Completion of Acquisition and Trading Update

RNS Number : 2455Y

Asian Plantations Limited

28 February 2012

 



28 February 2012

Asian Plantations Limited

("APL" or the "Company")

Completion of Acquisition

Trading Update

Asian Plantations Limited (LSE: PALM), a palm oil plantation company with operations in Malaysia, is pleased to confirm that, further to the Company's announcement on 25 August 2011, it has now completed the acquisition of 5,000 hectares of semi-developed plantation land in Sarawak, Malaysia, (the "Dulit Estate") (the "Acquisition"). Following completion of the Acquisition, the Company's gross titled land in Malaysia now totals 20,770 hectares.

The small increase in total land bank from the previously disclosed pro forma figure of 20,645 hectares is a result of some boundary adjustments by the local land office in the Company's favour.

The terms of the Acquisition remain consistent with those announced previously.

Planting update

Including the pro-forma effect of the Acquisition, the Company had approximately 9,322 hectares of land planted as at year-end 2011, with a further 157 hectares being used for the mill site, seedling nurseries, staff housing, quarry and related infrastructure works essential for plantation operations.

Management anticipate planting an additional 5,500 hectares of palm oil by the end of this calendar year, with the remaining plantable area of 3,200 hectares being planted during 2013. The Company currently has three nurseries with over 500,000 seedlings prepared for short term field plantings, with the intention of opening a fourth nursery in 2012, in anticipation of any potential additional land acquisitions and to maintain APL's desired total annual planting rate in excess of 5,500 hectares per annum for both 2013 and 2014.

In addition to the above palm oil planting, the Company expects to plant a total of approximately 300 hectares of rubber trees by the end of 2013, located in certain buffer areas of the Company's land bank which have steeper gradients that are not suitable for palm oil cultivation.  Accordingly, the Company's rubber nursery is progressing well and seedlings are being grown for first plantings expected in 2H 2012. This rubber initiative has been introduced in order to maximise the value of the Company's land bank.

Mill update

The Company expects its 120 tonne per hour ("TPH") vertical sterilizer milling complex, incorporating certain proprietary technologies (the "Mill"), to commence production of crude palm oil ("CPO") in Q4 2012. The Mill is located on the Company's Incosetia Estate and is ideally situated to process all of the Company's fresh fruit bunches ("FFB"). It is anticipated that the Mill will open later this year with an initial capacity of 60 TPH, which can be easily doubled to 120 TPH with minimal capital expenditures once FFB volumes are sufficiently large in 2014. Ground and foundation works are currently underway and running to budget and on schedule.

As previously announced, the Mill will incorporate a methane recapture facility that will offer cost-saving and efficiency benefits, which may include certain tax benefits to APL from using this green technology. Following the opening of the Mill, the Company will no longer be reliant on third party mills to process its FFB.

Community and social responsibility initiative

As part of Company's continued efforts to combat rural poverty and to improve the lives of small villages in the vicinity of our estates, the Company has developed an innovative joint-venture model with several indigenous Kenyah villages. With local native rights lawyers, we have assisted two Kenyah villages in forming their first-ever palm oil co-operative, entitled Koperasi Majumung Luyang Lemeting Baram Berhad ("Koperasi"). The Company recently signed a joint venture agreement (the "JV Agreeement") with Koperasi to develop 500 hectares of palm oil estate on native owned land (the "Koperasi Estate"), which was witnessed by nearly all members of the villages, community leaders, state officials and representatives of the Company.

The innovative joint venture is 60% owned by the Company and 40% by Koperasi, which has contributed the land for development for minimal financial consideration. Under the JV Agreement, the Company is required to develop the land and, accordingly, APL intends to plant 200 hectares in 2012 and the remainder in 2013, with land works having already been initiated on the Koperasi Estate. The Company believes that the Koperasi Estate is an important development that will substantially improve the lives of several hundred rural families and assist with the Company's RSPO certification process. The Company retains the option to expand the joint venture to several thousand hectares over the medium term.  This planting is in addition to the Company's primary and proprietary planting programme described above.

Fresh fruit bunch ("FFB") production

The Company produced a total of 2,903 tonnes of FFB in 2011 at an average price of RM 607 (US$202) per tonne, resulting in total revenues of approximately RM 1.76 million (US$570,000), representing an increase of 86% over 2010 results. The Company expects to produce approximately 30,000 tonnes of FFB in 2012 and between 70,000 to 80,000 tonnes in 2013, reflecting the delayed completion of the Acquisition and associated delays in remedial fertilization of the Dulit Estate.

Issuance of medium term notes

As previously announced by the Company in January 2011, a Southeast Asian investment bank has been arranging a medium term note programme ("MTN") for the Company totaling approximately RM 250,000,000 (approximately US$80,000,000), with various maturities ranging to up to ten years. The Company is pleased to report that negotiations are progressing well and it is anticipated that an initial tranche of funding will be issued by the end of Q1 2012.  The issue of MTNs will diversify the Company's funding sources and largely eliminate any debt repayments until the Company's estates are fully matured. Further announcements will be made in due course as appropriate.     

Growth strategy

The Company continues to selectively review potential green-field acquisition opportunities and whilst quality opportunities are increasingly challenging to source in the context of declining Malaysian land availability, the Company believes there remains a window of opportunity during the course of the next 18 months to continue the Company's opportunistic development of palm oil plantations. As a result, we are continuing to actively review such opportunities.

Pursuant to the Company's announcement of the proposed target acquisition of a Malaysian company on 29 September 2011 (the "Proposed Acquisition"), we remain in extended due diligence review on this particular parcel. There are a number of outstanding issues which the Company hopes to resolve within the next two months.  As a result of the due diligence work completed to date, should the Proposed Acquisition proceed, the Company expects the Company's land bank to increase by 9,000 titled hectares and a further 8,000 leased hectares of which a 60% stake is on offer to the Company.  In the event that these negotiations are inconclusive or terminated, the Company has identified possible alternative targets.  The board of Company (the "Board") remains confident that a total land bank target of 45,000 hectares remains achievable, albeit within a delayed timeframe.

In addition to considering full land bank acquisitions Board will also consider making such acquisitions within a joint venture structure which would enable the Company to participate in new palm oil plantations whilst minimising its financial exposure. The Board is in the exploratory stage of considering such opportunities and further updates will be made in due course as appropriate.

Dennis Melka, APL's Joint Chief Executive Officer, added:

"We are pleased to have formally completed the Acquisition of the Dulit Estate, which represents a further important step in the continued expansion of our land bank.  In addition, we are excited with the continued progress in the development of the Mill, which is an important element of the Company's overall strategy, as we begin to rapidly increase our levels of FFB production.  The current year is an important one for the Company, as the scale of our operations continues to increase, and I look forward to providing shareholders with further positive announcements as we progress."

For further information contact:

Asian Plantations Limited Graeme Brown, Joint Chief Executive Officer Dennis Melka, Joint Chief Executive Officer	Tel:  [phone]
Strand Hanson Limited James Harris Paul Cocker Liam Buswell	Tel: [phone]
Panmure Gordon (UK) Limited Tom Nicholson Callum Stewart	Tel:   [phone] Tel: [phone]
Macquarie Capital (Europe) Limited Steve Baldwin Dan Iacopetti	Tel: [phone]
Bankside Consultants Simon Rothschild	Tel: [phone]

 

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