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First Resources: Strong 1H2025 Performance and Growth Outlook · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome to the Deep Dive. Today, we're cutting through the noise and taking
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  a close look at First Resources Limited, a significant player in the palm oil sector. That's right.
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  They've just unveiled their financial statements for the first half of 2025, what we call 1H 2025.
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  And well, the headlines are all about strong results and double-digit production
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  growth. You see those headlines everywhere.
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  Exactly. But what's the real story behind those numbers, and what do they mean
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  for the company's future? Good question.
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  We've taken their condensed interim financial statements, the official press
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  release, production highlights, and their detailed results presentation.
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  All the key documents. Yep. And
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  our mission for you is to distill the most important nuggets of knowledge.
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  We're going to focus on their financial performance, peel back the layers to
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  understand the why behind the good, and the challenging figures. Okay.
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  And then peer into their outlook for the coming months.
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  Consider this your shortcut, really, to being well-informed on first resources.
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  That's the goal. You might have glanced at some of these figures,
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  but we're here to connect those dots, give you the full, unvarnished picture,
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  and equip you with the insights you need. Let's do it. So let's jump right in.
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  Kicking off with the big picture, the financial numbers truly pop.
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  The group reported a net profit of U.S.
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  $149.2 million in 1H 2025, which is a substantial 43.6% increase compared to
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  the same period in 2024. Raised a significant jump. Yeah.
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  Even their profit from operations saw a robust rise of 45.4% to U.S. $208.6 million.
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  Those are certainly compelling growth figures. They really are.
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  But what's truly insightful here, and something you should always look for,
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  is the underlying net profit. Oh, okay. The adjusted figure. Exactly.
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  Think of it as peeling back an onion. By stripping out the noise from non-cash,
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  often volatile changes like the fair value of biological assets.
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  Right. Those can swing wildly.
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  They can. And they can really skew reported figures based on market whims rather
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  than actual operational performance.
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  So if you exclude that, their underlying net profit actually soared by an even
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  more impressive 67.8% to U.S. $152.0 million.
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  Wow. Okay. That's even higher. It is. And this tells us the company isn't just riding a market wave.
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  Their fundamental day-to-day operations are significantly more efficient and profitable.
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  So that's the real story behind the headlines, then.
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  Core strength. Pretty much, yeah. Highlighting core business strength.
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  That distinction between reported and underlying profit is crucial for understanding
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  the true health of the business.
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  So what exactly fueled this powerful performance?
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  Was it one dominant factor or a confluence of forces?
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  It was primarily a potent combination of factors.
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  The main drivers were, first, a robust 47.4% growth in sales, reaching U.S.
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  $673.9 million, coupled with a 50.4% improvement in gross profit to U.S. $280.9 million.
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  Big jumps there, too. Yeah. They also managed to edge up their growth profit
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  margins slightly to 41.7% from 40.8% in the prior year.
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  And this overall strength was underpinned by two powerful factors.
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  They achieved higher average selling prices for their products.
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  Good for them. And they significantly increased their sales volumes.
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  It's the sweet spot, you know, when both price and volume move in your favor.
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  Definitely. Here's where it gets particularly interesting for understanding
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  the growth strategy, though.
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  That impressive increase in sales volumes.
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  It wasn't just organic, was it? I recall seeing something about a significant acquisition.
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  You're absolutely right to recall that. That's key. The stronger sales volumes
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  were indeed supported by two engines.
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  First, robust organic growth in their production output. Meaning their existing
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  stuff was working well. Exactly.
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  Their existing plantations and mills were thriving. And second,
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  a significant contribution from the acquisition of PT Ostendo Nusantara Jaya, TBK or ANJ.
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  ANJ, right. Which they completed in May 2025. This acquisition is a critical
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  strategic piece of their performance story for this period. It added substantial
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  new capacity and expanded their footprint quite a bit.
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  Okay. And circling back to that biological assets loss you mentioned earlier,
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  that sounds like a very technical accounting term.
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  Can you simplify what that means and why it's typically excluded when we look
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  at underlying profit? Good question. Yeah, it can sound complicated.
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  So the group recognized a U.S. $3.6 million loss from changes in the fair value
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  of biological assets in 1H 2025.
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  Now, this is a shift from a U.S. $17.1 million gain in the same period last year. Big swing.
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  Huge swing. Essentially, biological assets refer to their oil palm trees.
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  The actual trees? The trees themselves. And their value is constantly reassessed
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  based on projected harvests and crucially prevailing market prices for fresh
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  fruit bunches, or FFB. That's the raw material.
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  This particular loss was mainly due to a decline in domestic FFB prices used
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  in their valuation compared to prices at the end of December 2024.
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  So market prices dropped. Right. Although it was partially offset because they
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  projected higher harvest quantities, but the price drop dominated.
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  We typically look past these fair value changes for underlying profit because,
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  well, they are non-cash movement. No actual cash-changing hands.
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  Correct. And they are highly sensitive to market price fluctuations.
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  They just introduce a lot of accounting noise that can obscure the true operational
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  profitability picture. Makes sense.
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  So beyond the impressive top-line numbers and the immediate financial impact,
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  let's unpack the operational side of the business.
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  How did this translate into actual production across their, well,
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  sprawling plantations?
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  Yeah, operationally, they were strong, too.
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  Total FFB harvested increased by a very impressive 23.0% to over 2 million tons in 1H 2025.
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  2 million tons. Wow. It's a lot. Correspondingly, crude palm oil,
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  or CPO, production rose by 28.9% to 554,519 tons. Okay.
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  But what's even more compelling for you as a listener to note is that even excluding
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  the effects of the A&J acquisition.
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  Right, just looking at the original business. Exactly, meaning just from their
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  existing assets FFB harvested still increased by 13.5%. Till double digits.
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  Yeah, and CPO production grew by 18.6%. This really underscores very strong
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  organic growth from their established operations. It shows the core business
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  is performing exceptionally well on its own scheme.
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  That's a significant point. It tells us their existing operations are not just
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  benefiting from the acquisition's additional volume, but are themselves performing
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  strongly and becoming more productive.
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  Precisely. Speaking of productivity, did their yields improve?
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  I mean, indicating greater efficiency from their land. Absolutely,
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  they did. And that's another positive sign.
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  FFB yield, which measures the raw fruit produced per hectare,
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  improved to 9.6 tons per hectare. Up from?
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  Up from 8.4 tons in the prior year. Nice improvement.
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  And CPO yield, which measures the refined oil produced per hectare,
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  also improved to 2.1 tons per hectare from 1.9 tons.
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  Okay. So they're not just getting more volume, but they're doing so more efficiently.
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  This means they're extracting more value from each planted area,
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  which is, well, a great sign of operational excellence. Definitely.
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  Okay, let's shift our focus to the balance sheet now, because a major acquisition
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  like ANJ always leaves its mark, especially on a company's debt profile. It always does.
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  How did this acquisition reshape their asset and liability landscape?
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  You're right to pinpoint that. this is where we see the strategic cost of expansion, if you like.
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  Total assets increased by a substantial 40.8% to U.S. $2,747.9 million.
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  Big jump in assets. Huge. With non-current assets rising by 34.3%,
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  This was primarily due to the inclusion of A&J's newly acquired assets and also
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  their ongoing capital expenditure for development. Okay, understandable.
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  But the liabilities side. Right. However, to facilitate this,
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  total liabilities also rose sharply by a dramatic 153.0% to U.S.
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  $1,174.5 million.
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  Whoa, 153%? Yeah. That's a huge shift in their financial structure,
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  and it immediately flags a change in their risk profile.
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  You see that number and you have to ask why. That significant increase in liabilities
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  certainly flags a shift in their financial structure.
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  For our listeners, seeing that jump immediately begs the question,
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  what exactly drove such a substantial increase? And what does it mean for their financial health?
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  You're absolutely right to hone in on that. It's the key question.
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  The primary factor was a sharp rise in gross borrowings. Debt,
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  basically. Exactly, debt. Which surged from U.S.
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  $270.1 million at the end of 2024 to U.S.
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  $916.9 million by June 2025. Tripled. Almost. Pretty much. A net drawdown of U.S.
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  $500.8 million in bank loans was predominantly used to finance the ANJ acquisition.
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  Which had a hefty purchase consideration of approximately U.S.
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  $329.76 million. So they borrowed heavily to fund that strategic expansion.
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  They did, and this obviously makes them more leveraged.
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  To put it simply, their gearing ratio, a key measure of debt relative to equity.
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  Tells you how much they rely on borrowed money. Right. That jumped from a very
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  comfortable 0.18 times to 0.58 times.
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  Okay, still under one, but a big move.
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  A very big move. Now, they still maintain U.S.
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  $190.4 million in cash, which is healthy.
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  But this increase in leverage means their financial risk profile has certainly changed. No doubt.
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  The big question now is how quickly they can integrate ANJ and generate sufficient
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  cash flows from these new assets to manage this increased debt load.
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  The execution of that integration will be absolutely key. Okay.
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  Yeah, that integration piece is critical. Speaking of cash, let's briefly touch
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  on cash flow, because those numbers also saw some interesting movements given
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  the acquisition and increased sales.
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  Did the cash flow statement reflect this dynamic shift, perhaps in unexpected ways?
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  It did indeed show quite a dynamic
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  shift, and maybe not entirely as you'd expect given the profit jump.
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  Net cash generated from operating activities actually declined.
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  Declined? Really? Yes, from U.S. $112.4 million in 1H 2024 to a much lower U.S.
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  $13.8 million in 1H 2025.
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  Why was that? It was mainly due to an increase in outstanding trade receivables,
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  essentially, money owed to them by customers that hasn't been collected yet.
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  Yeah, working capital. Exactly. And a buildup in inventories during the period.
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  Both of these factors reflect a significant tie-up of working capital,
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  meaning more cash is locked up in the day-to-day running of the business and awaiting collection.
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  Okay, so profits up, but operating cash flow down temporarily.
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  For this period, yes. On the investing side, as you'd expect,
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  we saw a massive net cash outflow of U.S.
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  $404.4 million. Mostly the acquisition.
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  Predominantly for the A&J acquisition and their ongoing capital expenditure.
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  However, to fund all this, financing activities generated a substantial U.S.
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  $442.1 million. For the borrowing. Largely reflecting those bank loan drawdowns for the ANJ purchase.
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  So, yeah, a lot of cash went out for the acquisition. Operating cash was tighter,
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  but they financed it strategically.
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  Okay, that paints the picture. So with all these numbers in mind,
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  the robust profits, the operational strengths, the significant acquisition,
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  and these shifts in their balance sheet and cash flow, So let's look forward.
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  What's the outlook for First Resources and the palm oil industry in general,
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  according to their commentary?
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  Well, the company's CEO, Cilander Fangiono, highlighted several factors supporting
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  palm oil demand, painting a generally positive picture. OK, good news then. Seems like it, mostly.
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  He noted the improved competitiveness of palm oil prices relative to other vegetable
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  oils, which makes it an attractive choice for buyers. Price matters. Always.
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  This, coupled with India's recent reduction in import duties,
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  is expected to encourage major consuming countries to replenish inventories,
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  especially ahead of upcoming festivities.
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  So, restocking demand expected.
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  That seems to be the expectation.
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  Furthermore, the local biodiesel mandate in Indonesia is seen as a strong,
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  continuous demand driver.
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  Right, that underpins domestic demand. Exactly.
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  Ensuring a baseline demand for palm oil regardless of global food consumption
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  trends. That sounds largely positive on the demand side.
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  Are there any headwinds they're anticipating or challenges they're preparing
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  for in this dynamic environment?
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  Because global trade rarely remains entirely smooth, does it?
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  No, it certainly doesn't. And yes, there are challenges.
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  While demand factors are strong, Indonesian exporters, including first resources,
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  will have to contend with higher export levies.
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  Ah, the government taking a bigger slice. Essentially, yes.
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  Following a change in structure back in May 2025, this will directly impact
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  their cost structure and potentially their margins. Squeezing them a bit. Could do.
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  Additionally, global trade flows are continually being reshaped by ongoing tariff
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  policy developments around the world.
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  That creates a layer of market uncertainty that they must carefully navigate.
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  Always something isn't there. Always.
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  So it's a mix of clear opportunities and, well, tangible cost and policy headwinds.
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  Given that blend of opportunities and challenges, what's their stated strategy
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  in this dynamic environment?
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  How do they plan to address both the potential for growth and these impending
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  hurdles? Well, First Resources stated they remain vigilant of macroeconomic
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  conditions, which, you know, is a crucial stance given the global trade shifts.
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  You have to be watchful. Absolutely.
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  Their internal focus continues to be on their ongoing replanting program,
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  which is a vital long-term investment in future productivity and plantation rejuvenation.
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  Keeping the trees young and productive.
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  Exactly. And strengthening their operational capabilities across their plantations
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  and mills. It's a kind of holistic approach, really, about securing their long-term supply and efficiency.
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  And how does that massive ANJ acquisition play into their future strategy and
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  outlook beyond just the immediate 1H 2025 boost?
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  What's the longer-term vision there? Good question.
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  Post-acquisition, the integration of ANJ is explicitly expected to contribute
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  to further production volume growth.
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  Makes sense. And enhance the group's operational performance.
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  This suggests a strategic move to significantly boost their upstream footprint,
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  essentially, getting more raw materials from their own sources.
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  More control over supply. Right. And enhancing feedstock availability for their
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  downstream processing operations.
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  It's about securing supply, achieving greater vertical integration,
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  and potentially driving economies of scale down the line.
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  This integration will be a critical area to watch for how it translates into
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  sustained performance and value creation going forward, especially,
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  as we said, in managing the increased debt. Definitely one to keep an eye on.
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  Before we wrap up, I noticed they also declared an interim dividend.
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  Does this reflect their confidence in their performance and financial stability
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  despite the increased leverage?
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  It absolutely does, or at least it's intended to signal that.
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  An interim dividend of 4.50 Singapore cents per share was declared.
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  Which is higher than last year. It is, yeah.
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  Notably higher than the 3.50 Singapore cents in the corresponding period last year.
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  Okay. This increase is a direct reflection of their strong financial results
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  for the first half of 2025, and it signals confidence to shareholders about
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  their overall healthy balance sheet and future cash generation capabilities.
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  Even with the higher debt? Even with the strategic increase in debt.
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  It's a message that management believes they are well-positioned. Right.
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  This deep dive into First Resources Limited's 1H 2025 results certainly paints
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  a picture of a company navigating both aggressive growth and strategic expansion. It really does.
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  They've delivered impressive financial gains, significantly driven by that ANJ
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  acquisition and also robust organic operational performance.
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  Can't forget the organic part.
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  Definitely not. But this comes despite increased leverage and some,
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  well, notable shifts in cash flow dynamics. Indeed.
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  The company is strategically expanding its capacity while riding,
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  you know, favorable market conditions for palm oil demand, at least for now.
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  But it's operating within a global landscape of evolving trade policies and
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  those domestic levy changes that present real challenges.
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  And crucially, they've introduced a higher financial risk profile with that
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  increased debt. Which leads us to the final thought. Exactly.
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  This raises an important question for you, the listener, as you consider this company.
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  How will their long-term focus on replanting and strengthening operational capabilities
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  balance against the immediate impacts of market uncertainties,
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  those higher export levies, and perhaps most critically,
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  the need to efficiently integrate A&J and pay down the increased debt from this
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  major strategic acquisition?
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  A truly complex equation to watch unfold.
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  Thank you for joining us on this deep dive into First Resources Limited.
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  We hope this has given you a clearer, more insightful and actionable understanding
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  of their recent performance and what might lie ahead.