Anglo-Eastern Plantations Regulatory News (AEP)

6 November 2023

Anglo-Eastern Plantations Plc

("AEP" or the "Company")

Trading Statement

Anglo-Eastern Plantations Plc, a major producer of palm oil and some rubber across Indonesia and Malaysia, today announces a trading update covering the nine months to 30 September 2023.

Operational and financial performance

For the first nine months ended 30 September 2023, our own production of fresh fruit bunches ("FFB") from continuing operations was 841,960mt, a decrease of 2% compared to the same period in 2022 (9M22: 859,900mt). Over the last two years, 2,370 hectares of old palms had been felled in Bengkulu and North Sumatera with 1,100 hectares replanted in 2022 and another 869 hectares replanted for the first nine months of 2023 resulting in the decline in FFB production. FFB production from discontinued operations in South Sumatera in 2023 was 21,580mt (9M22: 37,000mt). FFB bought-in was 805,030mt, a decrease of 5% in comparison with the same period in 2022 (9M22: 845,850mt). The drop in external crop purchases was primarily driven by intense competition for external crops in Riau and lower crop trend in Bengkulu. Total Crude Palm Oil ("CPO") produced was 338,840mt, a decrease of 4% compared to the corresponding period in 2022 (9M22: 351,460mt) due to lower FFB supplied from both our own estates and bought-in crops.

CPO price ex-Rotterdam averaged $983/mt for the first nine months of 2023. This represents a significant decrease of 33% from the average price of $1,471/mt recorded in the corresponding period in 2022. Prices remain volatile as CPO price ex-Rotterdam closed at $920/mt on 18 October 2023 compared to $1,060/mt at the start of the year. Our Group's average ex-mill price for CPO for the first nine months of the year was also lower by 19% at $729/mt (9M22: $896/mt). The Group also experienced a decrease in palm kernel price which was on average lower by 46% at $342/mt against $635/mt last year. Lower CPO prices were attributed to higher inventory of vegetable oils and the abundance of cheap sunflower oils from Russia and Ukraine, as these two top producers took advantage of their depreciated currency to grab larger share of the edible oils market.

The Group's balance sheet remains strong with no outstanding bank loans. The Group had net cash of $226.1m at 30 September 2023 (3Q22: $252.6m). The reduction in the cash balance takes into account the acquisition and consolidation of AEP's holding in two Indonesian subsidiaries for $25.2m, as announced on 12 July 2023, $5.9m remitted in advance to the Company's Registrar for interim dividends payable on 6 October 2023 and a $4.1m remitted to the Company's broker for its irrevocable commitment to purchase its Ordinary Shares, as announced on 24 August 2023. During this period, the Board also approved an investment of $10m into some short-term capital protected securities for a better yield.

Development

The Group's total landholding from its continuing operations comprises some 90,667 hectares of which the planted area stands at around 68,414 hectares. The Group's new planting and replanting for the nine months ended 30 September 2023 totalled 1,452 hectares (including Plasma) against 1,367 hectares for the corresponding period last year. Plasma planting for the period was 126 hectares (9M22: 201 hectares). New planting in Kalimantan was temporary halted due to the extreme dry conditions in the last two months.

As previously announced, on 5 July 2023, the Group has completed the disposal of the three loss-making South Sumatera estates. The affected employees were retrenched, closely supervised by the local labour department and witnessed by representatives from the labour unions. The new owner has officially taken over the operations of these plantations.

The BioCNG plant in North Sumatera is nearing completion with some piping works remaining. Equipment are being tested with the possibility of commencing production before the end of 2023. 

The construction of the seventh mill in North Sumatera has been completed. Test runs are being conducted processing small batches of in-house FFB to test the equipment. The palm oil mill effluent is currently stored in open tanks away from the work areas while final checks are being carried out to test the recently repaired Anaerobic Tank Digesters for leakages. The bacteria in the anaerobic effluent treatment plant will also need to be cultivated and build-up before the whole system is fully functional. The mill is expected to start buying external crop for processing by the first quarter of 2024.

There is, however, little progress on the construction of the eighth mill in Kalimantan as we await the relevant government authorities to approve the environmental impact assessment study before commencing the earthworks. 

Outlook

CPO prices are expected to be weak for the remaining part of the year as the industry enters traditional period of more robust crop production. The reported high palm oil inventory, together with the abundance of other competitive vegetable oils, coupled with a lower demand from the major importers are likely to suppress any upward movement in CPO prices for the last quarter of 2023.

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Note: The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.