REG-R.E.A. Holdings plc R.E.A. Holdings plc: AGM Statement

R E A HoldingsAnnouncement

08/06/2023 07:00

============

   R.E.A. Holdings plc (RE.)
   R.E.A. Holdings plc: AGM Statement

   08-Jun-2023 / 07:00 GMT/BST

   ══════════════════════════════════════════════════════════════════════════

   R.E.A. Holdings plc (“REA” or the “company”)

    

   AGM statement

    

   The company will hold its AGM at 10 a.m. today when the chairman will give
   the following statement to shareholders.

    

   Agricultural operations

    

   Key agricultural statistics for the period 1 January to 31 May 2023 (with
   comparative figures for 2022) were as follows:
    

                                                2023    2022
   Fresh Fruit Bunch (“FFB”) crops (tonnes):                
   Group harvested                           282,930 252,854
   Third party harvested                      77,579  98,698
   Total                                     360,509 351,552
                                                            
   Production (tonnes):                                     
   Total FFB processed                       331,348 338,964
   FFB sold                                   29,169  10,424
   CPO                                        72,792  76,008
   Palm kernels                               16,313  16,211
   CPKO                                        6,777   6,015
                                                            
   Extraction rates (percentage):                           
   CPO                                          22.0    22.4
   Palm kernel                                   4.9     4.8
   CPKO*                                        39.8    39.4
                                                            
   Rainfall (mm):                                           
   Average across the estates                  1,630   1,848

    

   *Based on kernels processed

    

   Group FFB for the period was slightly ahead of budget and some 12 per cent
   higher than the corresponding period in 2022. Competition from other mills
   offering enhanced payment terms for externally sourced FFB resulted in
   some reduction in purchases of third-party fruit during the initial months
   of the year but, following an adjustment to the group’s purchase prices,
   purchase levels have returned to normal.

    

   The above average number of declared rain days (being days on which normal
   harvesting had to be cancelled) impacted harvesting efficiency, upkeep and
   evacuation during much of the period and contributed to the slight fall in
   the CPO extraction rate as compared with 2022.

    

   Work continues on improving operational infrastructure and harvesting
   efficiencies. 

    

   Replanting and extension planting are proceeding in line with previously
   announced programmes.

    

   Prices

    

   Opening the year at $1,090 per tonne, CIF Rotterdam, prices have since
   weakened, but may well rebound as production growth is expected to remain
   slow and consumption continues to increase. The price currently stands at
   $865 per tonne.

    

   The average price realised from sales of CPO by the group during the
   period January to May 2023, including premia for certified oil but net of
   export levy and duty, adjusted to FOB Samarinda, was $766 (average for the
   year 2022: $821).

    

   As has been noted previously, the group understands that the premia it
   receives for selling CPO that is sustainable can be increased by selling
   segregated sustainable oil. The group is exploring opportunities for
   reorganising the processing of its fruit so as to process only sustainable
   FFB in one mill and then to segregate the delivery of CPO from this mill
   allowing for sales at enhanced premia.

    

   Stone and coal interests

    

   The rate of mining at the coal concession holding company, PT Indo
   Pancadasa Agrotama (“IPA”), to which the group has made loans, slowed to
   an average of 22,000 tonnes per month for the first five months of 2023,
   as IPA switched its main mining focus to its northern pit. By blending
   northern and southern pit coal, IPA has been able to arrange that all of
   its coal production continues to fall within the specifications for
   semi-soft coking coal. Drilling has confirmed the availability of a
   further area within the IPA concession of economically minable coal
   similar in quality to the southern pit coal. It is planned to open a third
   pit to mine this additional coal as the southern pit becomes fully mined
   out.

    

   Arrangements to permit exploitation of the quartz sand in the overburden
   overlaying IPA’s coal are being progressed. Agreement in principle has
   been reached with IPA’s coal mining contractor to extend the latter’s
   current coal mining contract with IPA to cover the mining of quartz sand
   on terms similar to those applicable to the contractor’s mining of IPA
   coal. Commencement of sand recovery operations remains dependent upon the
   issue of the necessary environmental licence by the Indonesian
   authorities.

    

   Wet weather has delayed mobilisation in preparation for opening the quarry
   at the andesite stone concession held by PT Aragon Tambang Pratama
   (“ATP”), to which the group has also made loans. Of the two crushers that
   have been purchased by ATP, one is now in situ but deep mud on the road
   into the quarry (following weeks of rain) has delayed delivery of the
   second, although recent drier weather should shortly bring an end to the
   delay. Quarrying is now expected to commence during the second half of the
   year, with stone production initially being used to upgrade access to the
   quarry.

    

   Prices for both thermal and coking coal have weakened considerably in
   recent weeks. IPA aims to offset the impact of this by gradually
   increasing production over the remainder of the year. Nevertheless, it is
   likely that the lower prices, coupled with the need to fund the opening of
   the ATP quarry and the commencement of tax payments following full
   utilisation of brought forward tax losses, will mean that net loan
   repayments to the group by IPA and ATP will be much lower in 2023 than
   they were in 2022.

    

   Finance

    

   Good progress is being made in the group’s negotiations with its
   Indonesian banker, PT Bank Mandiri Tbk (“Bank Mandiri”) for a development
   loan to fund a proportion of the extension planting costs at the group’s
   newest estate, PT Praesetia Utama (“PU”). Negotiations have been assisted
   by the recent renewal for a further 25 years of two of the group’s HGU
   land titles which form part of the security for the bank’s existing loans
   to the group.

    

   In addition, IPA and ATP are exploring options for refinancing a portion
   of their existing loans from the group.

    

   Results and dividends

    

   Results for the group for the first half of 2023 will reflect the lower
   selling price for CPO by comparison with 2022. In addition, it is likely
   that the results will include a significant exchange loss arising from the
   strengthening of the Indonesian rupiah against the US dollar with the
   rupiah currently standing at Rp14,888=$1 against Rp15,731=$1 at the
   beginning of the year.

    

   As previously announced, the semi-annual preference dividend of 4.5p per
   share falling due on 30 June 2023 in respect of the half year ending on
   that date will be paid on 30 June 2023. The directors continue to expect
   that the semi-annual dividends on the preference shares arising on 31
   December 2023 and in 2024 will be paid as they fall due.

    

   The directors stated in the annual report published on 19 April 2023 that,
   provided that operational performance and cash flows continued at
   satisfactory levels, they would aim to eliminate the arrears of preference
   dividend (7p per share) by the end of 2023. The recent fall in CPO and
   coal prices, if sustained, will mean that results and cash flows are
   likely to be lower than was expected on 19 April 2023. Nevertheless,
   provided that there is no further deterioration and the financing
   initiatives noted above provide the additional funding that the directors
   anticipate, the directors still expect that payment of the arrears of
   preference dividend can be made in conjunction with the semi-annual
   dividend arising on 31 December 2023.

    

   Outlook

    

   Looking towards the second half of the year, agricultural production
   should, as is normal, be higher than in the first half and should see
   further benefits from ongoing investments to improve operating
   efficiencies in field operations. Whilst the results for the year will be
   dependent upon CPO prices achieved over the rest of the year, falling
   levels of fertiliser prices will assist the group in offsetting other
   inflationary impacts on costs.

    

   Looking forward to 2024 and beyond, mining of the remaining coal reserves
   at IPA can be expected to augment group cash flow for two more years while
   commencement of quartz sand production at IPA and stone production at ATP
   have the potential to provide material and stable additional cash flows to
   the group for many years to come.
    

   Enquiries:
   R.E.A Holdings plc
   Tel: 020 7436 7877

    

   ══════════════════════════════════════════════════════════════════════════

   Dissemination of a Regulatory Announcement that contains inside
   information in accordance with the Market Abuse Regulation (MAR),
   transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

   ══════════════════════════════════════════════════════════════════════════

   ISIN:          GB0002349065
   Category Code: AGM
   TIDM:          RE.
   LEI Code:      213800YXL94R94RYG150
   Sequence No.:  249325
   EQS News ID:   1652051


    
   End of Announcement EQS News Service

   ══════════════════════════════════════════════════════════════════════════

    1 fncls.ssp?fn=show_t_gif&application_id=1652051&application_name=news&site_id=refinitiv2

References

   Visible links


============