Halcyon Agri notes natural rubber supply issues, Q1 decline

SINGAPORE—Natural rubber supplier Halcyon Agri Corp. Ltd. has reported supply issues alongside declines in first-quarter sales and earnings due to lower volumes and higher costs.

During the quarter, weather-related disruption in Indonesia and Thailand led Halcyon Agri to cut output and "focus on margins," Robert Meyer, executive director and CEO, said in a statement.

Challenges for natural rubber growers could persist, according to Meyer, who also suggested that the supply side could "experience more difficulties in the quarters to come…lending a degree of support to prices."

On the demand side, Halcyon Agri said China was contracting lower volumes and "seems to be focused on reducing domestic inventory." Against this background, the natural rubber supplier posted sales of just under $400 million for the three months to end of March, down 16 percent from the year before.

The company attributed the decline to a 7.5 percent drop in revenue per metric ton and 9.2 percent lower sales volume at 278,000 tons during the quarter.

Earnings (EBITDA) fell 8.3 percent year-on-year to $10.8 million, due in part to the drop in volumes and increased financing costs. However, Halcyon Agri said volume declines largely were due to the group migrating its sales strategy away from long-term contract (LTC) sales, towards spot sales.

This move is in line with Halcyon Agri's stated commitment to shift the majority of its tire-focused sales volumes to a new digital platform, called HeveaConnect, by the end of June.