Anglo-Eastern Plantations Regulatory News (AEP)

16 May 2014

Anglo-Eastern Plantations Plc

("AEP", "Group" or "Company")

Interim Management Statement

Anglo-Eastern Plantations Plc and its subsidiaries, which owns, operates and develops plantations in Indonesia and Malaysia, amounting to some 127,800 hectares producing mainly palm oil and some rubber of which approximately 61,530 hectares are planted, today announces its Interim Management Statement in respect of the period since 31 December 2013.

Operational and financial performance

For the first three months ended 31 March 2014, our own production of fresh fruit bunches ("FFB") was 180,630mt, an increase of 16% compared to the same period in 2013 (3M13: 155,900mt). FFB bought-in was 135,300mt, which represents an increase of 104% in comparison with the same period in 2013 (3M13: 66,200mt). Total Crude Palm Oil ("CPO") produced was 64,000mt, 38% higher than the corresponding period in 2013 (3M13: 46,300mt).

CPO CIF Rotterdam price averaged $904/mt for the first three months to 31 March 2014. This represents an increase of 7% from the average of $845/mt recorded in the first quarter of 2013 and is within our expected price range of $800/mt to $1,000/mt for the first half of 2014.

The Group's balance sheet remains strong with the Company continuing to achieve positive cash flow generation. The Company's Long Term Development Loans totalled $35.0m as at 31 March 2014 (3M13: $25.0m). The increase was due to drawdown of loans to finance plantation development activities.

Development

New planting by the Group for the first three months ended 31 March 2014 was 427 hectares (3M13: 427 hectares). As indicated in the preliminary announcement on 8 April 2014, the Group planted less than planned, due primarily to delays in finalising agreement with villagers for land compensation payments in Bengkulu and Bangka. The villagers are asking for compensation beyond what the Group considered fair and reasonable resulting in protracted negotiations.

Despite the heavy rainfall also disrupting the earthworks for construction of the mill in Central Kalimantan in second quarter of 2013, the earthworks are now almost completed and the construction of mill buildings is in progress. This $18 million mill with an initial capacity of 45mt/hr is expected to be operational in second quarter of 2015. As previously reported the construction of another mill in North Sumatera is deferred while the Board considers further the relative cost advantages of two selected sites. 

The $5 million biogas and biomass project for one of the mills in North Sumatera is nearing completion. The gas purification plant was recently installed with hot air ducting, biogas piping and biogas engine ancillaries' installation to follow. Final testing and commissioning is expected by the end of second quarter of 2014. When fully operational, it will result in a significant reduction in the greenhouse gas emissions which are presently discharged from the effluent treatment in the anaerobic lagoons. 

Outlook

The CPO price closed at $905/mt in mid-May 2014, representing a 2% increase from the start of the year. The CPO price peaked at $993/mt in early March 2014 on concerns that El Nino weather pattern could reduce output and forced buyers to reduce purchases. CPO prices then retreated from the recent 18-month peak due to soft demand for tropical oil as key consumers in India and China cut back on purchases. Palm oil imports by India in February 2014 plunged to the lowest in nearly three years. It was also reported that the Indian consumers are likely to import more sunflower and soy oil as price differential with CPO narrowed.

Despite this, we anticipate that CPO price will remain generally stable due to the increase in demand from biodiesel and modest levels of industry output. The Board remains cautious but expects to profitability and cash flow to remain in line with management forecasts for the remainder of 2014.

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