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Pin to quick picksR.e.a.hldgs. Regulatory News (RE.)

Share Price Information for R.e.a.hldgs. (RE.)

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106.00    0.00 (0.00%)
Bid:
105.00
Ask:
113.00
Spread: 8.00 (7.619%)
Market Cap: £46.46m
RE. Live PriceLast checked at - London Stock Exchange

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Trading Statement

17 Feb 2009 15:28

RNS Number : 4637N
R.E.A.Hldgs PLC
17 February 2009
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ο»Ώ

TradingΒ Statement

The crop of oil palm fresh fruit bunchesΒ ("FFB")Β for the year to 31 December 2008 amounted to 450,906Β tonnes,Β 7.1 per centΒ ahead of the budgeted crop of 421,000 tonnesΒ and an increase of 14.7 per cent on the FFB crop for 2007 of 393,217 tonnes.Β Β RainfallΒ for 2008Β averagedΒ 3,504Β mm across theΒ group'sΒ operations,Β down on the 4,413Β mm of the previous yearΒ but nevertheless wholly satisfactory for oil palm cultivation, particularly as the rainfall was well distributed.

Β 

External purchases of FFB from smallholders totalled 6,460 tonnes (2007:Β 2,767 tonnes). TheΒ crude palm oil ("CPO")Β and palm kernel extraction rates (based on the combination of theΒ group'sΒ own FFB production and externally purchased FFB) amounted to, respectively, 23.17 per cent and 4.56 per cent (2007:Β 24.00 per cent and 4.09 per cent). As previously reported, the decline in CPO extraction rate is attributedΒ by the directorsΒ to a combination of overcast conditions during part of the year andΒ pressure onΒ harvestingΒ standards. The group is implementing measures designed to reduceΒ harvester turnover andΒ make it easierΒ to recruit additional harvesters. The improved palm kernel extraction rate reflectsΒ successfulΒ modificationΒ ofΒ theΒ palm kernel extractionΒ processΒ to improve nut cracking efficiency.Β 

FollowingΒ theΒ deterioration in the world economic conditions and, in particular, a sharp decline in the price of CPO, the directors decided in OctoberΒ 2008Β thatΒ the group should be cautious andΒ that, until the outlook became clearer,Β no material new fundsΒ shouldΒ be committed toΒ furtherΒ oil palmΒ expansion.Β As a result, the area developed for oil palm in 2008 amounted to under 2,000 hectares, considerably less than had originally been planned.Β An accountingΒ consequence of this will beΒ that theΒ IAS 41Β valuation of the group's biological assetsΒ asΒ at 31 December 2008 will be less thanΒ wouldΒ otherwise have been expected.

Whilst commodity markets remain volatile, recent weeks have seen some recovery in the price of CPO which now stands at $585Β per tonne,Β CIF Rotterdam, against a low in October 2008 of $435 per tonne. Whist it is too early to predict that the CPO market has reached an equilibrium level, the directors are encouraged that offtakeΒ continues at good levelsΒ andΒ thatΒ stocks inΒ MalaysiaΒ andΒ IndonesiaΒ are declining. In the short term,Β much may depend upon whether,Β in the important markets of India and China, reduced consumer spending power is offset by the lower price of CPO feeding through into cheaper cooking oil.

The group is budgeting for an FFB crop in 2009 ofΒ 486,000Β tonnes. This is a little below the level that would result if palms of equivalent age achieved similar yields per hectare in 2009 to those of 2008 but the directors believe that it is appropriate to leave an element of contingency in budgeting crops as past experience has shown that contingencies are often needed.

Recent months have seen reductions in the prices of diesel oil and fertiliser, both of which are material components of the group's operating costs. In addition, a weak Indonesian rupiah (currently standing at RpΒ 11,800Β = $1 against RpΒ 9,419Β = $1 at 1 January 2008) is helping to offset the cost in US dollar termsΒ of Indonesian wage increases. As a result, at current CPO prices, the group is achieving margins which, although below the very high margins of 2008,Β areΒ stillΒ satisfactorilyΒ remunerative.

IfΒ CPO prices remain at around current levels or better, the directorsΒ intend to consider the resumption ofΒ extension planting. However, the directors expect that any such resumption would be kept to a level such that the capital costs entailed would leave the group with an appropriate cash reserve against furtherΒ weaknessΒ in CPO prices.

Work continues in relation to the two small coal concessions acquired by the group during 2008 and it is hoped that coal production can start duringΒ theΒ first half ofΒ 2009Β with early prospects of cash generation.

Enquiries:

Richard Robinow

R.E.A Holdings plc

Tel: 020 7436 7877

This information is provided by RNS
The company news service from the London Stock Exchange
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