Interim Results for six months ended 30 June 2012

RNS Number : 2704N

Equatorial Palm Oil plc

27 September 2012

 



27 September 2012

EQUATORIAL PALM OIL PLC

("EPO" or the "Company")

Interim Results for six months ended 30 June 2012

Equatorial Palm Oil plc (AIM: PAL)the AIM listed palm oil productioncompany with operations in Liberia, West Africa, announces its unaudited interim results for the six months ended 30 June 2012 ("the Period").

Highlights for the Period:

·     First international  sales of crude palm oil ("CPO")

·     Oil palm mill fully commissioned at Palm Bay

·     Enlargement of nurseries at Palm Bay and Butaw Estates with over  1.7m of young palms in nurseries for planting in 2012 and 2013

·     On track to plant 1,400 hectares of oil palms at Palm Bay and the first 300 hectares at Butaw by the end of 2012

·     Coastal & Environmental Services ("CES") appointed to conduct Environmental and Social Impact Assessment ("ESIA") studies

·     Praetorian Resources became a significant new shareholder in July 2012

Michael Frayne, Executive Chairman of Equatorial Palm Oil commented:

"The first half of 2012 has been anothersolid period for the Company which saw emphasis placed on expanding our nurseriesand land preparation. We also achieved the first shipment of CPO to international customers. We remain on track to plant over 1,700 hectares of palmsin total for this year at both Palm Bay and Butaw Estates.

"We have built up a strong operational team on the ground in Liberia which will significantly enhance our planting rate in 2013. The remainder of 2012 and 2013 remains an exciting time for the Company and I look forward to updating shareholders as we continue to work towards our long term strategic goals."

Equatorial Palm Oil plc Michael Frayne (Executive Chairman) www.epoil.co.uk	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / Paul Cocker	[phone]
Mirabaud Securities LLP (Broker) Peter Krens	[phone]
Pelham Bell Pottinger (Financial/ Corporate PR) Archie Berens / Joanna Boon	[phone]

Chairman's Statement

The start of 2012 continued to be a period of steady progress as we continue to develop ouroilpalmestates in Liberia.

The main focus of activity for the Company has been on the support for our large scale planting programme.

Operational Review

Palm Bay

The Palm Bay Estate is located 160 kilometres south east of the Liberian capital of Monrovia and 25 kilometres from the deep-water port of Buchanan. During the first six months of 2012, land clearing has continued at the Palm Bay Estate with 1,400 hectares of new planting due to be completed by December 2012. The planting capacity of seedlings on hand at mid-year stood at 5,800 hectares. This profile is in line with our on-going growth plans and demonstrates the development that has taken place in 2012.

Palm Oil Mill

Completion of the only commercial scale oil palm mill in Liberia took place in January 2012 at Palm Bay, marking a key milestone in EPO's long term plans to become a significant regional palm oil producer. Crude palm oil ("CPO") is to be sold both domestically and in international markets, with the first export sales into the Portuguese market having taken place during the first six months of 2012, together with continued sales into the local Liberian market.

Export sales are currently handled through container based loading.When volumes increase, our plan is to develop the full port infrastructure at Buchanan, which will rapidly increase our ability to sell into the export markets.

The mill is capable of running at full capacity, processing five tonnes of fresh fruit bunches per hour at approximately an 18 per cent extraction rate from the rehabilitated palms of Palm Bay. As the quality of the palms increases with new plantations, the extraction rate will increase to 20 per cent, highlighting the efficiency of this state of the art mill which will form the basis for building larger mills. The site for a new mill, which will be capable of processing 60MT of fresh fruit bunches per hour, has already been selected. We hope to provide shareholders with further information regarding the possible construction of this mill in due course.

Butaw Estate

Activity at the Butaw Estate remained focused on the nursery, with preliminary land preparation work having commenced in Q1 2012. Butaw Estate is approximately 12 months behindin development terms when compared with the Palm Bay Estate. This substantial nursery at Butaw, which has a capacity to plant 5,000 hectares, is a similar size to the Palm Bay nursery and remains on target to plant 300 hectares in the remainder of 2012. The planting in 2013 will significantly increase to 3,000 hectares and a suitable location has already been identified for a 60MT per hour processing mill.

River Cess

In 2010, a Memorandum of Understanding ("MOU") was signed with the elected representatives of the people of River Cess County in order to work with them to develop a significant palm oil concession. With an expansion potential of up to 80,000 hectares and an optimum location between our two existing estates, River Cess remains a key development for the Company. Negotiations are ongoing with local officials in order to convert the MOU into a full concession with the Liberian Government, which is anticipated to be finalised by the end of Q1 2013.

Praetorian Resources

In addition to the progress described above, and subsequent to the end of the Period, we announced an agreement whereby Praetorian ResourcesLimited became a significant new shareholder in EPO. The strong track record of Praetorian's management team, their deep understanding of the palm oil industry and their investment strategy will provide significant support in the implementation of our growth plans. Their shareholding in EPO provides the support of a new, long term and strategic shareholder and validates EPO's commercial plans and growth strategy.

The Community

Social responsibility remains a key commitment for us, and we continue to invest in the social and economic development of the local communities in which we operate.  The skills of the local workforce are imperative to the efficiency of production and through our operating mill we are able to provide an excellent training platform. As production and mill size increases, the current workforce will be well placed to progress with the Company building on the technical, operational and engineering skills they have developed. To aid this development, we have recruited a number of experts from Indonesia and Malaysia who are working on the Estates and bring with them their considerable knowledge and expertise of palm oil operations.

The wider local community is of equal importance and we continue to support the schools at Palm Bay and Butaw Estates, which, following consultations with the Ministry of Education, are currently undergoing an enlargement project. The schools will have the capacity for 950 students.

In February 2012, we appointed Coastal & Environmental Services ("CES") to conduct its Environmental and Social Impact Assessment ("ESIA") studies, as part of the Company's strategy to source development bank funding for the next stage of expansion. The studies will take place at Palm Bay Estate and will contribute to the social and environmental assessments that the Company has already made in relation to the large scale development of sustainable palm oil estates in line with international guidelines.The continuation of these social and environmental studies is an important process in the growth of our business.

Outlook

The growth in the palm oil market continues to be underpinned by compelling demographic and macro-economic trends. Despite the challenging market conditions over the Period, we remain confident that palm oil prices will improve as a result of limited supply and continuing strong demand.Liberia remains politically stable under democratic rule, following President Ellen Johnson Sirleaf having secured a further six year term in 2011.

We are proud to be playing a part in the continuing programme of redevelopment in Liberia and look forward to a successful 2012, delivering on our strategic objectives and creating shareholder value.

Michael Frayne

Executive Chairman

27 September 2012

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2012

	Note	Period ended 30 June 2012 (unaudited)	Period ended 30 June 2011 (unaudited)	Year ended 31 December 2011 (audited)
		$'000	$'000	$'000
Revenue		210	175	385
Administrative expenses		(1,306)	(1,306)	(2,279)
Share options expense	5	-	(125)	(15)
Operating loss		(1,096)	(1,256)	(1,909)
Share of operating loss of joint venture	3	(474)	(189)	(1,010)
Profit on disposal of assets to joint venture	3	-	752	752
Loss for the Period before and after taxation		(1,570)	(693)	(2,167)
Other comprehensive income
Exchange gains/(losses) arising on translation of foreign operations		63	194	60
Total comprehensive income for the period		(1,507)	(499)	(2,107)
Loss per share expressed in cents per share
- Basic & diluted	2	(1.2) cents	(0.6) cents	(1.7) cents

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2012

	Note	30 June 2012 (unaudited)	30 June 2011 (unaudited)	31 December 2011 (audited)
		$'000	$'000	$'000
ASSETS
Non-current assets
Investment in joint venture	3	20,508	21,803	20,982
Property, plant and equipment		-	-	-
		20,508	21,803	20,982
Current assets
Receivables		248	2,170	602
Cash & cash equivalents		1,734	575	1,329
		1,982	2,745	1,931
LIABILITIES
Current liabilities
Trade and other payables		291	92	175
		291	92	175
Net current assets		1,691	2,653	1,756
NET ASSETS		22,199	24,456	22,738
SHAREHOLDERS' EQUITY
Share capital	4	1,969	1,914	1,914
Share premium		30,402	29,619	29,489
Warrant and option reserve	5	1,030	2,202	2,092
Foreign exchange reserve		37	108	(26)
Retained loss		(11,239)	(9,387)	(10,731)
Total equity		22,199	24,456	22,738

EQUATORIAL PALM OIL PLC

GROUP CASH FLOW STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2012

	Period ended 30 June 2012 (unaudited)	Period ended 30 June 2011 (unaudited)	Year ended 31 December 2011 (audited)
	$'000	$'000	$'000
Cash flows from operating activities
Loss for the year before and after taxation Decrease/(increase) in receivables Increase/(decrease)in payables Depreciation Share options expensed Share of operating loss of joint venture Profit on disposal of assets to joint venture	(1,570) 354 129 - - 474 -	(1,256) (1,875) (57) 2 125 189 (752)	(2,167) (111) (370) 2 15 1,010 (752)
Net cash outflow from operating activities	(613)	(3,624)	(2,373)
Cash flows from investing activities
Investment in joint venture	-	(4,658)	(4,658)
Net cash outflow from investing activities	-	(4,658)	(4,658)
Cash flows from financing activities
Issue of ordinary share capital (net of expenses)	968	2,063	2,063
Net cash inflow from financing activities	968	2,063	2,063
Net increase/(decrease) in cash and cash equivalents	355	(6,219)	(4,968)
Cash and cash equivalents at beginning of period	1,329	6,760	6,760
Exchange gains/(losses) on cash and cash equivalents	50	34	(463)
Cash and cash equivalents at end of period	1,734	575	1,329

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2012

	Called up share capital	Share premium reserve	Foreign exchange reserve	Warrant and option reserve	Retained earnings	Total equity
	$ 000's	$ 000's	$ 000's	$ 000's	$ 000's	$ 000's
As at 1 January 2011	1,796	27,544	(86)	2,237	(8,724)	22,767
Share capital issued	118	1,945	-	-	-	2,063
Exercise of warrants and options	-	130	-	(160)	30	-
Share-based payments	-	-	-	125	-	125
Total comprehensive income for the period	-	-	194	-	(693)	(499)
As at 30 June 2011	1,914	29,619	108	2,202	(9,387)	24,456
As at 1 January 2011	1,796	27,544	(86)	2,237	(8,724)	22,767
Share capital issued	118	1,945	-	-	-	2,063
Exercise of warrants and options	-	-	-	(160)	160	-
Share-based payments	-	-	-	15	-	15
Total comprehensive income for the period	-	-	60	-	(2,167)	(2,107)
As at 31 December 2011	1,914	29,489	(26)	2,092	(10,731)	22,738
Exercise of warrants and options	55	913	-	-	-	968
Share-based payments	-	-	-	(1,062)	1,062	-
Total comprehensive income for the period	-	-	63	-	(1,570)	(1,507)
As at 30 June 2012	1,969	30,402	37	1,030	(11,239)	22,199

EQUATORIAL PALM OIL PLC

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2012

1.   Basis of preparation

These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2011 Annual Report. The financial information for the half years ended 30 June 2012 and 30 June 2011 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Equatorial Palm Oil plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2011 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2011 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2011 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated financial statements.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

2.   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.

	Period ended 30 June 2012 (unaudited)	Period ended 30 June 2011 (unaudited)	Year ended 31 December 2011 (audited)
	$'000	$'000	$'000
Loss for the period	(1,570)	(693)	(2,167)
Weighted average number of Ordinary shares of 1p in issue	127.3 million	123.3 million	124.1 million
Loss per share - basic	(1.2) cents	(0.6) cents	(1.7) cents

3.   Investment in joint venture

The results of the joint venture for the period of six months to 30 June 2012 were as follows:

	30 June 2012	30 June 2011	31 December 2011
	$'000	$'000	$'000
Non-current assets	27,412	18,680	22,083
Current assets	14,270	27,420	20,989
Non-current liabilities	-	-	-
Current liabilities	(664)	(2,494)	(1,106)
TOTAL NET ASSETS	41,018	43,606	41,966
Income	574	10	229
Expenses	(1,522)	(388)	(2,249)
Loss after tax	(948)	(378)	(2,020)

The Company, through its investment in Equatorial Biofuels (Guernsey) Limited, owns a 50% interest in Liberian Palm Developments Limited. The Company's interest in Liberian Palm Developments Limited is as follows:

	$'000
Interest in joint venture at 1 January 2011	-
Transfer of assets to joint venture	21,992
Share of losses of joint venture	(189)
Dividend received from Liberian Palm Developments Limited	-
Interest in joint venture at 30 June 2011	21,803
Interest in joint venture at 1 January 2011	-
Transfer of assets to joint venture	21,992
Share of losses of joint venture	(1,010)
Dividend received from Liberian Palm Developments Limited	-
Interest in joint venture at 31 December 2011	20,982
Interest in joint venture at 1 January 2012	20,982
Transfer of assets to joint venture	-
Share of losses of joint venture	(474)
Dividend received from Liberian Palm Developments Limited	-
Interest in joint venture at 30 June 2012	20,508

4.   Called up share capital

Allotted, called up and fully paid	Period ended 30 June 2012 $'000	Period ended 30 June 2011 $'000	Period ended 31 December 2011 $'000
128,316,434Ordinary shares of 1p each (2011: 124,808,188)	1,969	1,914	1,914

During the Period the Group issued 3,508,246 shares at an average price of 17.5 pence per share ($0.28 cents).

5.   Share based payments

Warrants

Details of the warrants outstanding during the Period are as follows:

		Number of warrants		Weighted average exercise price
	Outstanding at 1 January 2012	26,722,498		17.5p
	Issued during the year	3,955,012		17.5p
	Expired during the year	(18,980,336)		17.5p
	Exercised during the year	(3,508,246)		17.5p
	Outstanding at 30 June 2012	8,188,928		17.5p
	Exercisable at 30 June 2012	8,188,928		17.5p

As at 30 June 2012 the following warrants to subscribe for Ordinary shares were outstanding:

Category	Over Number of Shares	Expiry Date
5yr Warrants, exercisable at 17.5p	2,198,757	26 February 2015
3yr Warrants, exercisable at 17.5p	5,990,171	26 February 2013
2yr Warrants, exercisable at 17.5p	-	26 February 2012
Total	8,188,928

Share options

Details of the options outstanding during the Period are as follows:

	Outstanding at 1 January 2012	Issued during the period	Exercised during the period	Outstanding at 30 June 2012	Exercisable at 30 June 2012
Options exercisable at 17.5p	7,550,000	2,020,200	-	9,570,200	3,775,000

6.   Events after the reporting period

Through a transfer of shares from existing shareholders, Praetorian Resources ("Praetorian") became a significant shareholder in the Company. Praetorian holds 9,947,950 shares in EPO, which equates to 7.75% of the Issued Share Capital

Praetorian is a newly formed natural resource focused investment holding company incorporated in Guernsey which was admitted to AIM on 9 July 2012. Praetorian's strategy is to invest in natural resources stocks that provide exposure to long term growth in demand for commodities such as palm oil. 

Praetorian will utilise the contacts and skills of its board of directors and international advisors to attract appropriate companies for its portfolio of investments. The Praetorian board is led by Richard Lockwood who has extensive experience in natural resources fund management.

INDEPENDENT REVIEW REPORT TO EQUATORIAL PALM OIL PLC

Introduction

We have been engaged by the Company to review the set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the group statement of comprehensive income, the group statement of financial position, the group cash flow statement, the group statement of changes in equity and the related explanatory notes.We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the set of financial statements in the half-yearly financial report based on our review.Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the set of financial statements in the half-yearly financial report for the six months ended 30 June 2012is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

London

United Kingdom

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

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