Anglo-Eastern Plantations Plc

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

 

Announcement of interim results for the six months ended 30 June 2023

 

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 2023.

 

Financial Highlights

 

Continuing operations	2023 6 months to 30 June $m (unaudited)		2022 6 months to 30 June $m (unaudited)		2022 12 months to 31 December $m (audited)
Revenue	173.4		249.2		447.6
Profit before tax
- before biological assets ("BA") movement	32.2		94.8		138.7
- after BA movement	32.5		89.5		132.9
Basic Earnings per ordinary share ("EPS")
- before BA movement	50.27cts		153.51cts		221.86cts
- after BA movement	50.73cts		144.73cts		212.34cts

 

 

Enquiries:

 

Anglo-Eastern Plantations Plc
Dato' John Lim Ewe Chuan	+44 (0)20 7216 4621
Panmure Gordon (UK) Limited
Dominic Morley / Amrit Mahbubani	+44 (0)20 7886 2500

 

 

 

Chairman's Interim Statement

 

The interim results for the Group for the six months to 30 June 2023 are as follows:

 

Revenue from continuing operations for the six months to 30 June 2023 was $173.4 million, 30% lower than $249.2 million reported for the same period of 2022. The Group's gross profit from continuing operations was $33.2 million compared to $90.3 million for the first six months of 2022. Overall profit before tax, after biological assets ("BA") movement, from continuing operations for the first half of 2023 was 64% lower at $32.5 million against $89.5 million for the corresponding period in 2022. There was no reversal of impairment losses for the first half of 2023 compared to a net reversal of impairment losses of $0.2 million for the first half of 2022. The BA movement adjustment from continuing operations for the first half of 2023 was a credit of $0.3 million as compared to a debit of $5.3 million for the same period last year.  The lower profit was mainly attributed to lower Crude Palm Oil ("CPO") prices, as well as lower crop productions in Bengkulu and North Sumatra and lower third party crops.

 

Fresh Fruit Bunches ("FFB") production from continuing operations for the first half of 2023 was 5% lower at 522,700mt compared to 550,800mt for the same period in the previous year due to lower production in Bengkulu and North Sumatera regions. The harvest in Bengkulu was lower by 16% due primarily to the reduction of almost 1,300ha of matured area of which 985ha was replanted in 2022 while another 682ha was cleared for replanting in the first half of 2023. Production in Kalimantan continued to recover by registering a 10% increase in harvest with 500ha coming to maturity in the first half of 2023. Bought-in crops for the first half of 2023 decreased by 10% to 501,400mt from 557,600mt for the same period last year. The 20% increase in third party crops in Kalimantan could not off-set a 14% decrease in bought in crops in Bengkulu and North Sumatera. Lower crop trend faced by our estates in North Sumatera and Bengkulu was also experienced by local smallholders and farmers.

 

Operational and financial performance

 

For the six months ended 30 June 2023, gross profit margin from continuing operations decreased to 19.2% from 36.2% as the Group experienced lower CPO and palm kernel prices.

 

CPO price ex-Rotterdam averaged $991/mt for the first six months to 30 June 2023, 40% lower than $1,640/mt over the same period in 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. As a result, the Group's average ex-mill price was lower by 27% at $751/mt for the same period (H2 2022: $1,035/mt). The ex-mill prices are normally at a discount to ex-Rotterdam prices as buyers factor in logistic charges and Indonesian CPO tax and levy, which they have to bear. Palm kernel prices were also lower by 55% at the average price of $361/mt against $808/mt in the same period last year.

 

Profit after tax from continuing operations for the six months ended 30 June 2023 was 65% lower at $24.1 million, compared to a profit after tax from continuing operations of $68.8 million for the first six months of 2022.

 

The resulting basic earnings per share from continuing operations for the period was 50.73cts (H1 2022: 144.73cts).

 

The Group's balance sheet remains strong with no outstanding bank loans. Net assets as at 30 June 2023 were $605.5 million compared to $585.3 million as at 30 June 2022 and $573.0 million as at 31 December 2022. The increase in net assets from the last interim report was attributed to profit during the period. The Indonesian Rupiah has appreciated by 4% against the US dollar in the first half of 2023.

 

As at 30 June 2023, the Group had cash and cash equivalents including short-term investments known as fixed deposits with banks of $261.3 million (H1 2022: $246.8 million, 31 December 2022: $277.0 million).  The Group remitted in advance about $10 million to the Company's Registrar for payment of a dividend resulting in lower cash position at 30 June 2023 compared to 31 December 2022. 

 

Operating costs

 

Operating costs for the Indonesian operations were lower in the first half of 2023 compared to the same period in 2022 mainly due to lower volume and prices paid for third party crops. This helped to offset higher maintenance costs in plantations and mills and also higher harvesting costs arising from the increase in newly matured area. Fertiliser costs rose sharply by 7.5% in the first half of 2023 to $17.0 million from $15.8 million for the corresponding period in 2022. We have recently concluded a tender to purchase fertilisers for the second half of 2023 and we are pleased to report that prices of fertiliser have corrected sharply by as much as 40% since peaking in the first half of 2023. Transport costs have also increased significantly by 54% to $4.3 million from $2.8 million for the corresponding period in 2022 due to increases in diesel prices.

 

Production and Sales

	2023	2022	2022
	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	522,700	550,800	1,124,400
- estates from discontinued operations	15,700	21,500	46,300
- bought-in from third parties	501,400	557,600	1,080,300
Saleable CPO	210,900	227,800	455,600
Saleable palm kernels	48,600	54,400	106,200
Oil palm sales
CPO	201,800	200,000	449,800
Palm kernels	47,400	48,900	105,700
FFB sold outside	24,200	17,800	42,800
Rubber production	250	168	440

 

The Group's six mills processed a total of 1,015,600mt in FFB for the first half of 2023, a 9% decrease compared to 1,112,100mt for the same period last year.

 

Overall CPO produced for the first half of 2023 was 7% lower at 210,900mt from 227,800mt for the corresponding period in 2022. The oil extraction rate for the first half of 2023 was 20.8%, slight improvement compared to 20.5% for the same period last year.

 

Commodity prices

 

The CPO price ex-Rotterdam for the first half of 2023 averaged $991/mt, 40% lower than last year (H1 2022: $1,640/mt). CPO price started the year at $1,060/mt and generally traded within a 12% range peaking at $1,100/mt in early January and March 2023 before dropping to a low of $860/mt in late May 2023. CPO price recovered slightly to close at $955/mt at 30 June 2023. The trend of CPO price in the first half of 2023 reflected the increase in inventory of soft oils amidst reports of a slowdown in global demand.

 

Rubber price averaged $1,307/mt, 22% lower than H1 2022 at $1,670/mt.

 

Development

 

The Group's planted areas at 30 June 2023 comprised:

 

	Total	Mature	Immature
Continuing operations	Ha	ha	Ha
North Sumatera	19,093	18,699	394
Bengkulu	16,742	13,568	3,174
Riau	4,816	4,816	-
Kalimantan	18,068	15,389	2,679
Bangka	2,647	1,716	931
Plasma	3,761	2,629	1,132
Indonesia	65,127	56,817	8,310
Malaysia	3,453	3,453	-
	68,580	60,270	8,310
Discontinued operations
South Sumatera	6,681	6,288	393
Plasma	1,068	1,043	25
	7,749	7,331	418
Total: 30 June 2023	76,329	67,601	8,728
Total: 31 December 2022	76,095	66,694	9,401
Total: 30 June 2022	75,239	67,358	7,881

 

The Group's new planting and replanting for the first six months of 2023 totalled 987ha compared to 439ha for the same period last year. In addition, Plasma planting for the period was 89ha (H1 2022: 152ha).

 

The Group remains optimistic that it will meet substantially its planting target of 2,500ha (including replanting) in 2023. The Group's total landholding from its continuing operations comprises some 90,670ha, of which the planted area stands at around 68,580ha (H1 2022: 67,512ha) with a balance of estimated plantable land at 9,500ha (H1 2022: 10,850ha).

 

The seventh mill in North Sumatera which was earmarked for completion in the first half of 2023 has been delayed because of the tragic explosion, as previously announced on 9 May 2023, resulting in a loss of lives of 4 employees of the contractor whilst conducting final trials and tests before handing over. The police recently completed their investigation and the contractor is now allowed access to the area to assess the damages and to determine the extent of repairs required. We do not expect the mill be in commercial operation until early next year.

 

The environment impact assessment study ("EIA") for the eighth mill in Kalimantan has been completed. The earthworks however cannot commence until the relevant government ministry has approved the EIA report. The backlog of companies seeking approval of their EIA reports is expected to set back the commencement of earthworks by a few months. 

 

Dividend

 

The final dividend of 25.0 cents per share in respect of the year ended 31 December 2022 was paid on 7 July 2023.

 

As you are aware AEP has not been paying Interim dividend for a number years, however, the Board is pleased to declare an interim dividend of 15.0 cents per share in respect of the year ending 31 December 2023. The interim dividend will be paid on 6 October 2023 to those shareholders on the register on 8 September 2023.

 

Outlook

 

Despite a traditionally more robust FFB production in the second half of the year, which would increase supply, CPO price is expected to perform better due to a projected drop in soybean production in the United States as farmers planted more corns at the expense of soybeans. The Indonesian government strong commitment for the B35 biodiesel mandate is expected to strengthen local demand and should augur well for the CPO price. Russia's recent pull out from the Black Sea Grain deal which allowed for the secure passage of agricultural products from Ukraine's ports in the Black Sea would also have some impact on sunflower oil and CPO prices. We do not expect the drought induced by El Nino weather phenomenon to have a significant effect on yield for the second half of 2023. The effect, if any would be more prominent in 2024.  

 

Principal risks and uncertainties

 

The principal risks and uncertainties, including the risks due to the Covid-19 and other contagious diseases, have broadly remained the same since the publication of the annual report for the year ended 31 December 2022.

 

A more detailed explanation of the risks relevant to the Group is on pages 31 to 36 and from pages 139 to 144 of the 2022 annual report which is available at https://www.angloeastern.co.uk/.

 

 

Subsequent events

 

The disposal of the three non-performing plantations in South Sumatera, namely PT Riau Agrindo Agung, PT Karya Kencana Sentosa Tiga and PT Empat Lawang Agro Perkasa, to Mrs Lina (also known as Liena Efendy) and Miss Lenny Nurimba on 5 July 2023 for a total cash consideration of $8.5 million had been completed. Since the Group is no longer in control of the subsidiaries, all the assets and liabilities of the subsidiaries will be derecognised from July 2023 onwards.

 

In July 2023, the Group also completed the acquisition of 25% of the issued share capital of PT United Kingdom Indonesia Plantations and the 10% of the issued share capital of PT Mitra Puding Mas, from PT. Canadianty Corporindo, the minority shareholder in Indonesia, for a total cash consideration of $25.2million, increasing the Group ownership interest to 100%.

 

 

 

 

Mr Jonathan Law Ngee Song

Chairman

24 August 2023

 

 

 

 

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 2023 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

24 August 2023