Final Results

RNS Number : 6998Q

Anglo-Eastern Plantations PLC

16 April 2009

 



16 April 2009

Anglo-Eastern Plantations PLC 

('AEP', 'Group' or 'Company')

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMER 2008

Anglo-Eastern Plantations PLC, which owns approximately 132,000 hectares of plantation land, primarily in Indonesia, and operates approximately 40,000 hectares of developed plantations, announces another year of record profit.

Financial Highlights

• Revenue increased by 37% to $174.7m.

• Operating profit, after Biological Asset ('BA') adjustment, increased by 41% to $75.4m.

• Pre-tax profit, before BA adjustment, increased by 46% to $76.5m and after the BA adjustment increased by 45% to $77.9m.

• Basic Earnings Per Share, before BA adjustment, increased by 33% to 103.0cts, and diluted EPS after BA adjustment increased by 34% to 104.8cts.

• Year-end cash totalled $69.4m, which compares with $66.4m at the end of 2007.  Total Bank Loans and other financial liabilities were reduced from $43.0m at 31 December 2007 to $35.7m at 31 December 2008.

• The board propose a final dividend for the year of 5.0 cts per share, a reduction of 64%. (2007: 14.0cts per share).  If approved at the Company's annual general meeting, this will be paid on 7 August 2009 to shareholders on the register on 26 June 2009.

Commercial Highlights

• The market average price for crude palm oil (CPO) for 2008 was $945/mt, compared to $790/mt in 2007, an increase of 20%.

• Estate fresh fruit bunches (FFB) output for 2008 was 7% above the previous year.

• As announced in the interim statements in 2008, the group made two further land acquisitions amounting to 45,100 ha. The additional land brings the group's total landholding to 132,000 ha from 86,900 ha in previous year.

• FFB crops so far in 2009 have been satisfactory on all estates - comparable to the same period in 2008

For further enquiry, contact:

Anglo-Eastern Plantations plc
Donald H Low	Tel [phone]
Charles Stanley Securities
Russell Cook / Jen Boorer	Tel [phone]

Chairman's statement

Results

I am pleased to report a record profit for 2008 which was largely attributable to both higher average Crude Palm Oil (CPO) prices and production volume. Equally important, the group has expanded its total landholding to 132,000 ha, a 50% increase in landholding from 2007. Out of this, 40,000 ha are planted and 63,000 ha are available for planting. With a measured land clearing and planting programme, the group will be able to double its planted area in the next five years. 

Group operating profit for 2008, before biological asset (BA) adjustment, was $74.1 million, 41% more than 2007. Estate fresh fruit bunch (FFB) output for 2008 was 7% above the previous year. The increase is attributed by higher overall productivity and larger mature hectarage.

Profit before tax and after BA adjustment was $77.9 million, compared to $53.6 million in 2007. The BA adjustment was a credit of $1.3 million, compared to $1.0 million in 2007, reflecting the estate valuations referred to below.  However, note that the BA adjustment has no bearing on cash generation of the group.

Earnings per share before BA adjustment increased by 33% to 103.0 cts, compared to 77.2 cts in 2007.

Financing

Our policy is to fund the Group's operations, capital expenditure and development from internally generated funds or from the drawdown of existing bank loans. The group is confident additional loan facilities can be obtained, should the necessity arise.  For the two acquisitions announced in 2008, amounting to $11.4 million, this was mainly funded via internally generated funds. Capital expenditure is planned for two new mills at Cahaya Pelita Andhika (CPA), North Sumatra and in Sumindo estate, Bengkulu, amounting to $20.5 million.  The construction of the mill in Sumindo estate, Bengkulu, has started and is expected to be completed by 2010.

During the year, we repaid $4.2 million of our existing borrowings. There were no new borrowings.

The Group's balance sheet remains strong. The Group continued to experience strong cash flow generation for 2008, enabling it to have higher cash reserves and reduce its borrowings. As at 31 December 2008, the group had a cash position of US$69.4 million and lower borrowings of $35.6 million, giving it a net cash position of $33.8 million, compared to $23.3 million in 2007.

Our policy is to continue seeking to purchase mature and immature land to increase total landholdings.

Recent acquisitions

In 2008, the AEP acquired a 95% equity interest in PT Riau Agrindo Agung (RAA), an Indonesian company owning the rights to 15,000 ha of vacant land in Bengkulu, and a 95% equity interest in PT Empat Lawang Agro Perkasa (ELAP) and PT Karya Kencana Sentosa Tiga (KKST); two Indonesian companies which hold the rights to 14,100 ha and 16,000 ha respectively in South Sumatra. The total addition of 45,100 ha brings the group's total landholding to 132,000 ha from 86,900 ha in the previous year. While these new properties are all evidenced by official 'rights to occupy' (a temporary title which precedes application for and grant of a full land title or Hak Guna Usaha (HGU)), they require detailed surveys. In addition to identifying plantable areas, this survey involves an assessment of the areas that ought to be set aside for local community use. With land available for commercial and private agriculture becoming increasingly scarce in Indonesia, this is an important and sensitive issue.

The peak net development cost of the total plantable area of about 63,000 ha, including the above acquisitions, is likely to be about $170 million to be spread over a period of five to ten years.

Directors

The Board had undergone rejuvenation in terms of new appointments to replace long-serving directors.

Mr Peter O'Connor and Mr Ho Soo Ching, two of our long-serving independent non-executive directors, have retired subsequent to our twenty third annual general meeting on 31 July 2008. Mr. David Smith resigned on 4 March 2009.  Datuk H Chin Poy-Wu, our long-serving independent non-executive director, will be retiring at the forthcoming annual general meeting and will not be seeking re-election.  The Board thank these directors for their service.

I am pleased to welcome the appointment of Mr. Donald Han Low as Acting Chief Executive Officer with effect from 26 August 2008 as well as Mr. Nik Din Nik Sulaiman as an independent non-executive director with effect from 1 April 2009. Both Mr. Donald Han Low and Mr. Nik Din Nik Sulaiman are submitting themselves for re-appointment by shareholders at the forthcoming annual general meeting.

Madam Lim Siew Kim, our non-executive director, will submit herself for re-election at the forthcoming annual general meeting.

I will submit myself for re-appointment by the shareholders at that same annual general meeting.  

Outlook

Fresh Fruit Bunch (FFB) production as of February 2009 has been satisfactory in all estates and comparable to the same period in 2008. It is too early to forecast whether the performance can be sustained for the rest of the year.

The CPO price opened the year at $962.5/mt and ended the year at $495/mt, averaging $945/mt for the year. Since its peak of $1,420/mt achieved in March 2008, CPO price has fallen back sharply and hit a low of $455/mt in October 2008. This significant price adjustment of a 68% drop from its peak is not unlike the sharp drop across the board experienced by other vegetable oil and commodities, especially crude oil.

In response to the sharp drop in CPO price, prevalent in the second half of 2008, the Indonesian government has annulled the export tax on CPO to zero with effect from 1 November 2008. The resulting tax saving has cushioned the impact of the CPO price decline, and this calming effect can be seen by the CPO price strongly supported around $460/mt and $520/mt price band. Since January 2009, CPO prices have been steadily trading in the range of $495/mt and $620/mt. The industry generally feels that a long term sustainable price is around $600/mt-$700/mt.

The US dollar appreciated by approximately 25% against the Indonesian Rupiah in 2008, and this had an impact in terms of an unrealised exchange loss on the exchange reserve position. The Indonesian Rupiah has not experienced adverse fluctuations against the US dollar during early 2009 and we expect a satisfactory exchange level to be attainable for the rest of the year. To mitigate exposure to currency exchange volatility, AEP is managing its cash in dollars and local currencies prudently, taking into consideration its dollar-denominated borrowings and operational cost currencies requirements.

Prospects for 2009 will be challenging in view of the lower CPO price and the global recession. Market perception is that Indonesia will remain economically stable, in spite of the global recession, and this is expected to bode well as demand for basic foodstuff, such as cooking oil in the domestic market, may continue to sustain. The Group is confident that demand for its product will be sustainable and we can expect a satisfactory profit level and cash flow for 2009.

Dividend

The board is mindful that the Group's development programme will require a considerable capital commitment. In this respect, the dividend level needs to be balanced against the planned capital expenditure. The board is proposing to declare a final dividend of 5.0 cts in respect of 2008, representing a reduction of 64% from 14.0 cts in respect of 2007. Shareholders choosing to receive their dividend in sterling will do so at the rate ruling on 26 June 2009, when the register closes. Based on the exchange rate at 7 April 2009 of £1 = $1.4751, the proposed dividend would be equivalent to 3.4p, compared to 7.0p declared in respect of 2007.

CHAN TEIK HUAT

Chairman    16 April 2009

Business review

Commodity prices

2008 has been an exceptionally volatile year for vegetable oil prices, including CPO.  The CPO price opened the year at $962.5/mt and continued to creep upwards before hitting its peak of $1,420/mt in March 2008. CPO price was steadily high until June 2008, when it fell back sharply and hit a low of $455/mt in October 2008. The sharp drop in CPO price is in correlation with falls experienced by other vegetable oil and commodities, especially crude oil.  The CPO price ended the year at $495/mt, averaging $945/mt for the year. Pricing in CPO is the result of a complex relationship between competing oils and meals, oil seed production in both hemispheres, and as can be seen correlates to a certain extent with crude oil due to its biodiesel potential.

In the early half of 2008, the Indonesian government, in order to curb commodity-driven inflation, reformulated the export taxes on CPO to a scale tax rate ranging from 5% to 25% for Rotterdam CIF prices commencing from $650/mt. However, in response to the sharp drop in CPO price, of which Rotterdam CIF price dropped to its lowest of $455/mt in October 2008, the Indonesian government annulled the export tax on CPO to zero with effect from 1 November 2008. While we do not export CPO, this tax saving is passed back to producers and reduces the domestic ex-factory prices directly. The resulting tax saving cushioned the impact of the CPO price decline, and this calming effect can be seen by the CPO price trading between $460/mt and $520/mt since.

Rubber prices averaged $2,500/mt for 2008 (2007-$2,100/mt). Our small area of 409 ha of mature rubber contributed a pre-tax profit of $2.1 million in 2008. The newly planted 270 ha of rubber is expected to start production in 2011.

Valuations

In 2007 the main valuation assumptions were changed to reflect the improving outlook for palm oil and for Indonesia, and also to reflect increasing operating costs. In 2008, we have maintained the CPO price assumption at $500/mt and the discount rate is unchanged at 12%. 

Indonesia

FFB production in North Sumatra, which aggregates the estates of Tasik, Anak Tasik, Labuhan Bilik, Blankahan, Rambung, Sungai Musam and CPA, produced 261,000mt in 2008, 1% higher than 2007. The small increase is encouraging, considering the mature age of the trees in Tasik, which ordinarily would become less yielding as the trees grow older. To counter this, the group has begun a small amount of planting young plants. Tasik contributed 60% of the total production in North Sumatra estates. Bought in crop at 206,000mt was 29% more than 2007. The oil extraction rates at Tasik and Blankahan mills were 21.14% (2007: 20.7%) and 21.67% (2007: 21.9%) in 2008.

FFB production in Bengkulu (South Sumatra), which aggregates the estates of Puding Mas and Alno as well as three newly acquired land of KKST, ELAP and RAA, produced 186,000mt, 9% higher than the previous year. The absence of a more pronounced drought effect compared to last year, coupled with the improved road infrastructure, contributed to this improved performance. Bought in crop increased to 128,000mt from 117,000mt, but extraction rates for Bengkulu mill fell back to 20.5% in 2008 from 20.9% in 2007. The second 40/60mt/hr oil mill costing $10 million, located at Sumindo estate, one of the outlying estates, is currently under construction and once completed it is expected to result in saving in transport costs as well as procuring more bought-in crop from smallholders. 

FFB production in the Riau region, comprising Bina Pitri estates, produced 79,000mt in 2008, 31% higher than 2007. The improved performance resulted from productivity arising from a fertilisation and rehabilitation programme started in 2005/6, immediately after Bina Pitri was acquired. Bought-in crop reached 109,000mt, almost double the 55,000mt bought-in in the previous year, as a result of the new mill operating at higher capacity. The extraction rates for Bina Pitri mill decreased slightly to 21.0% in 2008 from 21.2% in 2007, mainly due to a higher proportion of bought-in crops.

Malaysia

FFB production in 2008, at 40,185mt, was 2% above 2007. This is encouraging after a disappointing 11% drop experienced in 2007. The favourable CPO prices in the first half of 2008, enabled the Malaysian estates to contribute pre-tax profit of $1.8 million, 22% lower than 2007. By the end of 2008, the Malaysian subsidiary had cash of $5.5 million with no external debt.

Existing development

As announced earlier in our interim statements in 2008, two new mills were planned to be built, one at CPA in North Sumatra and the other at Sumindo estate in Bengkulu. Construction of the mill for the Sumindo estate is progressing well. The construction of a new mill at CPA has been deferred to enable the group to re-prioritise its resources and until investment return visibility becomes clearer. 

In North Sumatra, an additional 2,000 ha have been planted in Labuhan Bilik and CPA. In Bengkulu, the 2,000 ha that were earmarked to be planted in 2008, have been deferred to 2009 by the slow progress caused by protracted compensation negotiations with neighbouring villages. It is important these are handled carefully and fairly. It is expected the land clearing and planting for Bengkulu will be completed by December 2009.

Land compensation and clearing, which usually takes 1 to 2 years, is progressing smoothly and steadily in new areas in Kalimantan.

Acquisitions

As explained in the interim statements in 2008, the group made two further land acquisitions in Indonesia.

• Bengkulu

In January 2008, the group acquired, for a cash consideration of $3.7 million, a 95% interest in PT Riau Agrindo Agung (RAA), an Indonesian company owning the rights to 15,000 ha of vacant land in Bengkulu. The balance 5% interest in RAA is held by the vendor, who is also the minority shareholder of PT Sawit Graha Manunggal (SGM), one of the group's Indonesian subsidiaries. The location is about 120 kilometres south of the group's existing properties in Bengkulu ('old' Bengkulu) and 60 kilometres north of the provincial capital, Bengkulu town. It will therefore make a natural addition to the group's existing 15,000 planted hectares and, in its early years, will have the support of existing nurseries and access to the group's existing mills.

Terrain on this property is hilly, but better than that of the 'old' Bengkulu properties. Soils are good and rainfall is suitable for oil palm. Vegetation is scrub and light secondary forest, the original forest having been removed some years ago. As for the other properties, the area is zoned for development but contains villages whose own development needs must be met. Limited planting began in 2008, with significant planting commencing in 2009. This is due for completion by 2013, with production commencing immediately in the same year.

 2.  South Sumatra

In June 2008 the group acquired a 95% interest in PT Empat Lawang Agro Perkasa (ELAP) and PT Karya Kencana Sentosa Tiga (KKST); two Indonesian companies which hold the rights to 14,100 ha and 16,000 ha respectively in South Sumatra. Consideration was $7.7 million in cash. The balance 5% interest in both ELAP and KKST is held by the vendor, an Indonesian national.  The area is only 125 km from Bengkulu town and near enough to our other Bengkulu estates for FFB to be transported there prior to building a mill.

Terrain on this property is quite similar to RAA and better than that of the 'old' Bengkulu properties. Soils are good and rainfall is suitable for oil palm. Vegetation is scrub and secondary forest. The area is zoned for agricultural development but contains small villages to which some land will be allocated for community development. The group is currently undertaking assessment of the planting programme.

Conversion of the land rights in Bengkulu and South Sumatra to full HGU titles is likely to take two to three years.

Audited consolidated income statement

for the year ended 31 December 2008

		2008			2007
Continuing operations	Notes	Result before BA adjustment	BA adjustment	Total	Result before BA adjustment	BA adjustment	Total
		$000	$000	$000	$000	$000	$000
Revenue		174,684	-	174,684	127,898	-	127,898
Cost of sales		(96,812)	-	(96,812)	(72,297)	-	(72,297)
Gross profit		77,872	-	77,872	55,601	-	55,601
Biological asset reval-
uation movement (BA
adjustment)		-	1,347	1,347	-	1,001	1,001
Other income		-	-	-	566	-	566
Administration expenses		(3,808)	-	(3,808)	(3,646)	-	(3,646)
Operating profit		74,064	1,347	75,411	52,521	1,001	53,522
Exchange profits		1,503	-	1,503	215	-	215
Finance income		3,645	-	3,645	1,800	-	1,800
Finance costs		(2,686)	-	(2,686)	(1,945)	-	(1,945)
Profit before tax		76,526	1,347	77,873	52,591	1,001	53,592
Tax	5	(25,487)	(404)	(25,891)	(15,328)	(300)	(15,628)
Profit for the year		51,039	943	51,982	37,263	701	37,964
Attributable to:
-    Equity holders of the parent		41,182	819	42,001	30,485	515	31,000
-    Minority interests		9,857	124	9,981	6,778	186	6,964
		51,039	943	51,982	37,263	701	37,964
Earnings per share
-    basic	6	103.0 cts		105.1 cts	77.2 cts		78.5 cts
-     diluted	6			104.8 cts			78.4 cts

Audited consolidated statement of recognised income and expenses

for the year ended 31 December 2008

			2008 $000		2007 $000
Unrealised surplus on revaluation of the estates			5,302		4,823
Loss on exchange translation			(29,944)		(5,932)
Deferred tax on revaluation			(1,128)		(1,186)
Total recognised income and expense for the year			(25,770)		(2,295)
Profit for the year			51,982		37,964
Total recognised income and expense for the year			26,212		35,669
Attributable to:
- Equity holders of the parent			19,872		28,639
- Minority interest			6,340		7,030
			26,212		35,669

Audited consolidated balance sheet

for the year ended 31 December 2008

					2008 $000				2007 $000
Non-current assets
Biological assets					38,843				38,580
Property, plant and equipment					160,012				148,443
Receivables					1,677				1,677
					200,532				188,700
Current assets
Inventories					4,196				4,910
Tax receivables					761				1,875
Trade and other receivables					4,143				1,462
Cash and cash equivalents					69,442				66,358
					78,542				74,605
Current liabilities
Bank loans and other financial liabilities					(8,639)				(7,293)
Trade and other payables					(10,749)				(9,311)
Tax liabilities					(10,428)				(8,085)
					(29,816)				(24,689)
Net current assets					48,726				49,916
Non- current liabilities
Bank loans and other financial liabilities					(27,025)				(35,719)
Deferred tax liabilities					(28,450)				(23,025)
Retirement benefits - net liabilities					(1,494)				(1,534)
Net assets					192,289				178,338
Equity
Share capital					15,504				15,504
Treasury shares					(1,785)				(1,785)
Share premium reserve					23,935				23,935
Share capital redemption reserve					1,087				1,087
Revaluation and exchange reserves					(22,083)				46
Retained earnings					144,073				107,184
Equity attributable to equity holders of the parent						160,731			145,971
Minority interests					31,558				32,367
Total equity					192,289				178,338

Audited consolidated cash flow statement

for the year ended 31 December 2008

			2008 $000		2007 $000
Cash flows from operating activities
Profit before tax			77,873		53,592
Adjustments for:
BA adjustment			(1,347)		(1,001)
Net profit on disposal of current and fixed asset investments			-		(518)
Profit on disposal of tangible fixed assets			(53)		-
Depreciation			4,902		4,264
Share based remuneration expense			-		87
Retirement benefit provisions			40		700
Net finance (income)/expense			(959)		(145)
Operating cash flow before changes in working capital			80,456		57,269
Decrease/(increase) in inventories			712		(3,125)
(Increase)/decrease in trade and other receivables			(2,730)		142
(Decrease)/increase in trade and other payables			(3,935)		3,600
Cash inflow from operations			74,503		57,886
Interest paid			(2,728)		(2,051)
Overseas tax paid			(17,898)		(9,196)
Net cash flow from operations			53,877		46,639
Investing activities
Acquisition of subsidiaries			(11,363)		(14,480)
Property, plant and equipment
- purchase			(19,738)		(12,244)
- sale			489		94
Interest received			3,645		1,800
Net cash used in investing activities			(26,967)		(24,830)
Financing activities
Dividends paid by parent company			(5,112)		(4,266)
Share options exercised			-		40
Purchase of own shares for treasury			-		(398)
Repayment of existing long term loans			(4,237)		(1,694)
Drawdown of new long term loan			-		34,500
Finance lease (repayment)/drawdown			(110)		7
Dividends paid to minority shareholders			(2,378)		(735)
Loan to minority shareholder			-		(578)
Repayment of loan by minority shareholder			48		286
Purchase of portfolio investment			-		(1,668)
Receipt from sale of portfolio investment			-		2,234
Net cash (used in)/from financing activities			(11,789)		27,728
Increase in cash and cash equivalents			15,121		49,537
Cash and cash equivalents less overdrafts
At beginning of period			63,357		16,823
Foreign exchange			(9,036)		(3,003)
At end of period			69,442		63,357
Comprising,
Cash at end of year			69,443		66,358
Overdraft at end of year			(1)		(3,001)
Net cash at end of year			69,442		63,357

Notes to the financial statements

• Basis of preparation

The financial statements included in this announcement has been extracted from the Consolidated Financial Statement of AEP and its subsidiaries, which have been prepared in accordance with International Financial Reporting Standards (IFRS and IRFIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS.

  2. Accounting Policies

The accounting policies adopted in the preparation of the Consolidated Financial Statements for the year to 31 December 2008 are consistent with those followed in the preparation of the Annual Report and Financial Statements for the year ended 31 December 2007 and have been applied consistently throughout the group for the purposes of the Consolidated Financial Statements for the years ended 31 December 2008 and 31 December 2007.

  3.  Nature of financial information

The financial information contained in this announcement does not constitute the company's consolidated statutory financial statements for the years ended 31 December 2008 or 2007, but is derived from those financial statements. The financial statements for the year ended 31 December 2008 have been audited. The financial statements for the year ended 31 December 2007 have been delivered to the Registrar of Companies.  The auditors reports on the financial statements for the year ended 31 December 2008 and 31 December 2007 were unqualified, did not contain any emphasis of matter paragraphs, and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

  4. Exchange rates

Exchange rates - year end	2008		2007
Rp : $	10,950		9,419
$ : £	1.41		1.99
RM: $	3.48		3.31
Exchange rates - average
Rp : $	9,735		9,170
$ : £	1.84		2.01
RM: $	3.34		3.43

5.  Tax

		2008 $000		2007 $000
Foreign corporation tax - current year		20,552		14,356
Foreign withholding tax on remittances		4,550		499
Deferred tax adjustment - current year		789		773
Total tax charge for year		25,891		15,628

  6.  Earnings per ordinary share (EPS)

		2008 $000		2007 $000
Profit for the year attributable to equity holders of the parent company before BA adjustment		41,182		30,485
Net BA adjustment		819		515
Earnings used in basic and diluted EPS		42,001		31,000
		Number		Number
		'000		'000
Weighted average number of shares in issue in year
-    used in basic EPS		39,976		39,480
-    dilutive effect of outstanding share options		101		65
-    used in diluted EPS		40,077		39,545
Basic EPS before BA adjustment		103.0		77.2 cts
Basic EPS after BA adjustment		105.1		78.5 cts
Diluted EPS after BA adjustment		104.8		78.4

  7.  Dividend

		2008 $000		2007 $000
Paid during the year
Final dividend of 14.0 cts per ordinary share for the year ended 31 December 2007 (2006 - 10.8 cts)		5,112		4,266
Proposed final dividend of 5.0 cts per ordinary share for the year ended 31 December 2008 (2007 - 14 cts)		1,973		5,524

    The proposed dividend for 2008 is subject to shareholder approval at the forthcoming annual general meeting and has not been included as a liability in these financial statements.

    If approved at the Company's annual general meeting, to be held on 19 June 2009, the final dividend will be paid on 7 August 2009 to shareholders on the register on 26 June 2009.

      8.  Plantation Summary

	Total
Group interest in total areas below
Planted at 31 December 2008	Ha
Oil Palm
Mature	32,571
Immature
due to mature end 2009	2,165
other	4,852
Total	39,588
Rubber
Mature	406
Immature	270
Total	676
Total planted area	40,264
Reserves Plantable	63,888
Unplantable	26,562
Other	1,755
	92,205
Total area at 31 March 2009	132,469

9.  Posting of Annual Financial Report

The Annual Financial Report will be posted to shareholders in due course. Copies of this announcement are available from the Company Secretary, CETC (Nominees) Limited, Quadrant House, Floor 6, 17 Thomas More Street, Thomas More Square, London E1W 1YW.

 

END

 

 

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