Half Yearly Report

RNS Number : 3094G

Clean Energy Brazil PLC

29 January 2010

 



29 January 2010

Clean Energy Brazil PLC

("CEB" or the "Company")

Interim results for the six months ended 31 October 2009

Clean Energy Brazil PLC, an investment company focused on Brazil's sugar cane/ethanol industry, announces its unaudited interim financial results for the six months ended 31 October 2009.

Further enquiries:

Smith & Williamson Corporate Finance Limited (Nominated Adviser) David Jones	Tel: [phone]
IOMA Fund & Investment Management Limited (Administrator) Graham Smith	Tel: [phone]

Chairman's Statement

Recent developments and strategy

Clean Energy Brazil plc ("CEB" or the "Company") has undergone significant changes during and subsequent to the period under review, including changes to its shareholder base and Board. On October 30 2009, Global Investors Acquisition LLC ("GIA") made a mandatory cash offer for the entire issued ordinary share capital of the Company not already owned by GIA and certain concert parties, at GBP£0.1268 per CEB ordinary share. At the conclusion of the offer, GIA and its concert parties owned a total of 59% of the Company's issued shares. Following the conclusion of the offer, the CEB Board was reorganized and currently comprises Eitan Milgram, Josef (Yossi) Raucher and me as new directors, together with Tim Walker and Marcelo Junqueira who are continuing as directors.  

CEB's strategy continues to be to maximise shareholder value. This goal is being pursued through the following initiatives:

• Realisation of remaining assets: As previously announced, following the sale of the Company's investment in Usaciga during the period under review, CEB has decided to divest the Pantanal and Agua Limpa greenfield projects. Discussions continue regarding the potential sale of Pantanal and the Agua Limpa project is being wound down and will cease to trade shortly. The Board is focused on maximising value from the Company's investment in Unialco MS, although the timing of its realisation, as with that of Pantanal, is unclear and the situation is complex.

• Rationalisation of costs: The Board together with management is working to reduce costs in order to better align CEB's operations with its cost structure. In this context, the Board will continue to consider delisting the Company, while safeguarding the rights of all shareholders.

• Return of capital to shareholders: The Board is evaluating the potential timing and quantum of distributions taking account of the state of negotiations regarding the realisation of the Company's investments.  The Board has decided not to proceed with the previously announced proposed dividend of US$12.5 million. Court approval has been obtained for the reclassification of the Company's share premium to distributable reserves which will enable such distributions to be made in due course.

Financial results

The Company's NAV increased to US$65.0 million (44 US cents per share) at 31 October 2009 from US$57.3 million (39 US cents per share) at 30 April 2009. This was principally due to an increase in the valuation of CEB's investment in Unialco which in turn arose from higher comparable market multiples of cane crushing capacity.

The sugar and ethanol industry has seen substantial improvements in pricing. Sugar has maintained prices above 25 US cents per pound and ethanol prices have rebounded to profitable levels. These improvements have allowed the industry to cover the higher production costs and recover somewhat from its working capital shortages of earlier in the year. The challenge though, continues to be the availability of credit lines in order to allow companies to capitalize on these higher prices. In general, the industry, after suffering several setbacks due to higher costs, severe shortages of capital and soft prices, is now recovering and margins are improving. Industry multiples have risen to above US$100 per tonne of crushed cane.

Unialco MS continues to suffer from the above shortage of funding. It has managed to maintain its relatively moderate debt level and, although it continues to be loss-making, is positioning itself for a profitable recovery. Overall debt in local currency has been kept at similar levels as previous periods (approximately US$44 million at 30 September 2009). Due to abnormal rain levels, cane crushed of 1.2 million tonnes for the six months ended 30 September 2009 was slightly lower compared with the same period in the previous year. Unialco MS's Dourados greenfield site remains on hold as financing is outstanding and it is now more than two years behind schedule.

At a group level, income during the period was generated by bank interest of US$0.1 million and a loss of US$0.4 million was incurred on cane sales at Pantanal. Administrative expenses for the period amounted to US$3.9 million, which included US$0.5 million of professional fees relating to the mandatory cash offer by GIA. Net profit for the period was US$5.3 million, reflecting a US$10.2 million gain on revaluation of investments.

The valuation of CEB's investment in Unialco MS increased over the period to US$38.1 million from US$27.9 million due to higher comparable market multiples of cane crushing capacity. The Pantanal greenfield asset value has remained at its estimated US$2.3 million value. As a result of previous write downs, the Agua Limpa project is held at nil book value.

The cash position of the Group at the end of the period was US$23.4 million. Currently, the Group's cash balance stands at approximately US$18.3 million, much of the fall since the period end being due to the payment of Usaciga selling costs and the professional fees referred to above, both of which were accounted for as creditors at the period end. A final payment of US$2.9 million to the Company from the sale of Usaciga is due by March 2010.

Management change

We announced on 31 December, 2009 that John Koutras, currently CFO and acting CEO of CEB, had indicated his desire to leave the Company. John will be leaving the Company at the end of February 2010, unless the Company decides to exercise its option to have him stay until the end of March 2010; I would like to record our gratitude for the significant contribution he has made to the Company during a period of significant challenges. The Company is seeking a suitable replacement.

Jossef Barath

Chairman

28 January 2010

                  Consolidated Statement of Comprehensive Income

                   For the six months ended 31 October 2009

		(Unaudited)	(Unaudited)	(Audited)
	Note	6 Months to  31 October 2009	6 Months to  31 October 2008	12 Months to   30 April 2009
		$'000	$'000	$'000
Interest income on bank balances		130	1,100	1,595
Sundry income		6	5	-
Fair value movement on revaluation of investments	5	10,207	(23,030)	(89,174)
Fair value movement on agricultural assets	7	(137)	-	(3,624)
Loss on sale of agricultural assets		(395)	-	-
Investment expenses	9	(1,689)	-	-
Net investment income/(expense)		8,122	(21,925)	(91,203)
Other administration fees and expenses	10	(3,876)	(2,816)	(6,296)
Total administrative expenses		(3,876)	(2,816)	(6,296)
Foreign exchange gain/(loss)		1,209	(3,797)	(4,861)
Finance costs		(13)	(17)	(32)
Profit/(loss) for the period before tax		5,442	(28,555)	(102,392)
Taxation		(125)	(484)	(641)
Profit/(loss) for the period after tax		5,317	(29,039)	(103,033)
Other comprehensive income		2,461	(5,273)	(4,000)
Total comprehensive income/(loss) for the period		7,778	(34,312)	(107,033)
Basic and diluted earnings/(loss) per share	4	$0.04	$(0.20)	$(0.70)

Consolidated Balance Sheet 
At 31 October 2009

 

		(Unaudited)	(Unaudited)	(Audited)
	Note	31 October 2009	31 October 2008	30 April 2009
		$'000	$'000	$'000
Non-current assets
Investments at fair value through profit or loss	5	38,133	93,790	36,663
Property, plant and equipment		142	128	206
Total non-current assets		38,275	93,918	36,869
Current assets
Trade and other receivables		4,405	380	566
Agricultural assets	7	2,283	6,425	2,283
Cash and cash equivalents		23,443	30,176	26,593
Total current assets		30,131	36,981	29,442
Total assets		68,406	130,899	66,311
Current liabilities
Trade and other payables		(3,359)	(909)	(9,042)
Total liabilities		(3,359)	(909)	(9,042)
Net assets		65,047	129,990	57,269
Represented by:
Share capital	6	2,920	2,920	2,920
Share premium		82,584	82,584	82,584
Distributable reserves		(21,738)	46,939	(27,055)
Other reserves		1,281	(2,453)	(1,180)
Total equity attributable to equity holders of the Company		65,047	129,990	57,269

                Consolidated Statement of Changes in Equity 
                 For the six months to 31 October 2009

	Share capital	Share  premium	Distributable reserves	Other reserves	Shareholders' funds	Minority interest	Total equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Changes in equity for year to 30 April 2009 (audited)
Balance as at 1 May 2008	2,920	82,584	75,978	2,820	164,302	16	164,318
Loss for the year	-	-	(103,033)	-	(103,033)	-	(103,033)
Other comprehensive income/( loss)
Foreign exchange on translation of subsidiaries	-	-	-	(4,000)	(4,000)	-	(4,000)
Transactions with owners recorded directly in equity
Reclassification of minority interest	-	-	-	-	-	(16)	(16)
Balance at 30 April 2009	2,920	82,584	(27,055)	(1,180)	57,269	-	57,269
Changes in equity for the period ended 31 October 2009 (unaudited)
Balance as at 1 May 2009	2,920	82,584	(27,055)	(1,180)	57,269	-	57,269
Profit for the period	-	-	5,317	-	5,317	-	5,317
Other comprehensive income/( loss)
Foreign exchange on translation of subsidiaries	-	-	-	2,461	2,461	-	2,461
Balance at 31 October 2009	2,920	82,584	(21,738)	1,281	65,047	-	65,047

 Consolidated Statement of Cash Flows
For the six months ended 31 October 2009

	(Unaudited)		(Unaudited)	(Audited)
	6 Months to  31 October 2009		6 Months to  31 October 2008	12 Months to  30 April  2009
	$'000	$'000		$'000
Cash flows from operating activities
Profit/(loss) for the period after tax	5,317	(29,039)			(103,033)
Adjustments for:	-
Fair value adjustment	(10,070)	23,030			92,798
Finance income and expense	(1,326)	2,714			3,296
Tax paid	125	276			641
Depreciation of fixed assets	9	-			9
Changes in working capital
Change in trade and other receivables	(3,696)	828			606
Change in agricultural assets	576	(2,848)			(2,437)
Change in trade and other payables	2,574	(696)			7,071
Net cash flows used in operations	(6,491)	(5,735)			(1,049)
Cash flows from investing activities
Purchase of investments	-	-			(9,010)
Interest income	130	1,100			1,595
Purchase of fixed assets	55	35			(52)
Net cash flows from / (used in) investing activities	185	1,135			(7,467)
Cash flows from financing activities
Interest expense and other finance costs	(13)	(17)			(32)
Net cash flows (used in) / from financing activities	(13)	(17)			(32)
Net decrease in cash and cash equivalents	(6,319)	(4,617)			(8,548)
Foreign exchange gain/(loss)	3,169	(8,030)			(7,682)
Cash and cash equivalents at start of period	26,593	42,823			42,823
Cash and cash equivalents at end of period	23,443	30,176			26,593

  Selected notes to the condensed consolidated interim financial information
For the six months to 31 October 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 condensed consolidated financial information comprises the results of the Company and its subsidiaries (together referred to as the "Group") and is unaudited.

2. Statement of Compliance

These interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the period ended 30 April 2009. 

These interim consolidated financial statements were approved by the Board of Directors on 28 January 2010.

3. Significant accounting policies

Except as described below, the accounting policies applied by the Group in these interim consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the period ended 30 April 2009. 

Change in accounting policy

Presentation of financial statements 

The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. This presentation has been applied in these interim financial statements as of and for the six months period ended on 31 October 2009. Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

4. Earnings/(loss) per share

The basic and diluted earnings per share is calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of shares outstanding during the period:

	6 months to  31 October 2009
Profit attributable to  ordinary shareholders of the Company	$5,317,000
Weighted average number of  shares in issue	147,563,929
Basic earnings per share	$0.04

There is no difference between fully diluted earnings per share and basic earnings per share.

5. Investments

Investments at the period end comprise one holding as follows:

Name	Country of Incorporation	Proportion of ownership interest
Unialco MS Participaçoes SA	Brazil	33%

The investment is considered to be a joint venture.  However it is not equity accounted for, but designated as held at fair value through profit or loss in accordance with a permitted exemption under IAS 31. The investment in Unialco is stated at fair value, as estimated by the Directors. 

The valuation is based on a multiple of $90 per ton cane crushing capacity, and is then further discounted to reflect the fact the investment is a minority interest. Market data for recent industry transactions and public data have been used to arrive at this multiple, and market data has likewise been used for land values.

	Usaciga	Unialco	Total
	$'000	$'000	$'000
Balance at 30 April 2009	8,737	27,926	36,663
Disposal in period	(8,737)	-	(8,737)
Fair value adjustment	-	10,207	10,207
Balance at 31 October 2009	-	38,133	38,133

6. Share capital

Ordinary shares of 1pence each As at 31 October 2009 and 30 April 2009	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. 

7. Agricultural assets

The agricultural assets comprised of approximately 2,590 hectares of sugar cane. The Directors have revalued the agricultural assets to reflect the fair value at the period end.

8.    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.  

	31 October 2009	31 October 2008	30 April 2009
Net assets	$65,047,000	$129,990,000	$57,269,000
Number of shares in issue	147,563,929	147,563,929	147,563,929
NAV per share	$0.44	$0.88	$0.39

9. Investment expense

The investment expense relates to services provided in association with the disposal of Usaciga.

10. Other administration fees and expenses

Other administration fees and expenses consist of the following:

	6 months to October 2009	6 months to October 2008	12 months to April 2009
	$'000	$'000	$'000
Audit fees	83	65	61
Insurance	27	28	86
Pre-operational project costs	-	29	62
Professional fees	1,763	757	1,447
Administration costs	159	280	339
Staff costs	568	909	1,566
Directors' fees	217	191	584
Sundry expenses	1,059	557	2,151
Total	3,876	2,816	6,296

11. Related party transactions

Philip Scales was a director of the Company and of the Company's Administrator. The Administrator received fees of £40,730 in the period. 

Marcelo Junqueira was a Director of the Company and of Agrop Servicos Agricolas Ltda.  Agrop received fees of approximately US$700,000 in the period for agricultural services provided to some of the Company's Brazilian subsidiaries.

12. Events after the balance sheet date

On 10 December 2009, the High Court of Justice in the Isle of Man approved the reclassification of the share premium of $82,584,000 to distributable reserves.

The Company has become aware that Unialco SA, the 67% shareholder Unialco MS, has filed a judicial protest in which it alleges that the Unialco MS shareholder meetings held in December 2007 which, among other issues, approved the investment by the Company in Unialco MS were defective, and in which it seeks the right to interrupt the running of the limitation period to pursue a judicial annulment of the results of such meetings. The Company is taking legal advice as to the merits and implications of this action, although at this early stage in proceedings the Company is uncertain as to the likely outcome.

 

END

 

 

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