R.e.a.hldgs. Regulatory News (RE.)

11 Mar 2008 14:13

R.E.A.Hldgs PLC11 March 2008 Acquisition of additional land rights and trading update Land R.E.A. Holdings plc ("REA") announces that it has agreed to acquire further landallocations in East Kalimantan by purchasing two Indonesian companies, PT CiptaDavia Mandiri ("CDM") and PT Kutai Mitra Sejahtera ("KMS") for a cashconsideration of $2.5 million. The land allocations held by CDM and KMS (which represent the only assets ofthese two companies) encompass a total of some 37,000 hectares on two sites,each less than 30 kilometres away from the group's existing East Kalimantanestates. The land in question is deforested, having been logged out some timeago. It is suitable for planting with oil palms and has already been zoned foragricultural use (subject to the possible exclusion of up to 6,000 hectares inrespect of which mineral exploration rights were previously granted but have nowlapsed). CDM and KMS have recently obtained agricultural development permitsin respect of the land. CDM and KMS are being acquired by REA on terms that thevendors will have no responsibility for the further costs to be incurred by eachcompany in completing titling of the land allocations held but otherwise CDM andKMS have no existing liabilities. REA has previously announced the conditional acquisition of some 20,000 hectaresof land lying approximately 75 kilometres to the south of the group's existingEast Kalimantan estates. On satisfaction of the conditions of that acquisition(which it is hoped will occur fairly shortly), that land too will be acquiredthrough the purchase of an Indonesian company, PT Putra Bongan Jaya ("PBJ")which will also have land as its sole asset and no liabilities other than theprospective costs of completion of land titling. Arrangements will be made whereby CDM, KMS and PBJ will all be owned as to 95per cent through wholly owned subsidiaries of REA and as to 5 per cent by localinvestors. Upon completion of the above transactions, the REA group will hold landallocations totalling some 120,000 hectares. However, such allocations do notnecessarily permit the immediate planting of oil palms. During 2007, therewere delays to the group's targeted development programme as a result ofproblems in securing release for planting of land allocations in respect ofwhich the titling process had not been fully completed. Delays have continuedinto 2008 to-date. The new acquisitions of CDM and KMS and the previously reported conditionalacquisition of PBJ are designed to permit the group to advance concurrently landtitling in relation to several different development areas in the hope that thiswill reduce future delays to the group's expansion programme. It is, however,clear from the group's experience during 2007 that the land titling process inIndonesia, which was never straightforward, is becoming progressively moredifficult with the consequential risk of further unpredictable delays. Trading The crop of oil palm fresh fruit bunches ("FFB") for 2007 amounted to 393,217tonnes, 3.5 per cent ahead of the budgeted crop of 380,000 tonnes and anincrease of 17.7 per cent on the FFB crop for 2006 of 334,076 tonnes. Climaticconditions during 2007 were satisfactory with good rainfall of 4,413 mm (2006 -2,967 mm) generally well distributed through the year. The FFB crop for 2008 has been budgeted at 421,000 tonnes with the expectedincrease over 2007 reflecting a budgetary assumption of average rainfall (bothas to quantum and distribution), increasing yields from the 3,150 hectares offormerly immature oil palms brought into cropping during 2007 and maturing offurther hitherto immature areas. The crop to end February 2008 wasapproximately 7,000 tonnes above budget but, as the monthly phasing of eachyear's crop varies from year to year, this should not be taken as indicating alikelihood that the FFB crop for 2008 as a whole will be above budget. The extent of the new development achieved in 2007 was a significantdisappointment with an outturn of 1,500 hectares against the target of 6,500hectares set at the beginning of the year. In setting that target, thedirectors did recognise that its achievement would depend upon the titling ofland allocations held by the group proceeding as planned so that land wouldbecome available for development in time, and to an extent sufficient, to meetthe requirements of the development programme. Unfortunately, the titlingproblems referred to earlier meant that this did not happen and the shortfallwas the result. Despite the delays, the group has continued to establish nurseries in line withits target planting programme and will therefore have available seedlings withwhich to catch up on programme arrears if land availability and developmentlogistics permit. The average spot crude palm oil ("CPO") price, CIF Rotterdam, for 2007 was $780per tonne as compared with $478 for 2006. CPO, CIF Rotterdam, is currentlytrading at above $1,300 per tonne. During 2007, the group delivered 12,000tonnes under forward sale contracts at the equivalent of a CIF Rotterdam priceof $620 per tonne. Otherwise, sales were made on a spot basis. The 2007forward sale contracts are continuing into 2008 at the rate of 2,000 tonnes permonth until June (at the same equivalent price of $620 per tonne). Thereafterthe group has forward sales in respect of 2,000 tonnes per month for the sixmonth period to December 2008 and the twelve month period to December 2009 atprices equivalent to CIF Rotterdam prices of respectively $870 and $860 pertonne. Export duty is now payable on exports of CPO from Indonesia on apercentage basis rising from nil per cent on sales at prices of up to theequivalent of $550 per tonne, CIF Rotterdam, to 25 per cent on sales at pricesabove the equivalent, on that basis, of $1,300 per tonne. Press calls to:John OakleyTel: 020 7436 7877 This information is provided by RNS The company news service from the London Stock Exchange