Petra Foods’ 4Q15 earnings were below expectations, with FY15 as its worst year yet. 4Q15 revenue dropped 23.8% YoY to US$100m, reflecting the weak consumer sentiment in its core market Indonesia and de-stocking by trade customers. In constant currency terms, revenue would have declined by 11.5%. Operating profit was also about 79% lower at US$4.1m. These resulted in a 93.5% plunge in net profit to US$0.8m, culminating in a full year net loss of US$4.7m.

Excluding the one-off charge of US$19.5m in 3Q15, a full year PATMI of US$15.3m was recorded (FY14: US$48.8m). Pending more information from an analyst briefing later, we keep our SELL rating while our fair value estimate of S$1.97 is under review.

Following the settlement with Barry Callebaut, the group has concluded that US$111.7m cash reserves are in excess of immediate needs of the company, thus they have proposed to return US$60m to shareholders through a courtsanctioned capital reduction. Subject to shareholders’ approval, this translates to about 9.82 US-cents/share.

Source: OCBC Research - 23 Feb 2016