Anglo-Eastern Plantations Regulatory News (AEP)

28 Aug 2008 07:00



Thursday 28 August 2008

ANGLO-EASTERN PLANTATIONS PLC-INTERIM ANNOUNCEMENT 

("Anglo-Eastern" or the "Group")

"Results by far an interim record"

Anglo-Eastern (AEP.L), which operates approximately 40,000 ha of developed plantations, primarily oil palm in Indonesia, announces a 151% increase in pre-tax profit on revenue up 127% in the six months to 30 June 2008.

Financial Highlights

Revenue increased by 127% to $100.2m

Operating profit increased by 150% to $43.8m

Pre-tax profit increased by 151% to $44.4m

Basic earnings per share increased by 146% to 61.6 cts

Net cash at 30 June 2008 was $35.7m, compared with $23.3m at 31 December 2007 and $9.0m at 30 June 2007

Commercial Highlights 

The market average price for crude palm oil for the period was $1,169/mt, a 71% increase on the $683/mt in the first half of 2007

Crops of fresh fruit bunches increased by 17% to 266,000 mt 

In the half year, Anglo-Eastern announced two further land acquisitions in Indonesia: 15,000 ha in Bengkulu in January and 30,100 ha in South Sumatra in June, at a total cost to the group of $11.5m

The Group's total land holding is now 132,000ha, of which 40,000 ha are planted and 63,000ha are available for planting

In the new areas of Kalimantan, Bengkulu and Bangka, land clearing is proceeding and 2,000 ha should be planted by December 2008, with a further 6,000 ha in 2009

New 45 mt/hour mills are planned for the Sumindo estate in Bengkulu and for Cahaya Pelita in North Sumatra, at a total cost of just over $20m

Mr Chan Teik Huat, Chairman and Chief Executive stated 

"Production continues to increase steadily as a result of the planting programme and, with no net debt, the balance sheet is strong. CPO prices have fallen markedly since the end of June and are currently around $900/mt. Prices are difficult to predict but overall demand remains strong. Further progress can be expected in the second half year provided there are no further substantial CPO price falls". 

Chairman's Interim Statement

The Group's strong performance in 2007 has continued into the first half of 2008. Production has grown as planned, while commodity prices have remained generally high throughout the period. Since the end of June prices have fallen back and the volatility across all markets does create some uncertainty going forward. Nevertheless the Board remains confident of reporting a strong second half.

The results for the first half of 2008 were by far the best for a first half that the Group has ever recorded. Revenues were up 127% at $100.2 million (2007: $44.1 million). This generated operating profit of $43.8 million (2007: $17.5 million), an increase of 150%. Profit before tax was $44.4 million (2007: $17.7 million) up 151%. Earnings per share were 61.6cts (2007: 25.0cts), an increase of 146%.

Consequently cash flow for the period has been strong. Net cash at 30 June 2008 was $35.7million, an increase of $12.4million over 31 December 2007 even after considerable capital expenditure and the two acquisitions announced earlier this year. The improvement in the overall cash position meant that there was no net borrowing cost for the period.

Palm oil prices have remained above $960/mt cif Rotterdam for the whole of the period and averaged $1,169/mt, compared to an average of $683/mt in the same period of 2007.  This equates to an average ex-factory Crude Palm Oil ("CPO") price of $892/mt for the period. The difference between the local price and the world price is due to freight and Indonesian export taxes. This 71% improvement in prices is the major contributor to the increased profits, which are also bolstered by production rises. Crops of fresh fruit bunches ("FFB") totalled 266,000 tonnes, a 17% increase over the first half 2007 total of 228,000 tonnes. CPO production increased even more as a result of FFB purchases: 96,000 tonnes in 2008 compared with 69,000 tonnes in 2007. 

We made two further land acquisitions in Indonesia during the period: 15,000 ha in Bengkulu in January and a further 30,100 ha in South Sumatra in June, at a total cost to the group of $11.5 million. The Group now has 34,000 ha of mature oil palm, 6,000 ha under development and a further 63,000 ha of vacant, plantable land.  The South Sumatra acquisition was completed in July and is therefore not consolidated in the interim figures. 

Production and Sales

FFB production was higher than last year in all areas - up 6% in the older North Sumatra estates, up 60% in Bina Pitri in Riau and up 20% in Bengkulu. In Bengkulu it is encouraging to see the full recovery from the drought in late 2006 as well as underlying yield improvements consistent with the average age of the palms. 

Bought-in crops for the period were 74% higher than last year. In comparison to last year this partly reflects a full period of operations for the Bina Pitri mill which opened in May 2007 as well as higher availability of outside fruit in Bengkulu. Outside fruit continues to be available at prices which allow adequate contributions to profit. 

Produce prices

CPO prices appear to be establishing a more consistent link to petroleum prices and have remained strong throughout the period, as have competing edible oils such as soya.  The average for the period has been $1,169/mt (2007: $683/mt) with a minimum of $960 in early January and a peak of $1,390 in early March. Since the end of June prices have fallen back to the $900 mark but underlying demand from the traditional edible oil markets such as India and China remains strong. 

Indonesian export taxes are applied on a sliding scale based on the CPO price for the month. The effective rates for the six months have varied between 15% and 25%.  This has the effect of capping selling prices at around $900/mt 

Rubber prices averaged just over $2,750/mt, making a healthy contribution from our 400 ha., well above the average of $2,200/mt achieved in the first half of 2007.

Operating costs 

Production costs have increased as a result of higher petroleum and other commodity prices. The Indonesian government has recently removed some fuel subsidies and fertiliser prices have more than doubled since the same period last year.  Nevertheless we have been able to contain rising input prices to ensure an improvement in margin for the period.

Development

The Group's planted areas at 30 June 2008 were:-

In January 2008, we acquired a 95% interest in PT Riau Agrindo Agung ("RAA") for a cash consideration of $3.8 million.  RAA is an Indonesian company which owns the rights to 15,000 ha of vacant land in Bengkulu province in Sumatra.  The residual 5% interest is held by the vendor, who is also our partner in Kalimantan. The estate is located 60 km north of the provincial capital and 120 kms from our existing Bengkulu estates, so we shall be able to benefit from production and management synergies. We expect that 10,500 ha of the title area will be plantable, after allowing for areas to be set aside for local smallholder development and topographically unusable areas. It is hoped to plant the area fully over the five years to 2013.

In June 2008 we announced the acquisition of further land in South Sumatra province but near to the boundary with Bengkulu province. 95% holdings have been acquired in two companies, PT Empat Lawang Agro Perkasa and PT Karya Kencana Sentosa Tiga, which hold the rights to 14,000 ha and 16,100 ha respectively. After making similar allowances for local interests to RAA, we expect to plant 21,000 ha or so. The area is only 125 kms from Bengkulu town and near enough to our other Bengkulu estates for fruit to be transported there prior to building a mill. These transactions were completed in July 2008. 

New 45mt per hour mills are planned for the Sumindo estate in Bengkulu and Cahaya Pelita in North.Sumatra. Site preparation has begun at Sumindo and work is expected to begin at Cahaya Pelita in the first half of 2009.  Capital costs have been affected by steel and other construction material price rises and, now that detailed estimates have been prepared, the Sumindo mill is likely to cost $10 million and the Cahaya Pelita mill $10.5 million, compared to earlier estimates of $8.5 million and $8.6 million respectively

The Group's total landholding is now 132,000 ha, of which 40,000 ha are planted and 63,000 ha are available for planting.  In the new areas in Kalimantan, Bengkulu and Bangka, land clearing is proceeding and 2,000 ha should be planted by December 2008, with a further 6,000 ha in 2009.

Dividend

As in previous years no interim dividend has been declared. A final dividend of 14.0 cents per share in respect of the year to 31 December 2007 will be paid on 9 September 2008.

Risks and Uncertainties

The principal risks facing the business are as set out on page 13 of the 2007 annual report, and there have been no changes this year. 

  Outlook

Production continues to increase steadily as a result of the planting programme and, with no net debt, the balance sheet is strong. CPO prices have fallen markedly since the end of June and are currently around $900/mt. Prices are difficult to predict but overall demand remains strong. Further progress can be expected in the second half year provided there are no further substantial CPO price falls.  

Chan Teik Huat   26 August 2008

Chairman

Consolidated income statement

Consolidated statement of total recognised income and expenses

  Consolidated balance sheet

  Consolidated cash flow statement

  Consolidated cash flow statement (continued)

  Notes to the interim statements

1. Basis of preparation of interim financial statements

This interim report does not constitute the company's statutory accounts. The information presented in relation to 31 December 2007 is extracted from the statutory financial statements for the year then ended and which have been delivered to the Registrar of Companies. The Auditors' Report on the statutory financial statements for the year ended 31 December 2007 was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report(s) and did not contain statements under S237(2) or (3) of the Companies Act 1985

The interim statements for the six months ended 30 June 2008 and 30 June 2007 are unaudited. Those for the six months ended 30 June 2008 were approved by the board on 26 August 2008. These interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU, the requirements of the Disclosure and Transparency Rules issued by the Financial Services Authority and the accounting policies, methods of computation and presentation as applied in the group's 2007 Annual Report and Accounts. The comparative figures for the year ended 31 December 2007 are an extract from the audited financial statements for the year.

2. Biological assets

Group fixed assets are valued in total on the same "value in use" basis as disclosed in the group's accounting policies within the annual financial statements. Within this total, the value of biological assets has been estimated separately and, as required by IAS41, the movement in valuation surplus of biological assets has been charged or credited (BA adjustment) to the income statement for the relevant period.

3. Foreign exchange

4. Finance costs

5. Segment information

Segment information is now shown for Indonesia as a whole, rather than by Indonesian province, as in prior years, since that is no longer appropriate in management terms.

6. Tax

7. Dividend

The final and only dividend in respect of 2007, amounting to 14.00cts per share, or $5,531,000, will be paid on 9 September 2008 (2006: 10.80cts per share, or $4,265,000, paid on 9 July 2007). In common with previous years no interim dividend has been declared.

8. Earnings per share

9. Acquisition

For the acquisition below, since it was not an active plantation, the directors consider that they have obtained control of an entity that is not a business and accordingly have not accounted for this acquisition as a business combination. Instead, the amount paid for the acquisition has been allocated between individual identifiable assets and liabilities in the entity based on their fair values at the acquisition date.

On 10 January 2008 the group acquired a 95% interest in an Indonesian company PT Riau Agrindo Agung (RAA) for a cash consideration of $3,784,000. RAA owns the rights to 15,000ha of vacant land in Bengkulu province. The assets and their fair value adjustment were assessed as follows: REMOVE BOX BELOW

RAA was inactive throughout the period and therefore the group's share of any profit or loss from the date of acquisition to the end of June 2008 was nil.

10 Post balance sheet acquisition

On 7 July 2008, the Group acquired 95% of the ordinary share capital of two companies, PT Empat Lawang Agro Perkasa (ELAP) and PT Karya Kencana Sentosa Tiga (KKST), which own the rights to vacant land in South Sumatra province of Indonesia. The shares in ELAP and KKST were purchased for $3,601,000 and $4,086,000 respectively. 

11. Reserves and minority interests