Final Results

RNS Number : 1559B

Clean Energy Brazil PLC

21 October 2009

 



 21 October 2009

Clean Energy Brazil plc

("CEB" or the "Company")

Results for the year ended 30 April 2009

Clean Energy Brazil plc, a specialist investment company focused on participation in Brazil's sugar and ethanol industries, announces its final results for the year ended 30 April 2009. 

KEY EVENTS

• Sale of Usaciga post year end.

• Proposed interim dividend of US$12.5 million (subject to court consent).

• Implementation of cost cutting measures.

• Fair value adjustment reducing book value of investments in Usaciga and Unialco by US$89.2 million in total.

• Notice received of an unsolicited proposed mandatory cash only offer by Global Investors Acquisition LLC.

• Cash balance currently stands at approximately US$24.0 million, which includes the first payment from the Usaciga sale (US$5.8 million); a further US$2.9 million is due by March 2010.

• Improving sugar prices and recent recovery of ethanol market.

For further information please contact:

Numis Securities Limited (Financial Adviser & Broker) Charles Farquhar Lee Aston	Tel: [phone]
Smith & Williamson Corporate Finance Limited (Nominated Adviser) Azhic Basirov David Jones	Tel: [phone]
Fishburn Hedges (Financial PR Adviser) Andy Berry Michelle James	Tel: [phone] [e-mail] [phone] [phone]

Chairman's Statement

In the year to 30 April 2009, Clean Energy Brazil ("CEB" or the "Company") faced several challenges. These were dealt with expeditiously and actions were taken to resolve the issues. The Board's overriding goal is to position the Company in the best way possible to maximize the value of its assets. 

The sugar and ethanol industry as a whole faced substantial challenges in all areas. Soft pricing in the sugar and ethanol markets, higher production costs and working capital shortages created significant operational difficulties. Sugar prices during the season were in a range between 10 to 14 US cents per pound. The higher prices towards the end of the season had little to no effect on operations. The Board believes that taking advantage of current prices of well over 20 US cents would require substantial credit lines, which have not become readily available to the Company or its investee companies. 

Although ethanol sales in Brazil continue to increase at rates higher than 20% per annum, pricing has been below or, at best, at breakeven levels for most of the financial year. This results from lower international demand, increased capacity caused by new mills coming on stream, and the need to generate cash for working capital. 

In addition to wider operational difficulties, the financial crisis has severely limited CEB's own access to credit lines. Although the Group has engaged Bank of America Merrill Lynch to assist it with its efforts, conditions have not been favourable during the period. This has been the case not only in accessing the capital markets but also in restructuring debt.

As highlighted in previous statements, the Group's investee companies have suffered from the above difficulties and as a result have taken several measures with the aim of improving their performance. They have increased their cane crushing capacities, cut costs, and sought credit lines and debt restructuring. 

Usaciga was not able to resolve its overextended debt position. Its co-owners, Agrocana and CEB, had hired Alvarez & Marsal to advise on debt restructuring and seek alternative strategic solutions. The difficulties encountered in these tasks with Usaciga's total liabilities reaching approximately US$185 million, resulted in the CEB Board deciding to divest the asset in September 2009. 

By contrast, the Board believes that the Group's Unialco asset is better positioned to overcome the short to medium term industry challenges. The relatively moderate debt that the operation is carrying, the improved pricing levels in sugar and the very recent recovery of the ethanol market offer a constructive outlook. 

The Group's greenfield projects continue to face difficulties in securing project finance.  Unialco MS's Dourados site made very little progress over the period, and is now two years behind schedule, with financing still outstanding.

The Group's wholly-owned greenfield projects at Pantanal and Agua Limpa remain on hold with financing unavailable.  Both Pantanal and Agua Limpa are in the early stages of development and will require substantial investment. The Board of CEB has decided to divest these projects and this task is already underway.

While the industry faces various challenges, the Board believes that the fundamental drivers for long term investment in Brazilian sugar and ethanol remain positive. In order to minimise the effects of the near term problems referred to above, the Board intends to continue to take all reasonable measures to preserve shareholder value. 

As part of this process, the Group has restructured its organisation. Earlier in the year the Group consolidated its operations, focusing on our Sao Paulo head office, closing the Ribeirao Preto office and eliminating the position of COO. The Group is currently implementing a number of further cost reduction measures. As of 1 September Marcelo Junqueira, who was the CEO of CEB, no longer has a daily role in the Group, but continues to support the business by remaining on the Board as a non-executive director. In addition, the fees of all CEB directors were reduced by 30% on the same date. These measures are expected to lower the Company's ongoing overheads by US$300,000 on a quarterly basis, representing a reduction of over 50%. The actions include reductions in head office staff and third party services. John S. Koutras, current CFO of CEB, is in charge of day to day management of the Group through the restructuring period.

The Company, its Board and operating management continue to manage its assets with the aim of maximising underlying values and returning capital when appropriate.  The Board has announced a proposed dividend distribution of US$12.5 million which is subject to the approval by High Court of Justice of the Isle of Man of a re-classification of the Company's reserves.

As announced by the Company on October 5, the Company received notice of an unsolicited proposed mandatory cash only offer by Global Investors Acquisition LLC for the entire issued ordinary share capital of CEB not already owned by GIA and concert parties, at GBP£0.1268 per CEB ordinary share.  The Board is currently considering the offer and intends to advise shareholders of its view on the offer shortly.

Financial results 

Income during the year was generated by bank interest of US$1.6 million. 

Administrative expenses for the period reached US$6.3 million, a US$1.6 million improvement versus last year (including the investment adviser's fees). 

Due to large currency fluctuations, a US$4.9 million loss was incurred. The Brazilian Real during the period devalued by 30% against the US$, but this trend has reversed since the year-end. 

The Group continues to evaluate its assets based on market multiples of cane crushing capacity and realisable values of assets rather than a traditional discounted cash flow basis. This process has led to a total of US$92.8 million in write-downs. 

In the Unialco asset, market conditions and the delays in the completion of the Dourados project had caused a US$23 million write down in the interim results released in January. As the development of the greenfield is substantially behind original schedule, the total amount written down has been increased to US$38.9 million in the final year-end accounts. The resulting book value is US$27.9 million.

The Usaciga asset had been written down last year by US$73.4 million to US$50.0 million. The divestiture of the asset generated an additional write-down of US$50.3 million. This adjustment is reflected in the year-end accounts and no additional write-down will arise in the current calendar year. 

The Pantanal greenfield asset value has been estimated at US$2.3 million, necessitating a US$3.3 million write-down. As the Agua Limpa project remains in its initial stages, it has been written down to nil.

The result for the year is a loss of US$103.0 million.

The cash position of the Company at the end of the period was US$26.6 million (of which US$6.7 million was held in escrow pursuant to the December 2006 investment agreement between CEB, Usaciga and Agrocana). Currently, the Company's cash balance stands at approximately US$24.0 million, which includes the first payment from the Usaciga sale (US$5.8 million); a further US$2.9 million is due by March 2010.

Antonio Monteiro de Castro

21 October 2009

Consolidated Income Statement

For the year ended 30 April 2009

		2009		2008
	Note	$'000		$'000
Bank interest income		1,595		3,432
Sundry income		-		92
Fair value movement on revaluation of investments	6	(89,174)		(73,419)
Fair value movement on agricultural assets		(3,624)		-
Net investment loss		(91,203)		(69,895)
Investment advisor's fees	3	-		(3,422)
Termination of investment advisory contract	3	-		(18,389)
Other administration fees and expenses	4	(6,296)		(4,512)
Total administrative expenses		(6,296)		(26,323)
Foreign exchange loss		(4,861)		(469)
Finance costs		(32)		(595)
Loss for the year before tax		(102,392)		(97,282)
Taxation		(641)		-
Loss for the year after tax attributable to equity holders of the parent		(103,033)		(97,282)
Basic loss per share	5	$(0.70)		$(0.85)

Consolidated Balance Sheet

As at 30 April 2009

	Note	2009		2008
		$'000		$'000
Non-current assets
Investments at fair value through profit or loss	6	36,663		116,820
Property, plant and equipment		206		163
Total non-current assets		36,869		116,983
Current assets
Trade and other receivables		566		1,507
Agricultural assets		2,283		4,464
Cash and cash equivalents		26,593		42,823
Total current assets		29,442		48,794
Total assets		66,311		165,777
Current liabilities
Trade and other payables		(9,042)		(1,459)
Total liabilities		(9,042)		(1,459)
Net assets		57,269		164,318
Represented by:
Share capital	7	2,920		2,920
Share premium	8	82,584		82,584
Distributable reserves		(27,055)		75,978
Other reserves		(1,180)		2,820
Total equity attributable to equity holders of the Company		57,269		164,302
Minority interest		-		16
Total equity		57,269		164,318
Net Asset Value per share ($ )		0.39		1.11

Consolidated Statement of Changes in Equity

For the year ended 30 April 2009

	Share Capital	Share Premium	Distributable Reserves	Other Reserves		Total Shareholders' Funds		Minority Interest		Total Equity
	$'000	$'000	$'000	$'000		$'000		$'000		$'000
Balance at 1 May 2007	1,964	181,297	2,125	-		185,386		-		185,386
Cancellation of share premium	-	(181,297)	181,297	-		-		-		-
Share issue proceeds	956	85,957	-	-		86,913		-		86,913
Share issue costs	-	(3,373)	-	-		(3,373)		-		(3,373)
Loss for the year	-	-	(97,282)	-		(97,282)		-		(97,282)
Dividends paid	-	-	(10,162)	-		(10,162)		-		(10,162)
Subsidiary acquired	-	-	-	-		-		16		16
Foreign exchange on translation of subsidiaries	-	-	-	2,820		2,820		-		2,820
Balance at 30 April 2008	2,920	82,584	75,978	2,820		164,302		16		164,318
Loss for the year	-	-	(103,033)	-		(103,033)		-		(103,033)
Reclassification of minority interest	-	-	-	-		-		(16)		(16)
Foreign exchange on translation of subsidiaries	-	-	-	(4,000)		(4,000)		-		(4000)
Balance at 30 April 2009	2,920	82,584	(27,055)	(1,180)		57,269		-		57,269

Consolidated Cash Flow Statement

For the year ended 30 April 2009

		2009		2008
		$'000		$'000
Cash flows from operating activities
Loss for the period after tax		(103,033)		(97,282)
Adjustments for:
Fair value adjustment		92,798		73,419
Shares issued for non-cash consideration		-		18,389
Finance income and expense		3,296		(2,368)
Tax paid		641		-
Net goodwill written-off		-		114
Depreciation of fixed assets		9		-
Changes in working capital
Change in trade and other receivables		606		(664)
Change in agricultural assets		(2,437)		(4,464)
Change in trade and other payables		7,071		815
Net cash flows used in operating activities		(1,049)		(12,041)
Cash flows from investing activities
Purchase of investments		(9,010)		(96,711)
Interest income		1,595		3,432
Purchase of fixed assets		(52)		(17)
Acquisition of subsidiaries, net of cash acquired		-		(241)
Net cash flows used in investing activities		(7,467)		(93,537)
Cash flows from financing activities
Proceeds on issue of equity shares		-		68,524
Issue costs paid		-		(3,373)
Dividend paid		-		(10,162)
Loan from portfolio company (repaid) / received		-		(6,730)
Interest expense and other finance costs		(32)		(595)
Net cash flows (used in)/generated from financing activities		(32)		47,664
Net decrease in cash and cash equivalents		(8,548)		(57,914)
Cash and cash equivalents at start of year		42,823		98,386
Foreign exchange (loss)/gain		(7,682)		2,351
Cash and cash equivalents at end of year		26,593		42,823

  Notes to the Financial Statements

For the year ended 30 April 2009

1.    General information

The Company is a closed-end investment company incorporated on 19 September 2006 in the Isle of Man as a public limited company. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. 

The Company is listed on the AIM market of the London Stock Exchange.  

The financial information contained in this announcement has been extracted from the audited consolidated financial statements of the Company for the year ended 30 April 2009.

2.     Accounting policies

A summary of significant account policies is set out in the Company's audited financial statements for the year ended 30 April 2009.

3. Investment Advisor's fee

No investment advisor fee has been chargeable in the year, following the termination of the Investment Advisory Agreement in April 2008, as reported in the previous year's Annual Report and Accounts.

4.  Other administration fees and expenses

Other administration fees and expenses consist of the following:

	2009	2008
	$'000	$'000
Audit fees	61	64
Insurance	86	124
Pre-operational project costs	62	1,234
Professional fees	1,447	1,709
Administration costs	339	431
Staff costs	1,566	-
Directors' fees	584	546
Sundry expenses	2,151	404
Total	6,296	4,512

5. Loss per share

Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of ordinary shares outstanding during the year.

	2009	2008
Loss attributable to shareholders ($'000)	(103,033)	(97,282)
Weighted average number of ordinary shares in issue (thousands)	147,564	114,519
Basic loss per share	($0.70)	($ 0.85)

The Company has no dilutive potential ordinary shares, as the market price of the shares has been greater than the exercise price of the warrants throughout the year. Therefore the diluted loss per share is the same as the basic loss per share.

6. Investments at fair value through profit or loss

Investments comprise two holdings as follows:

Name	Country of Incorporation	Proportion of ownership interest
Usaciga - Açucar,Álcool E Energia Elétrica SA	Brazil	49%
Unialco MS Participaçoes SA	Brazil	33%

Both investments are joint ventures. They are, however, not equity accounted, but designated as held at fair value through profit or loss in accordance with a permitted exemption under IAS31. Both investments are stated at fair value, as estimated by the Directors. 

The Usaciga investment has been valued by the Directors at the price for which the investment was sold after the balance sheet date, as described in note 10 (less selling costs).  

The valuation of Unialco is based on a multiple of the crushing capacity, using recent industry transactions and public data to arrive at the multiple.  

	Usaciga	Unialco	Total
	$'000	$'000	$'000
Balance at 1 May 2008	50,000	66,820	116,820
Additions	9,010	7	9,017
Fair value adjustment	(50,273)	(38,901)	(89,174)
Balance at 30 April 2009	8,737	27,926	36,663

7. Share capital

Ordinary shares of 1pence each As at 30 April 2009 and 30 April 2008	Number of shares	Value £'000
Issued	147,563,929	1,475
Authorised	600,000,000	6,000

All shares are fully paid and each ordinary share carries one vote.

In addition to the ordinary shares, 25,000,000 equity warrants are admitted to trading on the AIM market. Each warrant entitles the holder to subscribe for one new ordinary share at £1.00 per share, subject to adjustment as detailed in the Company's Admission Document published in December 2006. 

8. Share premium

The share premium account represents the difference between the issue price of each new share and the par value of £0.01 per share, less share issue costs. On 15 June 2007, the High Court in the Isle of Man approved a reduction in the share capital of the Company which had arisen upon the placing of shares in December 2006, by way of cancellation of the share premium account. The amount cancelled was credited to distributable reserves.  

Further issues of shares in the year ended 30 April 2008 created new amounts of share premium.  An application has recently been made to the High Court of Justice of the Isle of Man to have this cancelled, as described in note 10. 

9.    Net asset value (NAV)

The NAV per share is calculated by dividing the net assets attributable to the equity holders of the Company at the end of the period by the number of shares in issue.  

	2009	2008
Net assets	$57,269,000	$164,302,000
Number of shares in issue (note 7)	147,563,929	147,563,929
NAV per share	$0.39	$1.11

10. Events after the balance sheet date

On 1 September 2009, the Company sold its 49% shareholding in Usaciga Acucar, Alcool e Energia Electrica Ltda. to Agrocana Participacoes Ltda, the 51% owner of the business, for US$8.7 million. The consideration was payable in cash through the immediate release of $5,837,000 from the escrow account already held by CEB and the payment of a further $2,900,000 due by March 2010. This investment has been fair valued by the Directors at $8,737,000 as at 30 April 2009, so no gain or loss arises on this disposal in the year to 30 April 2010.

An EGM was held on 16th September 2009, at which it was resolved to cancel the amounts standing to the credit of the share premium account and to re-classify such amounts as a distributable reserve.  An application to the High Court of Justice of the Isle of Man to approve the re-classification was subsequently submitted. As announced on 21 August 2009, following such approval the Company intends to return part of the Company's surplus cash resources to shareholders via an interim dividend of US$12.5 million in aggregate or 8.5 US cents per ordinary share.

 

END

 

 

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