REG - Dekel Agri-Vision - February Palm Oil and Cashew Project Update

Dekel Agri-VisionAnnouncement

10/03/2022 07:00

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RNS Number : 2735E  Dekel Agri-Vision PLC  10 March 2022

 

Dekel Agri-Vision Plc / Index: AIM / Epic: DKL / Sector: Food Producers

 

Dekel Agri-Vision Plc ('Dekel' or the 'Company')

February Palm Oil Production Update and Cashew Project Update

 

Dekel Agri-Vision Plc (AIM: DKL), the West African agriculture company focused
on building a portfolio of sustainable and diversified projects, is pleased to
provide a February production update for its Ayenouan palm oil project in
Côte d'Ivoire, and an update on the timing of the ramp-up of production of
our large-scale cashew processing plant at Tiebissou, Côte d'Ivoire (the
'Cashew Project').

 

Key Highlights

Palm Oil Project

·      The Crude Palm Oil ('CPO') high season, which normally ramps up
in February, has yet to commence therefore in line with the guidance we
provided last month our CPO production is 40.8% lower than February last
year.  Local experts who carry out fruit bunch counts and fruit ripening
assessments currently estimate the high season to commence in April.  In
terms of agronomic conditions, there has been no material differences in
rainfall and sunlight hours noted over the past 12 months to pin point any
specific reasons for the seasonal variations which also included materially
higher FFB volumes than normal in the second half of 2021.

·      CPO of €979 per tonne achieved in February 2022, a 23.6%
increase compared to February 2021

o  In the past two weeks international CPO prices have spiked to all-time
record levels of approximately €1,700.

·      CPO extraction rate increased 1 percentage point from January to
22.3% and was 0.5 percentage points higher than February 2021.

·      Palm Kernel Oil ('PKO') prices also continued their strong
momentum following the commencement of exports achieving €1,447 per tonne in
February 2022, an 86.0% increase compared to February 2021.

o  In the past two weeks international prices have spiked to all-time record
levels of approximately €2,200.

 

Cashew Project

·      Production from the Cashew project continued at approximately 15%
of production capacity in January 2022 and final equipment delivery timings
which will allow full production to commence remain in April.

 

 

                                                 Feb-22    Feb-21                    Change

 Fresh Fruit Bunches ('FFB') processed (tonnes)  13,683    23,638                    -42.1%
 CPO production (tonnes)                         3,057     5,163                     -40.8%
 CPO Sales (tonnes)                              3,660     4,754                     -23.0%
 Average CPO price per tonne                     €979      €792                      23.6%
 PKO production (tonnes)                         259                  270            -4.1%
 PKO Sales (tonnes)                              407       406                       0.2%
 Average PKO price per tonne                     €1,447    €778                      86.0%
 PKC production (tonnes)                         402       390                       3.1%
 PKC Sales (tonnes)                              366       299                       22.4%
 Average PKC price per tonne                     €85       €69                       23.2%

 

CPO Production

·      Following five consecutive months of production growth,
production in February, and we expect also March, will be lower than last
year.  This lower level of current production is being experienced nationwide
and also in Ghana.

·      Local agronomy experts are seeing a shift in seasonality of
volumes this year and are expecting the high season will commence later than
normal in April from assessments of fruit bunch counts on estates.

·      Revenue for the first two months of the year remains materially
higher than last year with the current lower levels of production being more
than offset by higher CPO extractions rates and higher CPO and PKO prices

CPO Price

·      We have held a long-term view that supply levels of CPO, which
accounts for over 40% of all vegetable oil will struggle to meet future demand
resulting in a sustained period of higher prices.  This was already evident
pre Covid-19 when CPO prices started to materially increase.

·      Supply shocks relating to Covid-19 and now the devastating
conflict in Ukraine, the world's largest producer of sunflower oil, has added
to the supply challengers in the vegetable oil market resulting in prices
spiking even further to over €1,700 per tonne.  Whilst we expect prices may
settle to a degree, we believe supply challengers will continue and we expect
CPO prices to remain materially higher than the long-term average of €700
per tonne for the foreseeable future

·      As previously announced, Côte d'Ivoire introduced price caps
during Covid-19 at around €900 per tonne to protect the local market given
CPO is a critical ingredient in food production.  However, due to market
forces, we are currently selling at prices around €1,025 - €1,050 per
tonne.

·      The further spike in prices over the past two weeks has led to a
significant difference between local prices and international prices.  We are
therefore assessing export options similar to the strategy we executed with
PKO should the CPO price differential remain this large.  This will be done
while balancing our obligations to local stakeholders.

·      Given the current disruption in global transportation and
logistics, in addition to the relatively low quantities Dekel produces,
exporting is not without its challenges.  However, we are currently in
discussions with a number of groups to execute this objective and we will keep
the market informed.

CPO Sales

·      The Company currently has approximately 4,000tn of committed
sales within Côte d'Ivoire for March at approximately €1,025-1,050 per
tonne.

·      As outlined above, given the current price gap between local
prices and international prices that has arisen, particularly over the past
two weeks, we will limit our normal strategy of pre-selling production with
the goal of increasing our prices closer to the international price

Palm Kernel Oil ('PKO') and Palm Kernel Cake ('PKC')

·    PKO Prices: 86% increase in PKO prices to €1,447 per tonne compared
to €778 in February 2021.

·    This is largely due to our success late last year identifying African
export alternatives for PKO at prices much higher than are available in Côte
d'Ivoire

·      Global prices have spiked further over the past two weeks.  We
are assessing options to increase our prices further as outlined above for CPO
and will update the market on our progress

Cashew Project

·      The latest timeline provided by our Contractor remains broadly
the same as our previous announcement with the colour sorter and shelling
machines expected to be delivered in April.  We are assisting our contractor
where we can to avoid unnecessary further delays.

·      In the interim, the Cashew processing plant is continuing
operating well at a limited capacity and test cashew sales are continuing
locally.

·      We continue to receive strong support from our local
stakeholders. We announced last month our key debt provider, the BIDC Bank,
has extended the principal grace period of its c.€4.6m loan from two to
three years.  The local co lenders NSIA bank who provided a loan of €2.3m
have also extended the principal grace period by one year.

 

Lincoln Moore, Dekel's Executive Director, said: "Short term, we remain on
track to deliver a second consecutive year of record revenue despite the
unusually late start to the high season.  Based on current market conditions,
we anticipate our sales prices will remain at record levels with the potential
to increase further in the coming months with international prices feeding
into local prices and the potential to export CPO at prices closer to the
international price, similar to our successful PKO export strategy."

 

"In the medium term, it is our view CPO prices and food prices in general will
remain materially higher than long term averages for the foreseeable future
which is highly supportive of our ongoing strategy to deliver a diversified
agri-processing and logistics business which we believe will deliver strong
returns to shareholders and provide vital support to our 1,000s of small
farmer partners."

 

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR").  Upon the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.

 

** ENDS **

 

For further information please visit the Company's website
www.dekelagrivision.com or contact:

 

 Dekel Agri-Vision Plc                        +44 (0) 207 236 1177

 Youval Rasin

 Shai Kol

 Lincoln Moore

 Arden Partners Plc (Nomad and Joint Broker)  +44 (0) 207 614 5900

 Paul Shackleton / Ruari McGirr /

 Elliot Mustoe (Corporate Finance)

 Optiva Securities Limited (Joint Broker)     +44 (0) 203 137 1903

 Christian Dennis

 Jeremy King

 

Notes:

Dekel Agri-Vision Plc is a multi-project, multi-commodity agriculture company
focused on West Africa.  It has a portfolio of projects in Côte d'Ivoire at
various stages of development: a fully operational palm oil project in
Ayenouan where fruit produced by local smallholders is processed at the
Company's 60,000tpa crude palm oil mill; a cashew processing project in
Tiebissou, which commenced production in early January 2021.

 

 

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