Full Year Results

RNS Number : 8790H

Equatorial Palm Oil plc

06 June 2011

 



6^th June 2011

EQUATORIAL PALM OIL PLC

('EPO' or the 'Company')

Full Year Results for the year ended 31 December 2010

Equatorial Palm Oil plc, (AIM: PAL), the AIM listed palm oil development company with operations in Liberia, announces its audited results for the year ended 31 December 2010.

Corporate and Operational Highlights:

The Company achieved a number of significant corporate milestones and made strong operational progress on the ground in Liberia:

·    Successful AIM listing raising £6.5 million in February 2010;

·   £5m subscription agreement signed with BioPalm in May 2010;

·   US$60m joint venture agreement between EPO and BioPalm providing long term equity funding, effective as of February 2011;

·    Reactivation of over 3,000 hectares of existing oil palm plantations;

·    Establishment of a 240,000 seedling nursery complex to plant out 1,200 hectares in 2011;

·    Construction and commencement of commissioning palm oil mill at Palm Bay; and

·    The Company made its first sales of crude palm oil from its state-of-the-art palm oil mill in May 2011.

Financial Highlights:

The Company finished the financial year with a robust financial position, after incurring costs associated primarily with the Company's listing and investing activities:

·     Strong net cash position with US$6.8m in the bank (2009: US$0.1m) having repaid all outstanding loans;

·     Increase in non-current assets to US$16.3m (2009: US$11m); and

·     Loss of $4.4m (2009: $1.48m), of which US$1.3m attributable to non-recurring costs associated with the listing in February 2010.

Michael Frayne, Executive Chairman of Equatorial Palm Oil commented:

"Through the initial capital raised on admission to AIM, supplemented by the US$60.0 million joint venture, the foundations are in place for EPO to benefit from an acceleration and expansion of its strategic development plan in respect of its c.169,000 hectare land position at Palm Bay, Butaw and River Cess.

"The Company has an ambitious goal of achieving 50,000 hectares of plantations within 10 years - I believe we have the experienced management team, strong strategic partner in BioPalm and an excellent shareholder base, to achieve this."

Enquiries:

Equatorial Palm Oil plc Michael Frayne, Chairman	[phone]
Shore Capital & Corporate Ltd. NOMAD and Joint Broker Pascal Keane Edward Mansfield	[phone]
Mirabaud Securities LLP Joint Broker Peter Krens	[phone]
Pelham Bell Pottinger Financial / Corporate PR Charles Vivian James MacFarlane	[phone]

Chairman's statement

2010 was a significant year for Equatorial Palm Oil. In February 2010 the Company listed on the Alternative Investment Market ('AIM') of the London Stock Exchange raising £6.5m towards the development of sustainable oil palm plantations on its 169,000 hectare land position in Liberia.

In May 2010, the Company received further significant financial backing through a £5.0 million subscription agreement with BioPalm Energy Ltd ('BioPalm') as a cornerstone investor. BioPalm is a wholly owned subsidiary of Indian conglomerate the Siva Group.

The strategic relationship with BioPalm was further cemented with the US$60.0 million joint venture (the 'Joint Venture') between EPO and BioPalm, approved by shareholders of the Company in December 2010, but consummated in February 2011. Under the Joint Venture, BioPalm have contributed US$22.5m equity funds and Equatorial Bio-Fuel (Guernsey) Ltd., a subsidiary of EPO, have contributed US$7.5m equity funds for a 50 per cent. interest in the Company's Liberian oil palm assets. In addition, BioPalm will arrange and guarantee an additional US$30.0 million loan facility to the Joint Venture. The resulting US$60.0 million will be used to accelerate the development of the Joint Venture's c.169,000 hectare land position at Palm Bay, Butaw and River Cess.

During the reporting period, the Group made significant progress on the ground with the reactivation of over 3,000 hectares of existing oil palm plantations, the establishment of a 240,000 seedling nursery complex which will plant out over 1,200 hectares of new oil palms in 2011 and the construction and commencement of commissioning of our first new palm oil mill at Palm Bay.

Subsequent to the year end, the Company and the Joint Venture achieved the major milestone of the first sales of crude palm oil from the operation of its state-of-the-art US$3.0 million palm oil mill (the 'Mill') capable of processing five tonnes per hour of fresh fruit bunches. We were delighted and honoured to have the President of Liberia, Ellen Johnson Sirleaf, attend the inauguration of the Mill in May 2011, reflecting the importance of the investment in the Mill and oil palm plantations being undertaken by EPO and the Joint Venture towards the economic and social fabric of Liberia. During the period significant contributions to local communities were made through schooling, medical and social development programmes, including the construction of new schools and clinics, and installation of community water pumps and other infrastructure.

The Board believes that the sourcing of CPO from sustainable sources will be a key factor in the global palm oil market going forward, as many large-scale end-users of CPO are turning to only sustainable sources. Major palm oil buyers, such as Unilever, Nestle, Tesco and McDonald's have committed to sourcing their palm oil from only sustainable sources, some by as early as 2015. As a member of the Roundtable on Sustainable Palm Oil ('RSPO'), EPO is eager to contribute to the sizeable annual increase in global palm oil production that adheres to these standards. EPO has been an RSPO member since 2006 and is developing policies and operating procedures in line with RSPO-approved principles and criteria which are recognised as being industry best practices. We consider this to be not only an investment decision for the long term supply of CPO, but also a significant investment into biodiversity of the region. Furthermore, expansion areas are based on previously logged land so will not cause degradation to primary forested areas in Liberia.

Financial Review

The loss of the Group for the 12 months ended 31 December 2010 of $4,401,000 (2009: $1,476,000) was in line with expectations and was partly attributable to non-recurring costs of approximately $1.3 million associated with the listing in February 2010.

Outlook

The Directors consider the outlook for the global palm oil market is positive, with strong growth in demand driving a significant increase in CPO prices over the reporting period, from a price of US$805/t at the start of January 2010 to US$1,200/t in May 2011.

Through the initial capital raised on admission to AIM, supplemented by the US$60.0 million Joint Venture, the foundations are in place for EPO to benefit from an acceleration and expansion of the development of its strategic development plan in respect of its c.169,000 hectare land position at Palm Bay, Butaw and River Cess.

The Company has an ambitious goal of achieving 50,000 hectares of plantations within 10 years - I believe we have the experienced management team, strong strategic partner in BioPalm and an excellent shareholder base, to achieve this.

I would like to thank all those involved in the Company for their tremendous efforts, as well as our new and existing shareholders for their support, and I look forward to updating you all on our progress throughout the year.

Michael Frayne

Executive Chairman

6 June 2011

Operations Review

The principal activity of the Company is the cultivation of oil palms for the production of crude palm oil and associated products in Liberia. The company currently holds two concession agreements with the Government of Liberia for the rehabilitation and management of up to 10,200 hectares of existing oil palm plantations and the development of a further 78, 548 hectares of agricultural land into oil palm plantations. The concession agreements are held by the wholly owned subsidiaries LIBINC Oil Palm Inc (LIBINCO) owning Palm Bay plantation in Grand Bassa County and, Liberia Forest Products Inc (LFPI) owning Butaw plantation in Sinoe County.

In June 2010 the Company successfully signed a Memorandum of Understanding with community groups, tribal and village elders and the elected representatives of River Cess County to establish a joint venture to develop oil palm plantations over 80,000 hectares.

During the course of the year the Company under took a number of tasks to achieve the Key Performance Indicators set out in the previous year's annual report. Since the last report the Company has grown considerably from employing around 100 employees to over 400 permanent employees and several hundred casual workers. In June 2010 we appointed our first Group Plantations Manager, Mr Gilbert Netto, and local Liberians to fill key plantation and operational roles within the company. EPO is currently one of the largest employers in Grand Bassa and Sinoe counties.

Palm Bay

In June we established our pre-nursery site at Palm Bay Estate to receive the first batch of germinated hybrid oil palm seeds ordered from Unipalm in the Democratic Republic of Congo. A total of 240,000 seeds were planted in the pre-nursery between July and October. These seeds have been developed and specially selected for West African conditions. A 20 hectare main nursery was also established at Palm Bay into which the seedlings from the pre-nursery were transplanted after the first round of selection at 3 months of age.

Rehabilitation of Land

Land clearing operations to remove and replant 1,200 hectares of redundant existing oil palms at Palm Bay commenced in December 2010. This work is being undertaken using 'zero burning' techniques involving the use of heavy equipment such as bulldozers and excavators to clear and stack vegetation rather than the traditional 'fell and burn' technique previously used in the region. Re-planting of this area is planned to commence in June / July 2011 when the nursery seedlings are ready for field planting.

Rehabilitation of 3,000 hectares of existing oil palms and road infrastructure at Palm Bay commenced in the second half of 2010 to coincide with the construction of the new Oil Mill and to facilitate the extraction of crop for processing at the facility. By the end of December in excess of 3000 hectares had been made ready for harvesting. Trial harvesting commenced in late December when the new mill started initial testing.

Building Renovations

Building renovations at the old oil mill site on Palm Bay Estate commenced in earnest in June in preparation for the arrival of the machinery for the new mill being shipped from Malaysia under a turnkey contract with Modipalm Engineering Sdn. Bhd. The first task was the rehabilitation of the estate office and Oil Mill complex including the scrapping and removal of the old Oil Mill machinery and the bringing back into use of warehouses and workshops located on the site. The new mill machinery arrived in Monrovia in early July together with a team of Modipalm contractors to install and commission the Oil Mill. Despite many difficulties the construction phase of the project was completed by the end of December. The testing / commissioning phase of the project commenced just before the end of the year. Small scale harvesting operations started to enable the processing machinery to be checked under operating conditions by the contractor. This phase continued into 2011 with the processing facilities being put under increasing loads in terms of both operating hours and crop tonnages.

Training Programme

In conjunction with the construction and testing of the Oil Mill a training scheme was initiated for selected Palm Bay employees to operate the Oil Mill machinery. Central to this operation was the successful recruitment of Mr Muniandy Kanniah, an experienced Malaysian oil mill engineer, who joined the company in December to take charge of operations at Palm Bay Oil Mill.

Butaw Estate

Operational activities at Butaw Estate in Sinoe County were hampered by the loss of road access to the concession area when both access roads were washed away during exceptionally heavy rainfall and subsequent flooding during the wet season. The company has undertaken a complete overhaul of the main access road into the concession involving the construction of 13 kilometres of road and a number of large timber bridges to enable all weather access to the concession area. This work was nearing completion by the end of the year. This work combined with the failure of a number of bridges along the national highway between Grand Bassa and Sinoe counties during the year necessitated the switching of the planned 2011 Butaw Estate planting programme to Palm Bay Estate.

Other infrastructure developments during the year saw the construction and establishment of two temporary elementary schools at Butaw Estate with the employment of a team of 10 qualified teachers to provide primary education to 300 children currently residing on the concession. The school facilities at Palm Bay Estate have also been upgraded and enrolment at the location is approaching 450 pupils in Grades 1 - 6. Company operated health care facilities continue to be upgraded at both locations and they provide the only health care available to concession and community inhabitants in the locality. The Company works in conjunction with the Liberian Ministry of Health and international health care providers to ensure that the quality of health care provided to patients meets the legal requirements and work is ongoing to progressively improve the standard of the facilities and the level of care available to patient.

GROUP Statement OF COMPREHENSIVE INCOME

Year ended 31 December 2010

		2010 $'000	2009 $'000
			(Restated)
Administrative expenses		(3,538)	(1,207)
Share options expensed		(694)	-
Total Administrative expenses and operating loss		(4,232)	(1,207)
Interest payable		(169)	(269)
Loss before taxation		(4,401)	(1,476)
Taxation		-	-
Loss for the year after taxation		(4,401)	(1,476)
Other comprehensive income
Currency translation differences		(295)	(307)
Total comprehensive income for the year		(4,696)	(1,783)
Loss per share expressed in cents per share
- Basic & diluted		(4.7) cents	(4.6) cents

Group STATEMENT OF FINANCIAL POSITION

As at 31 December 2010

Registered Number 5555087

		2010 $'000	2009 $'000	2008 $'000
			(Restated)	(Restated)
ASSETS
Non-current assets
Property, plant and equipment		15,554	11,049	9,752
		15,554	11,049	9,752
Current assets
Inventories		508	-	-
Other receivables		490	553	20
Cash & cash equivalents		6,760	100	26
		7,758	653	46
LIABILITIES
Current liabilities
Trade and other payables		545	3,199	1,579
Short term borrowings		-	3,188	1,121
		545	6,387	2,700
Net current assets/(liabilities)		7,213	(5,734)	(2,654)
NET ASSETS		22,767	5,315	7,098
SHAREHOLDERS' EQUITY
Share Capital		1,796	463	463
Share premium		27,544	8,937	8,937
Warrant and option reserve		2,237	30	30
Foreign exchange reserve		(86)	208	515
Retained loss		(8,724)	(4,323)	(2,847)
Total equity		22,767	5,315	7,098

STATEMENT OF Cash FlowS

For the year to 31 December 2010

		Group 2010 $'000		Group 2009 $'000 (Restated)		Company 2010 $'000		Company 2009 $'000 (Restated)
Cash flows from operating activities
Operating Loss		(4,232)		(1,207)		(3,524)		(1,195)
Decrease/ (increase) in trade and other receivables		63		(521)		355		(518)
(Decrease)/Increase in trade and other payables		(2,654)		1,437		(2,779)		1,414
Increase in inventories		(508)		-		-		-
Depreciation		494		36		31		34
Share options expensed		694		-		694		-
Net cash outflow from operating activities		(6,143)		(255)		(5,223)		(265)
Cash flows from investing activities
Loans to subsidiaries		-		-		(6,053)		(1,365)
Payments to acquire property, plant and equipment		(5,001)		(1,328)		-		-
Net cash outflow from investing activities		(5,001)		(1,328)		(6,053)		(1,365)
Cash flows from financing activities
(Repayment)/ Drawdown of short term borrowings		(1,040)		1,923		(1,040)		1,923
Issue of ordinary share capital		19,960		-		19,960		-
Share issue costs		(655)		-		(655)		-
Interest paid		(169)		(269)		(169)		(269)
Net cash inflow from financing activities		18,096		1,654		18,096		1,654
Net increase in cash and cash equivalents		6,952		71		6,820		24
Cash and cash equivalents at beginning of period		100		26		53		26
Exchange (losses)/gains on cash and cash equivalents		(292)		3		(430)		3
Cash and cash equivalents at end of period		6,760		100		6,443		53

GROUP Statement of Changes in Equity

For the period ended 31 December 2010

	Called up share capital	Share premium reserve	Foreign exchange reserve	Warrant and option reserve	Retained earnings	Total equity
GROUP	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)
As at 1 January 2009	463	8,937	515	30	(2,847)	7,098
Total comprehensive income for the period	-	-	(307)	-	(1,476)	(1,783)
As at 31 December 2009	463	8,937	208	30	(4,323)	5,315
As at 1 January 2010	463	8,937	208	30	(4,323)	5,315
Share capital issued (Note 18)	1,333	19,262	-	1,513	-	22,108
Cost of share issue	-	(655)	-	-	-	(655)
Issue of share options	-	-	-	694	-	694
Total comprehensive income for the period	-	-	(294)	-	(4,401)	(4,695)
As at 31 December 2010	1,796	27,544	(86)	2,237	(8,724)	22,767

NOTES TO FINANCIAL STATEMENTS

Accounting policies

Basis of preparation

The financial statements of the Group for the twelve months ended 31 December 2010 have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2010 or 31 December 2009 but is derived from those accounts. This announcement does not constitute the Group's annual report and statutory accounts.  The auditor's report on those financial statements was unqualified and did not contain a reference, to which the auditors drew attention by way of emphasis and did not contain a statement under s498 (2) - (3) of Companies Act 2006.

These financial statements have been prepared on a going concern basis.

Loss Per Share

The basic loss per share is derived by dividing the loss for the period attributable to ordinary shareholders by the weighted average number of shares in issue.

As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included.

	Group 2010 $'000	Group 2009 $'000 (Restated)
Loss for the period	(4,401)	(1,476)
Weighted average number of Ordinary shares of 1p in issue	93.5 million	32.0 million
Loss per share - basic	(4.7) cents	(4.6) cents

Details of any potentially dilutive shares are included in the share based payment note, Note 19, and also post year end share issues as detailed in Note 22.

Property, Plant and Equipment

Group	Assets under construction	Leasehold concession	Plant and equipment	Plantation development	Total
	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)
Cost
At 1 January 2009	-	7,644	237	2,000	9,881
Additions	-	-	14	1,314	1,328
Currency translation adjustment	-	-	13	-	13
At 31 December 2009	-	7,644	264	3,314	11,222
Additions	3,222	-	414	1,365	5,001
Currency translation adjustment	-	-	(4)	-	(4)
At 31 December 2010	3,222	7,644	674	4,679	16,219
Depreciation
At 1 January 2009	-	-	(129)	-	(129)
Charge for the year	-	-	(36)	-	(36)
Currency translation adjustment	-	-	(8)	-	(8)
At 31 December 2009	-	-	(173)	-	(173)
Charge for year	-	(399)	(95)	-	(494)
Currency translation adjustment	-	-	2	-	2
At 31 December 2010	-	(399)	(266)	-	(665)
Net Book Value
At 31 December 2010	3,222	7,245	408	4,679	15,554
At 31 December 2009	-	7,644	91	3,314	11,049
At 31 December 2008	-	7,644	108	2,000	9,752

Short term borrowings

The short term borrowings of the Group and Company comprised:

	Sterling Convertible Loan Notes	AUD Convertible Loan Notes	Loans from Adelise Services Ltd	Promissory Notes deposit	Agriterra refundable	Total
	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)	$'000 (Restated)
At 31 December 2008	-	144	977	-	-	1,121
Borrowings in period	2,042	-	-	358	350	2,750
Interest charged	-	61	40	153	16	270
Currency translation differences	(77)	45	98	88	-	154
Repayments	-	-	(1,107)	-	-	(1,107)
At 31 December 2009	1,965	250	8	599	366	3,188
Interest charged	-	11	-	53	5	69
Currency translation differences	(79)	(6)	-	9	-	(76)
Converted into shares	(1,886)	(255)	-	-	-	(2,141)
Repayments	-	-	(8)	(661)	(371)	(1,040)
At 31 December 2010	-	-	-	-	-	-

The sterling Convertible Loan Notes were unsecured and interest free and were converted into new Ordinary Shares upon Admission at the Placing Price of 17.5p with attached warrants. Adelise Services Ltd, a company held by a trust of which Michael Frayne is a beneficiary, held £700,000 of the £1,234,000 in sterling Convertible Loan Notes outstanding as at 31 December 2009.

The AUD 200,000 convertible loan note was repayable on 30 June 2009 with a 20% coupon at repayment. It was converted into new Ordinary Shares upon admission at the Placing Price of 17.5p with attached warrants.

The loans due to Adelise Services Ltd, a company held by a trust of which Michael Frayne is a beneficiary, had principal of £652,000 and interest was charged at 2% above LIBOR. As at 31 December 2009, £5,352 in interest was outstanding. This was fully paid on 26 February 2010.

The financing obtained from Adelise Services Ltd by way of unsecured 6 month promissory notes are as follows:

·     On 27 March 2009, the Company received AUD100,000 provided by way of an unsecured 6 month promissory note to Adelise Services Limited with a repayable of AUD125,000 due on 26 September 2009. This accrued at a rate of 35% per annum until repaid.

·     On 16 April 2009, the Company received AUD300,000 provided by way of an unsecured 6 month promissory note to Adelise Services Limited with a repayable of AUD375,000 due on 15 October 2009. This accrued at a rate of 35% per annum until repaid.

·     On 30 April 2009, the Company received AUD100,000 provided by way of an unsecured 6 month promissory note to Adelise Services Limited with a repayment of AUD125,000 due on 29 October 2009. This accrued at a rate of 35% per annum until repaid.

All of these Promissory Notes were fully repaid on 21 June 2010.

On 18 August 2009 Agriterra Limited announced it had signed a Memorandum of Understanding to acquire Equatorial Biofuels (Guernsey) Limited, a wholly owned subsidiary of the Company for USD2.5 million cash and USD12m in shares in Agriterra including a refundable deposit of USD350,000. On 22 September 2009 it was announced by Agriterra the MOU had been terminated.  The USD350,000 deposit became repayable to Agriterra effectively no later than 120 business days after 18 August 2009 together with interest at a rate of 12% per annum accruing from that initial date. It was fully repaid on 2 March 2010.

Related Party Transactions

Details of short-term borrowings from Adelise Services Ltd ("Adelise"), a company held by a trust of which Michael Frayne is a beneficiary, are disclosed in Note 17. 

Details of related party transactions in relation to services provided by Adelise, a company held by a trust of which Michael Frayne is a beneficiary, are disclosed in Note 6.

Details of loans to subsidiaries are disclosed in Note 12.

Included within trade and other payables are unpaid directors' fees as follows:-

	2010 $'000	2009 $'000 (Restated)
Michael Frayne	-	143
Ross Warner	-	35
Geoff Brown	-	350
Anthony Samaha	-	64
Peter Bayliss	-	209
Shankar Varadharajan	13	-
Joseph Jaoudi	-	307
Total	13	1,108

Also included within other payables were amounts owing to a Director and a former Director as follows:-

	2010 $'000	2009 $'000 (Restated)
Ross Warner	-	16
Anthony Samaha	-	6
Total	-	22

On 18 February 2010, Sanita Investments Limited (the "Landlord"), a company held by a trust of which Michael Frayne is a beneficiary, granted to the Company a 3 year lease in respect of Floors 1 to 4, 94 Jermyn Street, London SW1 6JE (the "Lease"). The yearly rent payable by the Company to the Landlord is £99,150. As at 31 December 2010, the outstanding balance under the lease agreement was $nil.

Events After the Reporting Period

Joint Venture

On 3 February 2011, the Company announced that the Joint Venture Agreement with BioPalm Energy Ltd had been fully implemented.

The Joint Venture Agreement provides for equity investment in the Joint Venture Company ("Palm

Developments") of US$30.0 million (US$7.5 million from Equatorial Bio-Fuel (Guernsey) Ltd., a subsidiary of EPO, on behalf of the Company and US$22.5 million from BioPalm Energy). Furthermore, BioPalm Energy will arrange and guarantee an additional US$30.0 million loan facility to the joint venture company.

As the operator of Palm Developments, EPO will use the resulting US$60 million to accelerate its strategic development plan in respect of its c.169,000 hectare land position at Palm Bay, Butaw and River Cess.

The Company's intention is to use the capital to aim to nearly double its previous planting targets each year from 2011 to 2014. The accelerated planting schedule will have the resultant impact downstream on harvesting rates, requiring faster investment in the associated infrastructure and palm mills to process palm fruit into CPO, palm kernel oil and palm kernel cake. The accelerated planting rates should also bring forward revenues generated from expected sales of CPO and other palm products. EPO believes this will have an overall positive impact on shareholder value.

Share Capital

The total number of shares in issue as at 2 June 2011 is 124,808,188 Ordinary Shares of 1p each.

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of Equatorial Palm Oil plc (the "Company") will be held at the offices of Sprecher Grier Halberstam LLP, 5th Floor, One America Square, Crosswall, London EC3N 2SG on Thursday 30th June 2011 at 11 am.

Availability of accounts

The audited Annual Report and Financial Statements for the 12 months ended 31 December 2010 will shortly be sent to shareholders and published at www.epoil.co.uk.

 

END

 

 

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