Company Announcements

Anglo-Eastern Plantations Plc

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

 

Announcement of interim results for the six months ended 30 June 2020

 

The group, comprising Anglo-Eastern Plantations Plc and its subsidiaries (the "Group"), is a major producer of palm oil and rubber with plantations across Indonesia and Malaysia, amounting to some 128,200 hectares, has today released its results for the six months ended 30 June 2020.

 

Financial Highlights

 

	2020 6 months to 30 June $m (unaudited)		2019 6 months to 30 June $m (unaudited)		2019 12 months to 31 December $m (audited)
Revenue	123.1		97.9		219.1
Profit / (Loss) before tax
- before biological assets ("BA") movement	17.1		(0.2)		15.6
- after BA movement	16.8		1.6		18.9
Basic Earnings per ordinary share ("EPS")
- before BA movement	26.83cts		(6.72)cts		35.37cts
- after BA movement	26.35cts		(3.74)cts		40.61cts
Total net assets	493.2		472.7		495.8

 

 

Enquiries:

 

Anglo-Eastern Plantations Plc
Dato' John Lim Ewe Chuan	+44 (0)20 7216 4621
Panmure Gordon (UK) Limited
Dominic Morley	+44 (0)20 7886 2954

 

 

 

Chairman's Interim Statement

 

There is cautious reprieve from the Coronavirus pandemic as many countries are easing their lockdowns and encouraging their population to return to economic activities but to remain safe. There are expectations of a second wave and in fact some countries are experiencing it. We have gone through more than three months of the COVID-19 outbreak without significant impact to our productions as our plantations and mills have been able to operate close to normal levels. Likewise, the demand for Crude Palm Oil ("CPO") during the pandemic has not been affected, as reflected in the six months results to 30 June 2020.

 

While the total lockdown in Malaysia and Indonesia due to COVID-19 has been progressively lifted, local movement is still restricted and most international flights have not been restored. The Group continues to practise safety protocols like encouraging employees to wear masks, keep their distance, practise personal hygiene and avoid crowded places to minimize the spread of the virus. The pandemic is far from over as Indonesia reported more confirmed cases of COVID-19 compared to China.

 

As we are still facing a period of uncertainty, the Board and the management have carried out stress tests to ensure that the Group has adequate financial resources in a reasonable worse case scenario to remain as a going concern for at least twelve months from the date of this report. By the same token we have also carried out assessments of our significant assets to determine whether such assets need to be impaired as a result of the pandemic.

 

The interim results for the Group for the six months to 30 June 2020 are as follows:

 

Revenue for the six months to 30 June was $123.1 million, 26% higher than $97.9 million reported for the same period of 2019. The Group's gross profit was $21.8 million compared to $5.3 million for the first six months of 2019. Overall profit before tax for the first half of 2020 increased more than ten fold to $16.8 million (after biological assets movement) against $1.6 million for the corresponding period in 2019. This was attributed mainly to higher CPO prices and production.

 

Fresh Fruit Bunches ("FFB") production for the first half of 2020 was 9% higher at 511,700mt compared to 470,300mt in the same period last year due to better weather and increased matured area. Bengkulu plantations reported a 20% increase in crop production as the region recovered from the moisture stress. Young matured oil palms in North Sumatera are growing well and reported an 11% better harvest in the same period.  Bought-in crops for the first half of 2020 also increased by 6% to 425,400mt from 402,900mt due to an abundance of crops in the Bengkulu region.

 

Operational and financial performance

 

For the six months ended 30 June 2020, gross profit margin increased to 17.7% from 5.4% as the Group experienced higher CPO and palm kernel prices.

 

CPO price ex-Rotterdam averaged $648/mt for the first six months to 30 June 2020, 23% higher than $527/mt over the same period in 2019. Our Group's average ex-mill price for CPO was higher at $551/mt for the same period (1H 2019: $466/mt).

 

Profit after tax for the six months ended 30 June 2020 was $12.5 million, compared to a profit of $0.3 million for the first six months of 2019, as a result of the increased gross profit margin.

 

The resulting basic earnings per share for the period was 26.35cts (1H 2019: loss of 3.74cts).

 

The Group's balance sheet remains strong. Net assets as at 30 June 2020 were $493.2 million compared to $472.7 million as at 30 June 2019 and $495.8 million as at 31 December 2019. The increase in net assets from the last interim report was attributed to higher profit and lower capital expenditure. The Indonesian Rupiah has depreciated by 3% against the US dollar in the first half of 2020.

 

As at 30 June 2020, the Group had cash and cash equivalents of $91.4 million (1H 2019: $100.1 million) and borrowings of $2.7 million (1H 2019: $16.1 million), giving it a net cash position of $88.7 million, compared to $84.0 million as at 30 June 2019 and $76.6 million as at 31 December 2019.

 

Operating costs

 

Operating costs for the Indonesian operations were higher in the first half of 2020 compared to the same period in 2019 mainly due to an increase in bought-in crops from third parties, higher wages due to the annual increase in minimum wage rates and a 5% increase in newly matured areas where the yield remains relatively low.

 

Production and Sales

	2020	2019	2019
	6 months	6 months	Year
	to 30 June	to 30 June	to 31 December
	mt	mt	mt
Oil palm production
FFB
- all estates	511,700	470,300	1,025,100
- bought-in from third parties	425,400	402,900	907,100
Saleable CPO	189,900	177,500	394,700
Saleable palm kernels	45,300	42,300	93,100
Oil palm sales
CPO	195,900	182,600	397,300
Palm kernels	45,200	41,200	92,900
FFB sold outside	19,000	23,300	62,100
Rubber production	215	202	514

 

The Group's six mills processed a total of 918,100mt in FFB for the first half of 2020, an 8% increase compared to 849,900mt for the same period last year. The higher throughput was due to the higher FFB supplied from both own estates and bought-in from third parties due to reasons explained earlier.

 

Overall CPO produced for the first half of 2020 was 7% higher at 189,900mt from 177,500mt. The oil extraction rate for the first half of 2020 decreased to 20.7% from 20.9% in the same period last year. External crops, which made up 46% of the crop processed compared to 47% in the first half of 2020, were mainly made up of dura variety which has a thinner mesocarp resulting in lower oil content. The withdrawal of fertiliser for older trees due for replanting may also have contributed to an overall decline in oil extraction rate.  

 

The Group continues to reduce its greenhouse gas ("GHG") emissions by capturing the methane gas released from its effluent treatment plants to produce electricity. The three biogas plants in the Group produced over 10,510 MWh of electricity compared to 7,470 MWh in the same period last year. However with the COVID-19 pandemic in Indonesia, many industries remain shut reducing the demand for power. The national grid temporarily suspended the uptake of electricity from one of our biogas plants in June 2020 until the economy recovers. There is a high risk that the authorities may reduce power purchases from biogas plants in North Sumatera despite the lower cost and cleaner energy as other power producers intensified their lobby for their energy to be prioritised for purchase.   

 

Commodity prices

 

The CPO price ex-Rotterdam for the first half of 2020 averaged $648/mt, 23% higher than last year (1H 2019: $527/mt). The price has gradually trended downwards from the start of the year at $878/mt to close at $576/mt on 30 June 2020 but has since increased to $702/mt as at 19 August 2020. CPO prices are expected to remain volatile and under pressure for the second half of 2020.

 

Rubber price averaged $1,174/mt, 11% lower than 2019 (1H 2019: $1,315/mt).

 

Development

 

The Group's planted areas at 30 June 2020 comprised:

 

	Total	Mature	Immature
	Ha	ha	Ha
North Sumatera	19,069	16,704	2,365
Bengkulu	16,844	16,844	-
Riau	4,873	4,873	-
South Sumatera	6,355	5,466	889
Kalimantan	15,900	13,441	2,459
Bangka	2,062	647	1,415
Plasma	3,885	2,612	1,273
Indonesia	68,988	60,587	8,401
Malaysia	3,453	3,453	-
Total: 30 June 2020	72,441	64,040	8,401
Total: 31 December 2019	71,481	61,151	10,330
Total: 30 June 2019	70,503	61,183	9,320

 

 

 

 

The Group's new planting and replanting for the first six months of 2020 totalled 971ha compared to 481ha for the same period last year. In addition, Plasma planting for the period was 216ha (1H 2019: 242ha).

 

The Group remains optimistic that it will meet substantially its total planting target of 3,100ha in 2020. The Group's total landholding comprises some 128,200ha, of which the planted area stands at around 72,441ha (1H 2019: 70,503ha) with the balance of estimated plantable land at 18,300ha.

 

The fourth biogas plant has been completed and work to connect its electricity supply to the national grid is in progress. The progress has however been slow due to the lockdown caused by the COVID-19 pandemic in Indonesia. The state electricity board is also evaluating the need to purchase as power demand has dropped drastically due to the economic lockdown.

 

Due to the virus pandemic in Indonesia, the Group is evaluating the tenders received for the civil and structural works for the seventh mill in North Sumatera to further reduce the cost of construction. The mill completion is likely to be delayed and is now scheduled for completion by 2022.

 

Dividend

 

As in previous years, no interim dividend has been declared. A final dividend of 0.5 cents per share in respect of the year ended 31 December 2019 was paid on 17 July 2020.

 

Outlook

 

There are rising concerns of a second wave of the virus pandemic in key importing countries in the second half of 2020 which may cloud market demand. The prolonged uncertainties together with low crude oil prices and higher seasonal crop production may put some downward pressure on CPO prices. Furthermore, it was reported that China may potentially import and crush more soybeans to feed and rebuild its hog population decimated by the swine flu resulting in more supply of rival soy oil in the China market. Palm oil used for biodiesel blending is also likely to suffer as a result of economic lockdown dampening demand and prices.

 

Principal risks and uncertainties

 

We believe that the potential impact on the Group, of the United Kingdom ("UK") leaving the European Union is limited, unless Brexit causes a worldwide recession. Other than maintaining its corporate presence and listing in the UK, all plantation and mill operations together with marketing are primarily based in Indonesia. I have previously mentioned in our last Annual Report that the prolonged lockdown arising from the Coronavirus pandemic could lead to a worldwide recession which could in turn have an adverse impact on the consumption and usage of palm oil. In this context, the UK has been reported to be in recession. The principal risks and uncertainties, including the risks due to the Coronavirus pandemic, have broadly remained the same since the publication of the annual report for the year ended 31 December 2019.

 

A more detailed explanation of the risks relevant to the Group is on pages 23 to 27 and from pages 101 to 106 of the 2019 annual report which is available at https://www.angloeastern.co.uk/.

 

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014.

 

 

 

Madam Lim Siew Kim

Chairman

26 August 2020

 

 

 

Responsibility Statements

 

We confirm that to the best of our knowledge:

 

a)       The unaudited interim financial statements have been prepared in accordance with IAS34: Interim Financial Reporting as adopted by the European Union;

 

b)       The Chairman's interim statement includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year); and

 

c)       The interim financial statements include a fair review of the information required by DTR 4.2.8R (material related party transactions in the six months ended 30 June 2020 and any material changes in the related party transactions described in the last Annual Report) of the Disclosure and Transparency Rules of the United Kingdom Financial Services Authority.

 

 

 

By order of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs

26 August 2020