Anglo-Eastern Plantations Plc

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

 

Announcement of interim results for the six months ended 30 June 2021

 

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 128,000 hectares, has today released its results for the six months ended 30 June 2021.

 

Financial Highlights

 

	2021 6 months to 30 June $m (unaudited)		2020 6 months to 30 June $m (unaudited)		2020 12 months to 31 December $m (audited)
Revenue	201.1		123.1		269.1
Profit / (Loss) before tax
- before biological assets ("BA") movement	54.2		17.1		50.4
- after BA movement	58.2		16.8		51.7
Basic Earnings per ordinary share ("EPS")
- before BA movement	90.27cts		26.83cts		77.67cts
- after BA movement	96.79cts		26.35cts		80.32cts
Total net assets	558.2		493.2		528.6

 

 

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

 

As of today, the world continues to struggle with the fallout from the Covid-19 pandemic with worldwide infections exceeding two hundred and twelve million and more than four million reported deaths. While vaccination efforts are picking up in many parts of the world, several countries are battling fresh Covid-19 infections. The emergence of a deadly Delta variant which is more contagious and transmissible has accelerated the pandemic especially in places where the vaccination of the mass population is making slow progress. The resurgence of infection brought renewed and expanded lockdowns in both Malaysia and Indonesia where the Group operates. The Indonesian government recently imposed large-scale movement restrictions to curb a spike in new infections as healthcare services are overwhelmed by increasing number of patients. In Malaysia despite a surge in the number of Covid infections, the lockdown was relaxed to allow interstate travel in certain circumstances and some social and commercial activities. 

 

Our operations in Indonesia located mainly in remote plantations, away from main cities are generally spared from the lockdowns which are concentrated in populated cities and towns where infection rates are high. However, we are certainly not spared as our Indonesian operations recently recorded a spike and doubling of employees who have tested positive for the virus in Bengkulu and Kalimantan regions. We continue to reiterate to our employees to observe established safety protocols. We also encourage our employees to register promptly for the government vaccination programs. There are no reported Covid cases in the Malaysian operation probably due to the small number of employees and its remote location.

 

The interim results for the Group for the six months to 30 June 2021 are as follows:

 

Revenue for the six months to 30 June was $201.1 million, 63% higher than $123.1 million reported for the same period of 2020. The Group's gross profit was $59.8 million compared to $21.8 million for the first six months of 2020. Overall profit before tax after biological assets ("BA") movement for the first half of 2021 increased more than three fold to $58.2 million against $16.8 million for the corresponding period in 2020. The overall profit includes a reversal of impairment loss of $0.1 million for the first half of 2021 compared to an impairment loss of $2.5 million for the first half of 2020. The BA movement adjustment for the first half of 2021 was a credit of $4.0 million against a debit of $0.3 million in the last period. The higher profit was attributed to the higher Crude Palm Oil ("CPO") prices and increased production.

 

Fresh Fruit Bunches ("FFB") production for the first half of 2021 was 15% higher at 586,500mt compared to 511,700mt for the same period last year due to better weather conditions and an increased matured area. Our young palms in North Sumatera and Kalimantan performed exceptionally well contributing to the higher production numbers. Bought-in crops for the first half of 2021 also increased by 37% to 583,400mt from 425,400mt mainly due to the increase of crop purchases in the Bengkulu region.

 

Operational and financial performance

 

For the six months ended 30 June 2021, gross profit margin increased to 29.8% from 17.7% as the Group experienced higher CPO and palm kernel prices.

 

CPO price ex-Rotterdam averaged $1,122/mt for the first six months to 30 June 2021, 73% higher than $648/mt over the same period in 2020. Our Group's average ex-mill price for CPO was higher at $706/mt for the same period (H1 2020: $551/mt). The ex-mill prices are normally at a discount to ex-Rotterdam prices as buyers are required to pay logistic charges and Indonesian CPO tax and levy.

 

Profit after tax for the six months ended 30 June 2021 was $45.9 million, compared to a profit after tax of $12.5 million for the first six months of 2020.

 

The resulting basic earnings per share for the period was 96.79cts (H1 2020: 26.35cts).

 

The Group's balance sheet remains strong. Net assets as at 30 June 2021 were $558.2 million compared to $493.2 million as at 30 June 2020 and $528.6 million as at 31 December 2020. 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 2021.

 

As at 30 June 2021, the Group had cash and cash equivalents, net of loans and borrowings, of $159.1 million (H1 2020: $88.7 million, 31 December 2020: $115.2 million). The external bank borrowings as at 30 June 2020 of $2.7 million which was part of the first half of $88.7 million as mentioned above were fully repaid in 2020. The Group has no bank borrowing in 2021. 

 

Operating costs

 

Operating costs for the Indonesian operations were higher in the first half of 2021 compared to the same period in 2020 mainly due to the increase in bought-in crops from third parties, higher upkeep of plantations and mills and higher harvesting cost related to the increase in production and the increase in matured area.

 

Production and Sales

	2021	2020	2020
	6 months	6 months	Year
	to 30 June	to 30 June	to 31 December
	mt	mt	mt
Oil palm production
FFB
- all estates	586,500	511,700	1,103,100
- bought-in from third parties	583,400	425,400	913,200
Saleable CPO	238,700	189,900	406,100
Saleable palm kernels	57,100	45,300	97,100
Oil palm sales
CPO	237,900	195,900	400,400
Palm kernels	55,400	45,200	94,700
FFB sold outside	13,400	19,000	44,300
Rubber production	206	215	465

 

The Group's six mills processed a total of 1,156,500mt in FFB for the first half of 2021, a 26% increase compared to 918,100mt for the same period last year. The higher throughput was due to the higher FFB supplied from both our own estates and bought-in crops from third parties as explained earlier.

 

Overall CPO produced for the first half of 2021 was 26% higher at 238,700mt from 189,900mt. The oil extraction rate for the first half of 2021 was 20.6% compared to 20.7% in the same period last year. External crops made up 50% of the crop processed compared to 46% in the first half of 2020, which have historically always had a lower oil content.

 

Commodity prices

 

The CPO price ex-Rotterdam for the first half of 2021 averaged $1,122/mt, 73% higher than last year (H1 2020: $648/mt). The price was volatile for the first half of 2021. It started the year at $1,014/mt, gradually trended upwards to peak in May at $1,345/mt before dropping to a low of $975/mt towards the middle of June, before recovering and closing at $1,050/mt on 30 June 2021. The rally in the first half of 2021 was built upon speculation of unfavourable weather conditions in prime soybean-producing countries which may adversely affect the supply of soybean oil. This has resulted in a positive spill-over effect in the demand for CPO which is the closest substitute for soybean oil.

 

Rubber price averaged $1,734/mt, 48% higher than H1 2020 at $1,174/mt.

 

Development

 

The Group's planted areas at 30 June 2021 comprised:

 

	Total	Mature	Immature
	Ha	ha	Ha
North Sumatera	19,113	18,310	803
Bengkulu	16,750	15,725	1,025
Riau	4,873	4,873	-
South Sumatera	6,468	5,742	726
Kalimantan	16,764	14,208	2,556
Bangka	2,519	816	1,703
Plasma	4,191	3,077	1,114
Indonesia	70,678	62,751	7,927
Malaysia	3,453	3,453	-
Total: 30 June 2021	74,131	66,204	7,927
Total: 31 December 2020	73,600	63,414	10,186
Total: 30 June 2020	72,441	64,040	8,401

 

 

The Group's new planting and replanting for the first six months of 2021 totalled 1,025ha compared to 971ha for the same period last year. In addition, Plasma planting for the period was 187ha (H1 2020: 216ha).

 

The Group remains optimistic that it will meet substantially its total planting target of 3,800ha in 2021. The Group's total landholding comprises some 128,000ha, of which the planted area stands at around 74,131ha (H1 2020: 72,441ha) with the balance of estimated plantable land at 17,900ha.

 

The construction of the seventh mill in North Sumatera has been delayed by the frequent lockdowns caused by the pandemic in the country, affecting the deployment of manpower at construction site, as well as fabrication of mechanical works, interruption of supply chain and the transport of building materials. The mill is now likely to be completed at the end of Q2, 2022.

 

Dividend

 

As in previous years, no interim dividend has been declared. A final dividend of 1.0 cents per share in respect of the year ended 31 December 2020 was paid on 16 July 2021.

 

Outlook

India, the world's largest edible oil importer in its effort to tame its domestic inflation has at the end of June 2021 cut its taxes on CPO and other palm oil products for three months while maintaining the existing tax rates on other vegetable oils. This is likely to lead to a bigger import and improved demand at the expense of other vegetable oils.

 

The industry also welcomed the Indonesian government decision to reduce the CPO export levy at the start of the second half of 2021. Export levy is payable on a gradual basis starting at $55/mt when CPO price reaches $670/mt. The previous maximum export levy was $255/mt when CPO price exceeds $995/mt. The revised maximum export levy is $175/mt when CPO price exceeds $1000/mt.

 

On the whole CPO prices are expected to moderate in the second half of 2021 as the industry enters into the high production season and palm oil inventory inches higher over the next few months. Prices nevertheless are expected to remain volatile depending on how production levels unfold amidst a change in global weather pattern.  

 

Despite the increase in the vaccination rate, there are rising concerns over the emergence of a new virus variant which has already spread to Indonesia and could interrupt our operations or in a worst case scenario shutdown our estates and mill operations. A prolonged pandemic in our main export markets may also hurt demand in the short term. The Group has policies in place and would be in a good position to mitigate these risks should they arise to limit the impact to the Group.

 

Principal risks and uncertainties

 

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 2020.

 

A more detailed explanation of the risks relevant to the Group is on pages 34 to 39 and from pages 114 to 119 of the 2020 annual report which is available at https://www.angloeastern.co.uk/.

 

 

 

Madam Lim Siew Kim

Chairman

26 August 2021

 

 

 

 

 

Responsibility Statements

 

We confirm that to the best of our knowledge:

 

a)       The unaudited interim financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34: Interim Financial Reporting as adopted by the European Union;

 

b)       The Chairman's interim statement includes a fair review of the information required by Disclosure and Transparency Rule ("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 2021 and any material changes in the related party transactions described in the last Annual Report) of the DTR of the United Kingdom Financial Conduct Authority.

 

 

 

By order of the Board

Dato' John Lim Ewe Chuan

Executive Director, Corporate Finance and Corporate Affairs

26 August 2021