three years to one year could heighten regulatory uncertainty, increase operational costs and discourage long-term investment, analysts warned, even as the government said that the measure will help control supply and stabilise prices. 'Transitioning from a three-year to a one-year period will heighten regulatory uncertainty for miners,' noted Amelia Haines, commodities analyst at BMI. 'Annual quotas will require companies to engage with regulatory authorities more frequently, potentially lengthening permitting timelines and diverting resources to compliance activities.' The Indonesian government will press ahead with implementing the policy in October, despite opposition from players in the mining industry. The move would roll back a 2023 reform to the work plan and budget system, known locally as RKAB, which extended quota validity from one year to three. Miners in Indonesia must get RKAB approval to decide how much of a mineral resource they can extract over a set period. That longer cycle was intended to help miners plan production better and reduce administrative costs. Energy and Mineral Resources Minister Bahlil Lahadalia said on Monday (Aug 11) that the U-turn aims to tackle oversupply in key commodities such as coal and nickel, which have experienced significant price volatility, partly due to surging Indonesian output. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up The government believes that more frequent reviews will enable it to better align production with market demand, helping to avoid price collapses. 'Indonesia supplies 45 per cent of the world's thermal coal exports. When prices drop, there's little we can do; demand is low while supply is high. We will revise the policy without exception to maintain stability,' the minister noted. Damage control Indonesia is the world's largest producer of nickel, a key component in stainless steel and electric vehicle batteries, and more frequent quota reviews would give the government greater control over supply. As of the first half of this year, the country has produced 357.6 million tonnes of coal and 220 million tonnes of nickel ore. However nickel prices have come under pressure in recent years as a surge of Indonesian output has flooded the global market . The government has set nickel production quotas at 296.1 million tonnes for 2025 and 261.4 million tonnes for 2026, though the final approval for the 2026 quota remains uncertain. The country has also become a major supplier of coal, iron ore, and other minerals, giving it significant influence over global supply flows. However, some observers say its ability to sway prices is far more limited than officials had anticipated. Bill Sullivan, senior foreign counsel at Jakarta-based law firm Christian Teo and Partners, questioned whether shortening the RKAB period will truly enhance price stability. 'I find it impossible to see how this improves price stability for mineral products,' he said. 'It is much more likely that the government has belatedly realised it overestimated Indonesia's ability to influence world prices, and now needs to more carefully control approved production quotas to avoid putting further downward pressure on prices.' Sullivan characterised the change as 'damage control' and warned that it would reinforce the longstanding narrative of regulatory unpredictability in Indonesia. 'The shorter the period of the approval, the less certainty mining companies have as to their future production, sales, revenue and profitability,' he explained. 'That lack of certainty operates as a constraint on their ability to secure additional financing or investment.' Burden on cost While more frequent quota adjustments may give the government flexibility to respond to market fluctuations, overall increase in administrative burden could weigh on companies' earnings and raise their operational costs. BMI said that it may also reduce regulatory certainty, potentially discouraging capital investment particularly in long-term projects with substantial upfront costs. Research by Shanghai Metals Market (SMM) noted that the introduction of the one-year RKAB for the 2026 period is expected to keep tin prices volatile going forward, particularly on the Shanghai Futures Exchange. 'Investors need to closely monitor changes in international macroeconomic policies and domestic supply-demand conditions, and operate with caution,' SMM wrote in its research, published on Aug 4. Industry groups have yet to formally respond to the proposal, but mining executives had previously backed the three-year RKAB cycle, citing its benefits in reducing bureaucracy and improving long-term planning. Gita Mahyarani, acting executive director of the Indonesian Coal Mining Association, said that reverting to annual approvals would require more frequent paperwork, site inspections, and compliance reporting, all of which increase costs and divert management's focus from operations. South-east Asia's largest economy has often faced criticism from investors over its lengthy and complex bureaucracy, a challenge that prompted the previous administration under president Joko Widodo to streamline licensing procedures and make them more seamless, aiming to provide greater certainty for businesses. Nickel producers in Indonesia's Sulawesi region faced a supply crisis a few years ago and had to import additional ore from the Philippines due to delays in local permitting and production disruptions caused by severe weather. As a result, in 2023 the government decided to extend the validity of mining production plans to three years. Analysts say the new measure could have unintended consequences on supply chains. Delays or unpredictability in quota approvals could disrupt exports, undermine Indonesia's reputation as a reliable supplier, and push buyers towards competitors. The change may also make Indonesian miners less competitive compared with producers in other major coal-exporting countries that operate under more stable regulatory regimes. 'Buyers value consistency,' Haines from BMI said. 'Frequent changes to rules and approvals can make them think twice about long-term contracts.'
Business Times
10 hours ago
- Business Times
Delfi H1 net profit down 37.7% to US$12.2 million on softer performance in Indonesia
[SINGAPORE] Delfi posted a 37.7 per cent drop in net profit to US$12.2 million for its first half ended Jun 30, 2025, from US$19.6 million in the previous corresponding period. Excluding a non-recurring item resulting from the streamlining of its Philippine manufacturing operations, net profit would have been down 33.9 per cent to US$12.9 million, the chocolate confectionery company said in a bourse filing on Tuesday (Aug 12). Earnings per share stood at 2 US cents for the half-year period, down from 3.2 cents the previous year. In the half-year period, the company said it had spent more on promotions in Indonesia to drive the growth of its key brands and to address heightened competitive pressures. Meanwhile, its agency brands in Indonesia recorded lower sales, on the back of reduced promotion spending by some agencies, it said. Revenue for H1 fell 0.5 per cent to US$259.6 million, from US$260.8 million in the year before. This was primarily due to a softer performance in Indonesia, but largely offset by growth in its regional markets. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The top line also reflected the impact of a weaker Indonesian rupiah against the US dollar during the period, Delfi said. An interim dividend of 1 US cent (1.28 Singapore cents) a share was declared for the half year, down from 2.72 Singapore cents the year before. The dividend will be paid on Sep 12, after books closure on Aug 28. Delfi expects the operating environment to remain challenging in the rest of 2025 and into 2026, shaped by ongoing geopolitical tensions, macroeconomic headwinds and uncertainty in global trade. Persistently high cocoa bean prices also remain a major headwind for chocolate manufacturers globally, and are expected to continue hurting industry earnings, it said. Shares of Delfi closed S$0.01 or 1.2 per cent higher at S$0.85 on Tuesday, before the results were released.
Business Times
15 hours ago
- Business Times
Wilmar H1 profit rises 2.6% on improved plantation, sugar milling and food product segments
[SINGAPORE] Agribusiness Wilmar Internationa l on Tuesday (Aug 12) reported a net profit of US$594.9 million for the first half ended Jun 30, up 2.6 per cent from US$579.6 million in the year-ago period. This was attributed to stronger performances in its plantation and sugar milling, which rose on the back of higher palm oil prices and fresh fruit bunch production. Wilmar's food product segments also turned in a strong performance, due to improved sales in the flour and rice businesses in China. Contributions from the company's associations and joint ventures also more than doubled in H1, compared to a year ago. This was especially due to the group's investments in Asia. However, these improvements were partially offset by lower contributions from the feed and industrial products segment, said Wilmar. Revenue was also up 6.3 per cent to US$32.9 billion, from US$30.9 billion, for the first half of the financial year on the back of higher revenue across most of the group's business divisions. Earnings per share was US$0.095 for the six months, up from US$0.093. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The group declared an interim dividend of S$0.04 per share, a drop from S$0.06 per share. The dividend will be paid on Aug 28. Kuok Khoon Hong, CEO of Wilmar said that the group's first half results have improved despite 'difficult operating conditions'. 'Refining margins for the tropical oils business are expected to remain challenged, while the plantations business should be favourable for the rest of the year. Our crushing operations are expected to remain stable,' said Kuok. He added that Wilmar's full-year results will depend on the resolution of various issues relating to its operations in Indonesia. In June, the company was embroiled in Indonesian court proceedings involving a palm-oil graft case . In July, Indonesian authorities launched a probe into major rice producers , including Wilmar's unit, over alleged mislabelling practices. Said Kuok: 'Barring unforeseen circumstances, we are cautiously optimistic that the performance of our core segments will be satisfactory.' Shares of Wilmar closed flat at S$2.97 on Tuesday, before the announcement.
