Anglo-Eastern Plantations Plc

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

 

Announcement of interim results for the six months ended 30 June 2022

 

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, has today released its results for the six months ended 30 June 2022.

 

Financial Highlights

 

Continuing operations	2022 6 months to 30 June $m (unaudited)		2021 6 months to 30 June (restated) $m (unaudited)		2021 12 months to 31 December $m (audited)
Revenue	249.2		197.7		433.4
Profit before tax
- before biological assets ("BA") movement	94.8		56.4		132.7
- after BA movement	89.5		60.2		137.1
Basic Earnings per ordinary share ("EPS")
- before BA movement	153.51cts		93.76cts		235.25cts
- after BA movement	144.73cts		100.11cts		242.34cts

 

 

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

 

The interim results for the Group for the six months to 30 June 2022 are as follows:

 

Revenue from continuing operations for the six months to 30 June 2022 was $249.2 million, 26% higher than $197.7 million reported for the same period of 2021. The Group's gross profit from continuing operations was $90.3 million compared to $61.8 million for the first six months of 2021. Overall profit before tax, after biological assets ("BA") movement, from continuing operations for the first half of 2022 was 49% higher at $89.5 million against $60.2 million for the corresponding period in 2021. The overall profit from continuing operations includes a net reversal of impairment losses of $0.2 million for the first half of 2022 compared to a reversal of impairment loss of $0.1 million for the first half of 2021. The BA movement adjustment from continuing operations for the first half of 2022 was a debit of $5.3 million compared to a credit of $3.9 million in the last period. The higher profit was attributed to the higher Crude Palm Oil ("CPO") prices.

 

Fresh Fruit Bunches ("FFB") production from continuing operations for the first half of 2022 was 3% lower at 550,800mt compared to 569,100mt for the same period in the prior year due to lower production in Bengkulu and Kalimantan regions. The harvest in Bengkulu was lower by 13% primarily due to a reduction of almost 1,000ha of matured area of which 428ha was replanted in the second half of 2021 while another 551ha was cleared for replanting in the first half of 2022. During 1Q 2022 the public roads in Kurun township were closed for a month because of extremely bad weather which affected the transportation of crops and in turn caused a 9% decline in the harvest in Central Kalimantan. Younger palms in North Sumatera continue to out-performed the rest of the regions by registering a growth of 6% against last year. Bought-in crops for the first half of 2022 also decreased by 4% to 557,600mt from 583,400mt. The increased purchase of outside crops in North Sumatera (6%) and Kalimantan (9%) could not off-set a 19% decrease in crop purchase in the Bengkulu region. The significant decrease in the Bengkulu region is caused by the reopening of a mill of one of the suppliers following a shutdown for maintenance in 2021. In addition, some of AEP's mills had to reduce external crop purchases due to the CPO storage tanks reaching their maximum storage capacities as inventory built-up during the export ban. 

 

Operational and financial performance

 

For the six months ended 30 June 2022, gross profit margin from continuing operations increased to 36.2% from 31.3% as the Group experienced higher CPO and palm kernel prices.

 

CPO price ex-Rotterdam averaged $1,640/mt for the first six months to 30 June 2022, 46% higher than $1,122/mt over the same period in 2021. As a result, the Group's average ex-mill price was higher by 47% at $1,035/mt for the same period (H1 2021: $706/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. The Group also benefited from higher palm kernel prices which was 66% higher at the average price of $808/mt against $486/mt last year.

 

Profit after tax from continuing operations for the six months ended 30 June 2022 was 45% higher at $68.8 million, compared to a profit after tax from continuing operations of $47.3 million for the first six months of 2021.

 

The resulting basic earnings per share from continuing operations for the period was 144.73cts (H1 2021: 100.11cts).

 

The Group's balance sheet remains strong with no outstanding bank loans. Net assets as at 30 June 2022 were $585.3 million compared to $496.6 million as at 30 June 2021 and $542.1 million as at 31 December 2021. The increase in net assets from the last interim report was attributed to higher profit and higher inventories. Inventories, comprising mainly of CPO, built up to $41 million against $15 million as at 30 June 2021 due to the CPO export ban in Indonesia which is explained in more detail under commodity prices below. The Indonesian Rupiah has depreciated by 4% against the US dollar in the first half of 2022.

 

As at 30 June 2022, the Group had cash and cash equivalents including all fixed deposits with banks of $246.8 million (H1 2021: $160.7 million, 31 December 2021: $219.7 million).

 

Operating costs

 

Operating costs for the Indonesian operations were higher in the first half of 2022 compared to the same period in 2021 mainly due to higher prices paid for third party crops, higher costs of maintaining plantations and mills and higher harvesting costs arising from the increased   matured area. Fertiliser costs rose sharply by 80% in the first half of 2022 to $15.8 million from $8.8 million for the corresponding period last year. Transport costs have also increased significantly by 56% to $2.8 million from $1.8 million for the corresponding period last year as diesel prices have increased.

 

Production and Sales

	2022	2021	2021
	6 months	6 months	Year
	to 30 June	to 30 June	to 31 December
	mt	mt	mt
Oil palm production
FFB
- all estates from continuing operations	550,800	569,100	1,152,400
- estates from discontinued operations	21,500	17,400	37,200
- bought-in from third parties	557,600	583,400	1,142,200
Saleable CPO	227,800	238,700	473,200
Saleable palm kernels	54,400	57,100	97,100
Oil palm sales
CPO	200,000	237,900	477,600
Palm kernels	48,900	55,400	113,400
FFB sold outside	17,800	13,400	29,400
Rubber production	168	206	425

 

The Group's six mills processed a total of 1,112,100mt in FFB for the first half of 2022, a 4% decrease compared to 1,156,500mt for the same period last year.

 

Overall CPO produced for the first half of 2022 was 5% lower at 227,800mt from 238,700mt. The oil extraction rate for the first half of 2022 was 20.5% compared to 20.6% in the same period last year.

 

Commodity prices

 

The CPO price ex-Rotterdam for the first half of 2022 averaged $1,640/mt, 46% higher than last year (H1 2021: $1,122/mt). The CPO price started the year at $1,350/mt, gradually trending upwards to peak in March 2022 at $2,000/mt before dropping to $1,420/mt towards the middle of June, before recovering to close at $1,500/mt at 30 June 2022. The rally in the first three months of 2022 was built upon; speculation of unfavourable weather conditions in prime soybean-producing countries which have adversely affected the supply of soybean oil (of which CPO is the closest substitute), the gradual re-opening of the world economy after the ravage of Covid-19 and the disruption to supplies because of the Russia-Ukraine conflict. The Indonesian government's move to ban the export of CPO and refined palm oil from 28 April 2022 to 22 May 2022 added further volatility to global edible oil prices. CPO prices have since retracted to lower levels due to high inventory of CPO built up during the export ban. The Indonesian government is constantly refining its policies to accelerate exports of CPO as well as to contain the price of domestic cooking oil which could trigger more volatility in prices.

 

Rubber price averaged $1,670/mt, 4% lower than H1 2021 at $1,734/mt.

 

Development

 

The Group's planted areas at 30 June 2022 comprised:

 

	Total	Mature	Immature
Continuing operations	Ha	ha	Ha
North Sumatera	19,107	18,851	256
Bengkulu	16,557	14,912	1,645
Riau	4,836	4,836	-
Kalimantan	17,409	14,889	2,520
Bangka	2,564	1,065	1,499
Plasma	3,586	2,268	1,318
Indonesia	64,059	56,821	7,238
Malaysia	3,453	3,453	-
	67,512	60,274	7,238
Discontinued operations
South Sumatera	6,662	6,064	598
Plasma	1,065	1,020	45
	7,727	7,084	643
Total: 30 June 2022	75,239	67,358	7,881
Total: 31 December 2021	75,204	65,921	9,283
Total: 30 June 2021	74,131	66,204	7,927

 

 

 

The Group's new planting and replanting for the first six months of 2022 totalled 439ha compared to 1,025ha for the same period last year. In addition, Plasma planting for the period was 152ha (H1 2021: 187ha).

 

The Group remains optimistic that it will meet substantially its reduced total planting target of 1,900ha (including replanting) in 2022. The Group's total landholding from its continuing operations comprises some 90,690ha, of which the planted area stands at around 67,512ha (H1 2021: 66,623ha) with the balance of estimated plantable land at 10,850ha (H1 2021: 11,590ha).

 

The construction of the seventh mill in North Sumatera, which has been delayed by the frequent lockdowns caused by the pandemic in the country, is nearing completion. It is making good progress as most machineries have been prefabricated and are being assembled on site. Some items like the steam turbine and decanter have arrived at the local port and are awaiting delivery to the construction site. The mill is expected to be completed before the year end. The costs of construction have reached about $22 million against an earlier estimate of $19 million.

 

In the meantime, an external consultant has been appointed to undertake an environmental study to advise compliance criteria to apply for the necessary permits to build the eighth mill in Kalimantan. 

 

Dividend

 

As in previous years, no interim dividend has been declared. A final dividend of 5.0 cents per share in respect of the year ended 31 December 2021 was paid on 15 July 2022.

 

Outlook

 

CPO prices are expected to weaken in the second half of 2022 as the industry enters into the high production season. In addition, the Indonesian government's decision to waive the export levy until the end of August 2022 in its effort to flush out and reduce its stockpile of palm oil could push prices even lower. An agreement between Ukraine and Russia to reopen the ports in the Black Sea to allow the export of commodities, including sunflower oil, from the region would also negatively impact on palm oil prices. Economists fear that inflationary pressure arising from higher commodity prices could trigger a worldwide recession in the coming months which could dampen demand for CPO. It is increasingly apparent that 2022 will be a year of two halves, with record CPO prices in the first half of 2022 and much lower prices in the second half. On a positive note, the Indonesian government's determination to develop and increase the biodiesel blending to B35 and B40 from B30 in the near future would help enhance the domestic consumption and absorb a higher production of CPO.   

 

Tribute

 

The Board has previously announced its profound sadness of the passing of our ex-Chairman, Madam Lim Siew Kim on 14 July 2022. Madam Lim joined the Board in 1993 and was the Non-Executive Chairman from 2011 until her recent retirement. During her tenure, the Group grew in profitability and the business expanded to what it is today. The Board of Directors had conveyed their condolences to the family members at the time and would like to formally record their appreciation and thanks for Madam Lim's invaluable guidance and advice during her tenure on the Board.

 

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 2021.

 

A more detailed explanation of the risks relevant to the Group is on pages 42 to 47 and from pages 130 to 135 of the 2021 annual report which is available at https://www.angloeastern.co.uk/.

 

 

 

Mr Jonathan Law Ngee Song

Chairman

25 August 2022

 

 

 

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 2022 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

25 August 2022