Shares in IndoFood Agri Resources recovered more than 10% after the Singapore-listed plantations and oils group proved less susceptible to the fall in palm oil prices than investors had feared.

IndoFood Agri, whose operations are based mainly in Indonesia, reported a 55% slump to Rp240bn (US$22.3m) in first quarter earnings on revenues down 30% at Rp1,995bn (US$186m).

However the results were better than analysts had hoped for after a halving to $577 in average palm oil prices over the quarter. Underlying earnings at the group's cooking oils and fats division soared 73% to Rp147bn on strong margarine sales.

Indofood Agri shares, which topped Sing$3 in February last year during the bull run in food commodities, recovered 8.5 cents to close at Sing$0.90 in Singapore.

"We continue to like Indofood Agri for its attractive valuations, strong management and potential cost synergies with [part-owned subsidiary] London Sumatra," analysts at CIMB said, raising their full year earnings forecast for the group by 6% to Rp907bn.

'Volatile' prices

Indofood Agri added that the long-term fundamentals for the palm oil market remained "strong", thanks to its discount to other vegetable oils and the range of uses, from food to soap to biofuels, that it could be put to.

Palm oil's use a raw material for foodstuffs would keep demand "fairly resilient" this year despite the economic downturn.

However, it warned against this firm demand, coupled with forecasts of tight Malaysian palm oil stocks, raising hopes for a smooth rise in palm oil prices.

"The group expects crude palm oil prices to remain volatile for the rest of 2009," Indofood Agri said.