21 Oct 2009 12:30
21 October 2009
Clean Energy Brazil plc
("CEB" or the "Company")
Results for the year ended 30 April 2009
Clean Energy Brazil plc, a specialist investment company focused on participation in Brazil's sugar and ethanol industries, announces its final results for the year ended 30 April 2009.
KEY EVENTS
Sale of Usaciga post year end.
Proposed interim dividend of US$12.5 million (subject to court consent).
Implementation of cost cutting measures.
Fair value adjustment reducing book value of investments in Usaciga and Unialco by US$89.2 million in total.
Notice received of an unsolicited proposed mandatory cash only offer by Global Investors Acquisition LLC.
Cash balance currently stands at approximately US$24.0 million, which includes the first payment from the Usaciga sale (US$5.8 million); a further US$2.9 million is due by March 2010.
Improving sugar prices and recent recovery of ethanol market.
For further information please contact:
| Numis Securities Limited (Financial Adviser & Broker) Charles Farquhar Lee Aston
| Tel: +44 (0) 20 7260 1000 |
| Smith & Williamson Corporate Finance Limited (Nominated Adviser) Azhic Basirov David Jones
| Tel: +44 (0) 20 7131 4000 |
| Fishburn Hedges (Financial PR Adviser) Andy Berry Michelle James | Tel: +44 (0) 20 7839 4321 ceb@fishburn-hedges.co.uk +44 (0) 7767 374421 +44 (0) 7958 451446 |
Chairman's Statement
In the year to 30 April 2009, Clean Energy Brazil ("CEB" or the "Company") faced several challenges. These were dealt with expeditiously and actions were taken to resolve the issues. The Board's overriding goal is to position the Company in the best way possible to maximize the value of its assets.
The sugar and ethanol industry as a whole faced substantial challenges in all areas. Soft pricing in the sugar and ethanol markets, higher production costs and working capital shortages created significant operational difficulties. Sugar prices during the season were in a range between 10 to 14 US cents per pound. The higher prices towards the end of the season had little to no effect on operations. The Board believes that taking advantage of current prices of well over 20 US cents would require substantial credit lines, which have not become readily available to the Company or its investee companies.
Although ethanol sales in Brazil continue to increase at rates higher than 20% per annum, pricing has been below or, at best, at breakeven levels for most of the financial year. This results from lower international demand, increased capacity caused by new mills coming on stream, and the need to generate cash for working capital.
In addition to wider operational difficulties, the financial crisis has severely limited CEB's own access to credit lines. Although the Group has engaged Bank of America Merrill Lynch to assist it with its efforts, conditions have not been favourable during the period. This has been the case not only in accessing the capital markets but also in restructuring debt.
As highlighted in previous statements, the Group's investee companies have suffered from the above difficulties and as a result have taken several measures with the aim of improving their performance. They have increased their cane crushing capacities, cut costs, and sought credit lines and debt restructuring.
Usaciga was not able to resolve its overextended debt position. Its co-owners, Agrocana and CEB, had hired Alvarez & Marsal to advise on debt restructuring and seek alternative strategic solutions. The difficulties encountered in these tasks with Usaciga's total liabilities reaching approximately US$185 million, resulted in the CEB Board deciding to divest the asset in September 2009.
By contrast, the Board believes that the Group's Unialco asset is better positioned to overcome the short to medium term industry challenges. The relatively moderate debt that the operation is carrying, the improved pricing levels in sugar and the very recent recovery of the ethanol market offer a constructive outlook.
The Group's greenfield projects continue to face difficulties in securing project finance. Unialco MS's Dourados site made very little progress over the period, and is now two years behind schedule, with financing still outstanding.
The Group's wholly-owned greenfield projects at Pantanal and Agua Limpa remain on hold with financing unavailable. Both Pantanal and Agua Limpa are in the early stages of development and will require substantial investment. The Board of CEB has decided to divest these projects and this task is already underway.
While the industry faces various challenges, the Board believes that the fundamental drivers for long term investment in Brazilian sugar and ethanol remain positive. In order to minimise the effects of the near term problems referred to above, the Board intends to continue to take all reasonable measures to preserve shareholder value.
As part of this process, the Group has restructured its organisation. Earlier in the year the Group consolidated its operations, focusing on our Sao Paulo head office, closing the Ribeirao Preto office and eliminating the position of COO. The Group is currently implementing a number of further cost reduction measures. As of 1 September Marcelo Junqueira, who was the CEO of CEB, no longer has a daily role in the Group, but continues to support the business by remaining on the Board as a non-executive director. In addition, the fees of all CEB directors were reduced by 30% on the same date. These measures are expected to lower the Company's ongoing overheads by US$300,000 on a quarterly basis, representing a reduction of over 50%. The actions include reductions in head office staff and third party services. John S. Koutras, current CFO of CEB, is in charge of day to day management of the Group through the restructuring period.
The Company, its Board and operating management continue to manage its assets with the aim of maximising underlying values and returning capital when appropriate. The Board has announced a proposed dividend distribution of US$12.5 million which is subject to the approval by High Court of Justice of the Isle of Man of a re-classification of the Company's reserves.
As announced by the Company on October 5, the Company received notice of an unsolicited proposed mandatory cash only offer by Global Investors Acquisition LLC for the entire issued ordinary share capital of CEB not already owned by GIA and concert parties, at GBP£0.1268 per CEB ordinary share. The Board is currently considering the offer and intends to advise shareholders of its view on the offer shortly.
Financial results
Income during the year was generated by bank interest of US$1.6 million.
Administrative expenses for the period reached US$6.3 million, a US$1.6 million improvement versus last year (including the investment adviser's fees).
Due to large currency fluctuations, a US$4.9 million loss was incurred. The Brazilian Real during the period devalued by 30% against the US$, but this trend has reversed since the year-end.
The Group continues to evaluate its assets based on market multiples of cane crushing capacity and realisable values of assets rather than a traditional discounted cash flow basis. This process has led to a total of US$92.8 million in write-downs.
In the Unialco asset, market conditions and the delays in the completion of the Dourados project had caused a US$23 million write down in the interim results released in January. As the development of the greenfield is substantially behind original schedule, the total amount written down has been increased to US$38.9 million in the final year-end accounts. The resulting book value is US$27.9 million.
The Usaciga asset had been written down last year by US$73.4 million to US$50.0 million. The divestiture of the asset generated an additional write-down of US$50.3 million. This adjustment is reflected in the year-end accounts and no additional write-down will arise in the current calendar year.
The Pantanal greenfield asset value has been estimated at US$2.3 million, necessitating a US$3.3 million write-down. As the Agua Limpa project remains in its initial stages, it has been written down to nil.
The result for the year is a loss of US$103.0 million.
The cash position of the Company at the end of the period was US$26.6 million (of which US$6.7 million was held in escrow pursuant to the December 2006 investment agreement between CEB, Usaciga and Agrocana). Currently, the Company's cash balance stands at approximately US$24.0 million, which includes the first payment from the Usaciga sale (US$5.8 million); a further US$2.9 million is due by March 2010.
Antonio Monteiro de Castro
21 October 2009
Consolidated Income Statement
For the year ended 30 April 2009
|
|
| 2009 |
| 2008 |
|
| Note | $'000 |
| $'000 |
|
|
|
|
|
|
| Bank interest income |
| 1,595 |
| 3,432 |
| Sundry income |
| - |
| 92 |
| Fair value movement on revaluation of investments | 6 | (89,174) |
| (73,419) |
| Fair value movement on agricultural assets |
| (3,624) |
| - |
| Net investment loss |
| (91,203) |
| (69,895) |
|
|
|
|
|
|
| Investment advisor's fees | 3 | - |
| (3,422) |
| Termination of investment advisory contract | 3 | - |
| (18,389) |
| Other administration fees and expenses | 4 | (6,296) |
| (4,512) |
| Total administrative expenses |
| (6,296) |
| (26,323) |
|
|
|
|
|
|
| Foreign exchange loss |
| (4,861) |
| (469) |
| Finance costs |
| (32) |
| (595) |
|
|
|
|
|
|
| Loss for the year before tax | (102,392) |
| (97,282) | |
|
|
|
|
|
|
| Taxation |
| (641) |
| - |
|
|
|
|
|
|
| Loss for the year after tax attributable to equity holders of the parent | (103,033) |
| (97,282) | |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic loss per share | 5 | $(0.70) |
| $(0.85) |
Consolidated Balance Sheet
As at 30 April 2009
|
| Note | 2009 |
| 2008 |
|
|
| $'000 |
| $'000 |
|
|
|
|
|
|
| Non-current assets |
|
|
|
|
| Investments at fair value through profit or loss | 6 | 36,663 |
| 116,820 |
| Property, plant and equipment |
| 206 |
| 163 |
|
|
|
|
|
|
| Total non-current assets |
| 36,869 |
| 116,983 |
|
|
|
|
|
|
| Current assets |
|
|
|
|
| Trade and other receivables |
| 566 |
| 1,507 |
| Agricultural assets | 2,283 | 4,464 | ||
| Cash and cash equivalents |
| 26,593 |
| 42,823 |
|
|
|
|
|
|
| Total current assets |
| 29,442 |
| 48,794 |
|
|
|
|
|
|
| Total assets |
| 66,311 |
| 165,777 |
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
| Trade and other payables |
| (9,042) |
| (1,459) |
| Total liabilities |
| (9,042) |
| (1,459) |
|
|
|
|
|
|
| Net assets |
| 57,269 |
| 164,318 |
|
|
|
|
|
|
| Represented by: |
|
|
|
|
| Share capital | 7 | 2,920 |
| 2,920 |
| Share premium | 8 | 82,584 |
| 82,584 |
| Distributable reserves |
| (27,055) |
| 75,978 |
| Other reserves |
| (1,180) |
| 2,820 |
| Total equity attributable to equity holders of the Company |
| 57,269 |
| 164,302 |
| Minority interest |
| - |
| 16 |
| Total equity |
| 57,269 |
| 164,318 |
|
|
|
|
|
|
| Net Asset Value per share ($ ) |
| 0.39 |
| 1.11 |
Consolidated Statement of Changes in Equity
For the year ended 30 April 2009
| Share Capital | Share Premium | Distributable Reserves | Other Reserves | Total Shareholders' Funds | Minority Interest | Total Equity | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| $'000 | $'000 | $'000 | $'000 |
| $'000 |
| $'000 |
| $'000 |
|
|
|
|
|
|
|
|
|
| ||
| Balance at 1 May 2007 | 1,964 | 181,297 | 2,125 | - | 185,386 | - | 185,386 | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Cancellation of share premium | - | (181,297) | 181,297 | - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| Share issue proceeds | 956 | 85,957 | - | - | 86,913 | - | 86,913 | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Share issue costs | - | (3,373) | - | - | (3,373) | - | (3,373) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Loss for the year | - | - | (97,282) | - | (97,282) | - | (97,282) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Dividends paid | - | - | (10,162) | - | (10,162) | - | (10,162) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Subsidiary acquired | - | - | - | - | - | 16 | 16 | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign exchange on translation of subsidiaries | - | - | - | 2,820 | 2,820 | - | 2,820 | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at 30 April 2008 | 2,920 | 82,584 | 75,978 | 2,820 | 164,302 | 16 | 164,318 | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Loss for the year | - | - | (103,033) | - | (103,033) | - | (103,033) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Reclassification of minority interest | - | - | - | - | - | (16) | (16) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign exchange on translation of subsidiaries | - | - | - | (4,000) | (4,000) | - | (4000) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at 30 April 2009 | 2,920 | 82,584 | (27,055) | (1,180) | 57,269 | - | 57,269 |
Consolidated Cash Flow Statement
For the year ended 30 April 2009
|
|
| 2009 |
| 2008 |
|
|
| $'000 |
| $'000 |
| Cash flows from operating activities |
|
|
|
|
| Loss for the period after tax |
| (103,033) |
| (97,282) |
|
|
|
|
|
|
| Adjustments for: |
|
|
|
|
| Fair value adjustment |
| 92,798 |
| 73,419 |
| Shares issued for non-cash consideration |
| - |
| 18,389 |
| Finance income and expense |
| 3,296 |
| (2,368) |
| Tax paid |
| 641 |
| - |
| Net goodwill written-off |
| - |
| 114 |
| Depreciation of fixed assets |
| 9 |
| - |
|
|
|
|
|
|
| Changes in working capital |
|
|
|
|
| Change in trade and other receivables |
| 606 |
| (664) |
| Change in agricultural assets |
| (2,437) |
| (4,464) |
| Change in trade and other payables |
| 7,071 |
| 815 |
| Net cash flows used in operating activities |
| (1,049) |
| (12,041) |
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
|
| Purchase of investments |
| (9,010) |
| (96,711) |
| Interest income |
| 1,595 |
| 3,432 |
| Purchase of fixed assets |
| (52) |
| (17) |
| Acquisition of subsidiaries, net of cash acquired |
| - |
| (241) |
| Net cash flows used in investing activities |
| (7,467) |
| (93,537) |
|
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
|
| Proceeds on issue of equity shares |
| - |
| 68,524 |
| Issue costs paid |
| - |
| (3,373) |
| Dividend paid |
| - |
| (10,162) |
| Loan from portfolio company (repaid) / received |
| - |
| (6,730) |
| Interest expense and other finance costs |
| (32) |
| (595) |
| Net cash flows (used in)/generated from financing activities |
| (32) |
| 47,664 |
|
|
|
|
|
|
| Net decrease in cash and cash equivalents |
| (8,548) |
| (57,914) |
|
|
|
|
|
|
| Cash and cash equivalents at start of year |
| 42,823 |
| 98,386 |
| Foreign exchange (loss)/gain |
| (7,682) |
| 2,351 |
|
|
|
|
|
|
| Cash and cash equivalents at end of year |
| 26,593 |
| 42,823 |
Notes to the Financial Statements
For the year ended 30 April 2009
1. General information
The Company is a closed-end investment company incorporated on 19 September 2006 in the Isle of Man as a public limited company. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man.
The Company is listed on the AIM market of the London Stock Exchange.
The financial information contained in this announcement has been extracted from the audited consolidated financial statements of the Company for the year ended 30 April 2009.
2. Accounting policies
A summary of significant account policies is set out in the Company's audited financial statements for the year ended 30 April 2009.
3. Investment Advisor's fee
No investment advisor fee has been chargeable in the year, following the termination of the Investment Advisory Agreement in April 2008, as reported in the previous year's Annual Report and Accounts.
4. Other administration fees and expenses
Other administration fees and expenses consist of the following:
|
| 2009 | 2008 |
|
| $'000 | $'000 |
| Audit fees | 61 | 64 |
| Insurance | 86 | 124 |
| Pre-operational project costs | 62 | 1,234 |
| Professional fees | 1,447 | 1,709 |
| Administration costs | 339 | 431 |
| Staff costs | 1,566 | - |
| Directors' fees | 584 | 546 |
| Sundry expenses | 2,151 | 404 |
| Total | 6,296 | 4,512 |
5. Loss per share
Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of ordinary shares outstanding during the year.
|
| 2009 | 2008 |
| Loss attributable to shareholders ($'000) | (103,033) | (97,282) |
| Weighted average number of ordinary shares in issue (thousands) | 147,564 | 114,519 |
| Basic loss per share | ($0.70) | ($ 0.85) |
The Company has no dilutive potential ordinary shares, as the market price of the shares has been greater than the exercise price of the warrants throughout the year. Therefore the diluted loss per share is the same as the basic loss per share.
6. Investments at fair value through profit or loss
Investments comprise two holdings as follows:
| Name | Country of Incorporation | Proportion of ownership interest |
| Usaciga - Açucar,Álcool E Energia Elétrica SA | Brazil | 49% |
| Unialco MS Participaçoes SA | Brazil | 33% |
Both investments are joint ventures. They are, however, not equity accounted, but designated as held at fair value through profit or loss in accordance with a permitted exemption under IAS31. Both investments are stated at fair value, as estimated by the Directors.
The Usaciga investment has been valued by the Directors at the price for which the investment was sold after the balance sheet date, as described in note 10 (less selling costs).
The valuation of Unialco is based on a multiple of the crushing capacity, using recent industry transactions and public data to arrive at the multiple.
|
| Usaciga | Unialco | Total |
|
| $'000 | $'000 | $'000 |
| Balance at 1 May 2008 | 50,000 | 66,820 | 116,820 |
| Additions | 9,010 | 7 | 9,017 |
| Fair value adjustment | (50,273) | (38,901) | (89,174) |
| Balance at 30 April 2009 | 8,737 | 27,926 | 36,663 |
7. Share capital
| Ordinary shares of 1pence each As at 30 April 2009 and 30 April 2008 | Number of shares | Value £'000 |
| Issued | 147,563,929 | 1,475 |
| Authorised | 600,000,000 | 6,000 |
All shares are fully paid and each ordinary share carries one vote.
In addition to the ordinary shares, 25,000,000 equity warrants are admitted to trading on the AIM market. Each warrant entitles the holder to subscribe for one new ordinary share at £1.00 per share, subject to adjustment as detailed in the Company's Admission Document published in December 2006.
8. Share premium
The share premium account represents the difference between the issue price of each new share and the par value of £0.01 per share, less share issue costs. On 15 June 2007, the High Court in the Isle of Man approved a reduction in the share capital of the Company which had arisen upon the placing of shares in December 2006, by way of cancellation of the share premium account. The amount cancelled was credited to distributable reserves.
Further issues of shares in the year ended 30 April 2008 created new amounts of share premium. An application has recently been made to the High Court of Justice of the Isle of Man to have this cancelled, as described in note 10.
9. Net asset value (NAV)
The NAV per share is calculated by dividing the net assets attributable to the equity holders of the Company at the end of the period by the number of shares in issue.
|
| 2009 | 2008 |
| Net assets | $57,269,000 | $164,302,000 |
| Number of shares in issue (note 7) | 147,563,929 | 147,563,929 |
| NAV per share | $0.39 | $1.11 |
10. Events after the balance sheet date
On 1 September 2009, the Company sold its 49% shareholding in Usaciga Acucar, Alcool e Energia Electrica Ltda. to Agrocana Participacoes Ltda, the 51% owner of the business, for US$8.7 million. The consideration was payable in cash through the immediate release of $5,837,000 from the escrow account already held by CEB and the payment of a further $2,900,000 due by March 2010. This investment has been fair valued by the Directors at $8,737,000 as at 30 April 2009, so no gain or loss arises on this disposal in the year to 30 April 2010.
An EGM was held on 16th September 2009, at which it was resolved to cancel the amounts standing to the credit of the share premium account and to re-classify such amounts as a distributable reserve. An application to the High Court of Justice of the Isle of Man to approve the re-classification was subsequently submitted. As announced on 21 August 2009, following such approval the Company intends to return part of the Company's surplus cash resources to shareholders via an interim dividend of US$12.5 million in aggregate or 8.5 US cents per ordinary share.