Anglo-Eastern Plantations Regulatory News (AEP)

4 Apr 2007 07:01

Anglo-Eastern Plantations PLC04 April 2007 Wednesday 4 April 2007 ANGLO-EASTERN PLANTATIONS - PRELIMINARY ANNOUNCEMENT Record profit, material improvement expected for 2007 Anglo-Eastern Plantations Plc, which operates approximately 34,000 hectares (ha)of developed plantations, primarily oil palm in Indonesia, announces a recordprofit for the year to 31 December 2006, 18% higher than 2005 and 6% higher thanthe previous record in 2004. The increase is attributable to higher commodityprices and crops and is in spite of the weakness of the US dollar and higheroperating costs in Indonesia. FINANCIAL HIGHLIGHTS •Revenue increased by 23.0% to $79.1m. •Operating profit increased by 18% to $26.3m, before biological asset (BA) adjustment, and by 29% to $28.6m, after BA adjustment. •Pre-tax profit increased by 25% to $26.7m, before BA adjustment, and by 36% to $29.0m, after BA adjustment. •Basic and diluted EPS increased by 24% to 38.3cts, before BA adjustment, and by 35% to 41.7cts, after BA adjustment. •On the strength of the improved outlook for palm oil and mindful of the effect of the weaker dollar on sterling-based shareholders, the board is proposing to increase the annual dividend by 23% to 10.8cts per share (2005: 8.8cts). •Cash balances net of all borrowings increased to $9.6m from $5.1m, despite capital expenditure of $15.4m (2005: $7.6m), and no net interest was paid. COMMERCIAL HIGHLIGHTS •The average crude palm oil (CPO) price for 2006 was $479/mt, 14% up on the $422/mt in 2005, and the year end price was $570/mt. •Fresh fruit bunch (FFB) crops were 12% ahead of 2005, although 3% below expectations, following exceptionally dry weather in the second half. •In the year, 1,709ha were planted, 1,360ha in Bengkulu and 349ha at Labuhan Bilik. •Bengkulu planted area likely to be completed at 15,850ha in 2007 and Labuhan Bilik at 4,000ha in 2008/09. •The search for new land continues but, with current high CPO prices, suitable opportunities are hard to come by. Mr Chan Teik Huat, Chairman and Chief Executive, stated "With the exception ofNorth Sumatra, crops so far in 2007 appear to suffer from the effects of theearlier drought and have been a little disappointing. Against this, the CPOprice is now around $640/mt and most vegetable oil analysts are positive aboutthe outlook for all vegetable oils, driven by strong consumption in traditionalmarkets as well as prospective demand from the biodiesel industry. If currentprices are maintained and unless there is a significant decline in crops, we canexpect a material improvement in profits and operating cash flows for 2007." Enquiries:Anglo-Eastern Plantations PlcRollo Barnes (Financial Director) 020-7236 2838 Bankside Consultants LimitedCharles Ponsonby 020-7367 8851 Chairman's statement ResultsIt is pleasing to report a record profit for 2006 which is 18% higher than 2005and 6% higher than the previous record in 2004. The good results areattributable to record crops and favourable commodity prices. Operating profit before biological asset (BA) adjustment was $26.3 million in2006 compared to $22.2 million in 2005. If not for the exceptionally dry weatherin Sumatra in the second half of the year, the 12% increase in FFB crops for theyear over 2005 would have been higher. Average dollar crude palm oil (CPO)prices were 14% higher but, because of the weakness of the dollar, were only 8%higher in Indonesian rupiah. Also, there were sharp increases in local costs atthe end of 2005 following the withdrawal of fuel price subsidies by theIndonesian government. For examples, wages in North Sumatra rose by some 25% anddiesel by some 160%. Profit before tax, and after a BA credit adjustment of $2.3 million, was also arecord $29.0 million. However, as I have said in earlier statements on thesubject, this adjustment has no bearing on the operating performance or cashgeneration for the group. Earnings per share were 38.3 cts in 2006, an increase of 24% over the 31.0cts of2005. FinancingDuring 2006, we repaid $1.6 million of long term loans and drew down a new fiveyear loan of $3.2 million to fund part of the cost of the mill being built atBina Pitri. As a result, group long term loans increased from $5.5 million atthe beginning of the year to $7.1 million at year end. Total capital expenditureamounted to $15.4 million (2005 - $7.6 million) comprising mainly $4.4 millionon the Bina Pitri mill, $3.7 million on the new development at Labuhan Bilik and$5.8 million for new plantings at Bengkulu. Notwithstanding these, group cashbalances increased from $10.8 million at beginning of the year to $16.8 millionat year end. ValuationsGiven the price trends in recent years, the outlook for the entire palm oilindustry and the operating environment in Indonesia, it is thought that theparameters used to ascertain the value of the group's Indonesian estates need tobe revised. This is also a reflection of the general uptrend in agriculturalproperty prices in Indonesia in recent years. We have revised our CPO priceassumption to be $440/mt (previously $400/mt), cif Rotterdam, and the discountrate to 12% (previously 15%). The result is that our Indonesian estates arevalued at an average of $4,450/ha compared to $3,790/ha in our 2005 balancesheet. This valuation is a 'value in use' to the company and we feel it is areasonably prudent figure in relation to current market values. The positive BAadjustment in the income statement reflects this increase in value. PricesAfter 18 months' trading in a relatively narrow range of $410/mt to $450/mt, theCPO price began to rise strongly from July 2006 and ended the year at $570/mt.The average for 2006 was $479/mt compared to $422/mt in 2005. By contrast, palm kernel prices, which were relatively strong in 2004 and 2005,fell 15% during 2006. Palm kernels accounted for about 9% of the group's oilpalm revenue in 2006. Rubber prices reached an all-time high of $2,750/mt in June 2006, largely onwhat is regarded as speculative demand, and ended 2006 at $1,950/mt. Pricesaveraged $2,080/mt in 2006 compared to $1,490/mt in 2005. IndonesiaStarting in July, we experienced a severe and prolonged drought both at Tasikand at Bengkulu. While crops at these estates were 10% and 19%, respectively,ahead of expectations in the first half of the year, they were only 4% ahead and3% below expectations, respectively, for the full year. FFB production from Tasik and Anak Tasik was 167,290 mt, about 1.7% lower thanin 2005. Tasik continues to perform well for the age of its plantings. With itssatisfactory yield, we might defer the start of replanting beyond 2008.Bought-in crop rose to 130,000 mt in 2006 as compared to 111,330 mt in 2005.However, margins reduced as a result of increasing competition from surroundingmills. FFB production from the three smaller estates around Medan was a record at66,010 mt, up 4% on the record of 63,450 mt harvested in the previous year.Sungei Musam performed exceptionally well, with yield rising to 28 mt/ha. Themill at Blankahan, which processes crop from all three estates, completed itssecond full year of operations. Bought-in crop rose to 44,950 mt from 26,420 mtin 2005. In spite of this large increase, extraction rates remained satisfactoryat 22.6%. All the remaining 258 ha of cocoa at Rambung has now been replaced byrubber. The mature rubber area of 434 ha made a contribution of $1.7 million togroup profits. Production at Bengkulu, at 189,940 mt, was 19% higher than the previous year butbelow our budget, due mainly to a severe prolonged drought. We spentconsiderable sums on improving road surfaces to address the difficulties of FFBtransport during the monsoon season. With some 4,000 ha of immature palms to bebrought into production in the next few years, Bengkulu will be the group's mainprofit generator. With keen competition from surrounding mills, bought-in cropat Bengkulu fell 19% to 119,690 mt. However, the extraction rate improved from21.0% in 2005 to 21.9% in 2006, reflecting in part the increasing proportion ofbetter planting material used in later years. Bina Pitri performed well and to our expectation, with crop up 70% on 2005 at46,760 mt. The new 40 mt/hr mill expects to commence production shortly. MalaysiaProduction was up 14% over 2005 at 43,900 mt, a significant improvement onearlier performance. With better FFB prices, our Malaysian properties recorded amuch reduced loss of $100,000 from $607,000 in 2005. At current prices, I expectthe Malaysian operation to repay all its borrowings during the current year,after which, at reasonable CPO prices, it will be in a position to deliver acash return to the group. DevelopmentNew planting at Bengkulu accelerated to 1,360 ha in 2006 from 980 ha in 2005,leaving about 1,100 ha to be completed in 2007. This will bring the Bengkuluestates to a planted area of 15,850 ha. At Labuhan Bilik, 1,400 ha were cleared and drained in early 2006 ready forplanting. However, work was held up while we waited for necessary permitsresulting in only 349 ha being planted by year end. The planted area hasincreased to 1,250 ha at the end of March 2007. We have acquired a further 880ha of land nearby, bringing the plantable area of this estate to 4,000 ha. Weare optimistic on yield from this fertile property. Our management continues to search for new land or estates to acquire. Withcurrent high CPO prices, suitable opportunities are difficult to come by. OutlookWith the exception of North Sumatra, crops so far in 2007 appear to suffer fromthe effects of the earlier drought and have been a little disappointing. Againstthis, the CPO price is now around $640/mt and most vegetable oil analysts arepositive about the outlook for all vegetable oils, driven by strong consumptionin traditional markets as well as prospective demand from the biodieselindustry. If current prices are maintained and unless there is a significantdecline in crops, we can expect a material improvement in profits and operatingcash flows for 2007. DividendOn the strength of the improved outlook for palm oil and mindful of the effectof the weaker dollar on our sterling-based shareholders, the board is proposingto increase the annual dividend by 23% to 10.8 cts per share from 8.8 cts in theprevious year. In future the sterling equivalent dividend will be paid at the rate of exchangeruling at the date the register closes. If the current exchange rate of $1.96:£remained unchanged, our sterling shareholders would receive a dividend of 5.51pper share, or an increase of 9.8% over the previous year. CHAN TEIK HUATChairman 3 April 2007 Consolidated income statement 2006 2005 Result BA Result BA before BA adjust before BA adjust- adjust- -ment adjust- ment ment ment Total TotalContinuing operations $'000 $'000 $'000 $'000 $'000 $'000 Revenue 79,094 - 79,094 64,321 - 64,321Cost of sales (50,089) - (50,089) (39,514) - (39,514)Gross profit 29,005 - 29,005 24,807 - 24,807Biological asset - (35) (35)revaluation movement(BA adjustment) - 2,312 2,312 Other income 13 - 13 115 - 115Administration (2,748) - (2,748) ( 2,721) - (2,721)expensesOperating profit 26,270 2,312 28,582 22,201 ( 35) 22,166Exchange profits/ (losses) 368 - 368 (550) - (550)Finance income 538 - 538 302 - 302Finance costs (448) - (448) (498) - (498)Profit before tax 26,728 2,312 29,040 21,455 (35) 21,420Tax (8,595) (694) (9,289) (7,107) 10 (7,097)Profit for year 18,133 1,618 19,751 14,348 (25) 14,323 Attributable to:- Equity holders of the parent 15,153 1,321 16,474 12,235 (52) 12,183- Minority interest 2,980 297 3,277 2,113 27 2,140 18,133 1,618 19,751 14,348 (25) 14,323 Earnings per share- basic 41.7 cts 30.9 cts- diluted 41.7 cts 30.9 ctsEarnings per share before BA adjustment are shown in note 5 Consolidated statement of recognised income and expenses 2006 2005 US$'000 US$'000 Profit for the year 19,751 14,323Unrealised surplus on revaluation of the estates 6,016 3,112Profit/(loss) on exchange translation 11,718 (5,703)Deferred tax on revaluation (3,327) (176)Total recognised income and expense for the year 34,158 11,556 Attributable to:- Equity holders of the parent 28,002 9,736- Minority interest 6,156 1,820 34,158 11,556 Consolidated balance sheet 2006 2005 US$'000 US$'000 Non-current assetsBiological assets 33,255 26,975Property, plant and equipment 127,568 102,543Receivables 1,071 1,071 161,894 130,589Current assetsInventories 1,785 2,499Investments - 259Tax receivables 2,684 1,106Trade and other receivables 1,918 2,003Cash and cash equivalents 17,246 11,194 23,633 17,061Current liabilitiesBank loans and other financial liabilities (2,167) (2,103)Trade and other payables (5,308) (3,487)Tax liabilities (3,235) (2,594) (10,710) (8,184)Net current assets 12,923 8,877 Non-current liabilitiesBank loans and other financial liabilities (5,454) (3,940)Deferred tax liabilities (21,152) (16,941)Retirement benefit net liabilities (834) (602)Net assets 147,377 117,983 EquityShare capital 15,495 15,481Treasury shares (1,387) (1,387)Share premium reserve 23,904 23,868Share capital redemption reserve 1,087 1,087Revaluation and exchange reserve 2,407 (9,121)Retained earnings 80,450 67,536Equity attributable to equity holders of the parent 121,956 97,464Minority interests 25,421 20,519Total equity 147,377 117,983 Consolidated cash flow statement 2006 2005 US$000 US$000 Operating profit 28,582 22,166Adjustments for:BA adjustment (2,312) 35Net loss/(profit) on disposal of current and fixed asset 158 (77)investmentsDepreciation 3,551 3,243Share-based remuneration expense 20 14Retirement benefit provisions 232 (491)Foreign exchange 715 (994)Operating cash flow before changes in working capital 30,946 23,896Decrease/(increase) in inventories 714 (964)Decrease/(increase) in trade and other receivables 85 (258)Increase in trade and other payables 1007 542Cash inflow from operations 32,752 23,216Interest paid (541) (600)Overseas tax paid (9,321) (9,809)Net cash flow from operations 22,890 12,807 Investing activitiesProperty, plant and equipment- purchase (15,370) (7,596)- sale 119 116Interest received 538 302Net cash used in investing activities (14,713) (7,178) Financing activitiesDividends paid by parent company (3,560) (3,158)Share options exercised 50 100Repayment of existing long term loans (1,645) (5,531)Drawdown of new long term loan 3,200 -Finance lease (repayment)/drawdown (11) 74Dividends paid to minority shareholders (460) (2,587)Repayment by minority shareholders - 693Subscriptions to subsidiary share capital by minority - 448shareholdersReceipt from sale of portfolio investment 267 227Net cash used in financing activities (2,159) (9,734)Increase/(decrease) in cash and cash equivalents 6,018 (4,105) Cash and cash equivalents less overdraftsAt beginning of year 10,805 14,910At end of year 16,823 10,805Comprising:Cash at end of year 17,246 11,194Overdraft at end of year (423) (389) 16,823 10,805 Notes to the financial statements 1 Basis of accounts preparationThe financial statements for the years ended 31 December 2005 and 2006 have beenprepared in accordance with International Financial Reporting Standardsincluding International Accounting Standards and Interpretations (collectively'IFRS') issued by the International Accounting Standards Board ('IASB') andendorsed for use by companies in the EU, and with those parts of the UKCompanies Act 1985 applicable to companies reporting under IFRS. Accountingpolicies have been applied consistently to both years presented. 2 Status of financial informationThe financial information contained in this preliminary announcement does notconstitute the company's consolidated statutory financial statements for theyears ended 31 December 2006 or 2005, but is derived from those financialstatements. The financial statements for the year ended 31 December 2005 havebeen delivered to the Registrar of Companies and those for 31 December 2006 willbe delivered at the same time as their despatch to shareholders. The auditorshave reported on those financial statements which were unqualified and did notcontain statements under section 237 (2) or (3) of the Companies Act 1985. 3 Exchange rates 2006 2005 Year end Rp : $ 9,020 9,830 $ : £ 1.96 1.72 RM : $ 3.53 3.78Average Rp : $ 9,141 9,751 $ : £ 1.86 1.81 RM : $ 3.66 3.79 4 Tax 2006 2005 US$000 US$000 Foreign corporation tax - current year 7,794 6,509Foreign withholding tax on remittances 590 539Deferred tax adjustment - current year 905 49 9,289 7,097 5 Earnings per ordinary share (EPS) 2006 2005 Number of Number of shares shares '000 '000Weighted average number of shares in issue in year- used in basic EPS 39,478 39,411- dilutive effect of outstanding employee share options 55 50- used in diluted EPS 39,533 39,461 2006 2005 US$ US$ Basic earnings per share before BA adjustment: 38.3 cts 31.0 cts Basic earnings per share 41.7 cts 30.9 cts There is no significant difference between basic and diluted EPS. 6 Dividend 2006 2005 2006 2005 US$'000 US$'000Paid during the year 8.8 cts 8.0 cts 3,560 3,158Proposed final dividend inrespect of the year ended 31 10.8 cts 8.8 cts 4,265 3,473December The proposed dividend for 2006 is subject to shareholder approval at theforthcoming annual general meeting and has not been included as a liability.Assuming shareholder approval, the proposed dividend will be paid on 9 July 2007to shareholders on the register on 8 June 2007. 7 Crops 2006 2005 Tonnes TonnesOil palm fresh fruit bunches- all estates 513,902 459,080- bought-in or processed for third parties 294,647 284,705- mill throughput 717,888 677,845Saleable CPO 156,285 145,820Saleable palm kernels 36,596 35,049Rubber 1,088 946Cocoa 46 157 8 Areas Total Mature ImmaturePlanted Ha Ha HaOil palm 33,395 27,390 6,005Rubber 534 434 100Cocoa (replanted to rubber in 2006) - - - 33,929 27,824 6,105Plantable reserves 7,264Total 41,193 This information is provided by RNS The company news service from the London Stock Exchange