REG-R.E.A. Holdings plc R.E.A. Holdings plc: Trading update

R E A HoldingsAnnouncement

23/01/2025 07:15

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   R.E.A. Holdings plc (RE.)
   R.E.A. Holdings plc: Trading update

   23-Jan-2025 / 07:00 GMT/BST

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

    

   REA, whose principal business is the cultivation of oil palms in the
   province of East Kalimantan in Indonesia and the production and sale of
   CPO and CPKO, is pleased to announce a trading update for the year ended
   31 December 2024.  

    

   All terms in this announcement are listed on the group’s website at:
    1 www.rea.co.uk/about/glossary.

    

   Agricultural operations

    

   Key agricultural statistics for the year to 31 December 2024 (with
   comparative figures for 2023) were as follows:

                                                    2024    2023
   Fresh Fruit Bunch (“FFB”) harvested (tonnes):                
   Group                                         682,522 762,260
   Third party                                   210,594 231,823
   Total                                         893,116 994,083
                                                                
   Production (tonnes):                                         
   Total FFB processed                           857,575 949,701
   FFB sold                                       34,192  45,032
   CPO                                           190,235 209,994
   Palm kernels                                   44,286  47,324
   CPKO                                           18,086  19,393
                                                                
   Extraction rates (per cent):                                 
   CPO                                              22.2    22.1
   Palm kernel                                       5.2     5.0
   CPKO*                                            40.6    40.2
                                                                
   Rainfall (mm):                                               
   Average across the estates                      2,707   3,225

    

   *Based on kernels processed

    

   Group FFB production for 2024 fell some 10 per cent below production in
   2023. Albeit that crop levels were weighted to the second half of the
   year, this weighting was less pronounced than usual with no discernible
   peak period as has been typical in the latter months of the year. The
   lower overall level of production and absence of a peak period is
   attributed to climatic factors and is reported to have been widespread
   across Indonesia. Additionally, the group’s lower crop volumes reflected
   the reductions in hectarage due to clearing of mature areas for
   replanting, as well as various other adjustments.

    

   Third party FFB was similarly impacted by the climatic factors that
   reduced production generally and, in turn, CPO production mirrored the
   drop in total FFB processed.

    

   The CPO extraction rate for the year averaged 22.2 per cent, consistently
   in the upper quartile when compared against local benchmarks. Oil losses
   in the mills remain comfortably below industry standards.

    

   Under experienced engineering management and with the benefit of recent
   substantial investments, improvements in operating efficiency and capacity
   utilisation in the group’s three mills were reflected in increased average
   throughput per hour and a reduction in the number of breakdowns and,
   therefore, reduced labour costs.

    

   Replanting and extension planting continued on schedule during 2024 with a
   total of, respectively, 1,500 and 1,000 hectares completed by the end of
   the year.

    

   Agricultural selling prices

    

   Firmer selling prices throughout 2024 served to offset the impact of lower
   production.

    

   Opening at $925 per tonne, CIF Rotterdam, prices steadily increased to
   peak at $1,390 per tonne in mid December and ended the year at $1,265 per
   tonne. Despite some increased volatility in recent weeks, CPO prices have
   remained comfortably above the $1,000 per tonne mark since the start of
   2025 and currently stand at $1,200 per tonne.

    

   The average price realised from sales of CPO in 2024, including premia for
   certified oil but net of export levy and duty, adjusted to FOB Samarinda,
   was $819 per tonne (2023: $718 per tonne). The average selling price for
   the group’s CPKO, on the same basis, was $1,094 per tonne (2023: $749 per
   tonne).

    

   As previously explained, the Indonesian government applies duties and
   tariffs on exports of CPO and CPKO. These tariffs are calculated on a
   sliding scale by reference to a CPO reference price that is set
   periodically by the Indonesian government on the basis of recognised
   benchmark CPO prices. Export levy is payable to a dedicated fund that
   utilises levy income to support measures designed to benefit the growing
   of oil palms in Indonesia. Export duty is a tax payable to the Indonesian
   government. The applicable tariffs, which are adjusted from time to time,
   are published on the group’s website at:
    2 www.rea.co.uk/investors/cpo-export-tariffs.

    

   The group sells CPO into the local Indonesian market which is not subject
   to export levy or export duty. However, arbitrage between the Indonesian
   and international CPO markets normally results in a local price that is
   broadly in line with prevailing international prices after adjustment of
   the latter for delivery costs and export tariffs and restrictions. Changes
   to export tariffs and restrictions therefore have an indirect effect on
   the prices that the group achieves on sales of its CPO.

    

   Local prices for CPO and CPKO, FOB Belawan/Dumai, currently stand at,
   respectively, $837 and $1,485 per tonne (2024: $833 and $1,145 per tonne).

    

   Sustainability and Environmental, Social and Governance

    

   Each year the group participates in the SPOTT assessment by the Zoological
   Society of London which assesses palm oil producers, processors and
   traders on their disclosures regarding their organisation, policies and
   practices with respect to ESG matters. In the 2024 assessment, published
   in November, the company’s score increased from 88.7 per cent to 91.5 per
   cent, compared with an average score of 48.2 per cent, ranking the group
   8th (2023: 12th) out of the 100 palm oil companies assessed.

    

   With increasing focus on addressing the challenges of climate change and
   deforestation, during 2024 the group installed processes and control
   systems to enable the group to make sales of segregated oil processed in
   one of its three mills (COM) and to comply with the requirements of EUDR.

    

   An independent assessment was conducted to verify the group’s preparedness
   for EUDR and concluded that the group had established a robust system to
   meet the requirements of the EUDR due diligence system. EUDR, which will
   prevent sales of non-compliant vegetable oils in the EU, was due to come
   into effect at the end of 2024 but implementation has been delayed by one
   year. COM remains ready to supply EUDR compliant CPO that is expected to
   command higher sales premia as soon as EUDR comes into force but, in the
   meanwhile, can now sell RSPO compliant identity preserved segregated CPO
   which should also attract valuable premia.

    

   In parallel, the group has continued to work with smallholder suppliers to
   increase the certified component of the group’s overall supply chain and
   to promote sustainable palm oil production. As a result, the proportion of
   the group’s current CPO production that is RSPO certified is continuing to
   increase towards the target of 100 per cent by the end of 2025.

    

   Stone and sand operations

    

   Development of the stone concession held by ATP and the sand concession
   held by MCU continued to progress towards commercial production throughout
   2024.

    

   With the access roads to the ATP quarry now open, some 75,000 tonnes of
   stone had been produced, and the first volumes of some 40,000 tonnes had
   been sold and delivered, by the end of the year. Production to date has
   been from large boulders found across the ATP concession area as a result
   of past rock falls, but work is now in hand to establish access to the
   west face of the andesite deposit and to start bench quarrying on that
   face around mid year. In the interim, clearance of access to the west face
   will provide increasing volumes of loose rock for crushing and sale. ATP
   expects to scale up production steadily throughout 2025, with a target of
   100,000 tonnes per month by year end and thereafter. Local demand for
   crushed stone for infrastructure projects remains strong and, as
   production levels increase, ATP aims to conclude offtake agreements with
   major interested purchasers at remunerative prices.

    

   MCU has agreed arrangements for the production of silica sand in the
   overburden overlaying IPA’s coal with IPA’s coal mining contractor, who
   already has equipment on site and has, to date, stockpiled some 16,000
   tonnes of sand. The contractor has been appointed to mine the silica sand
   on behalf of MCU on terms similar to those that previously applied to
   mining coal at IPA. The contractor will commission a sand washing plant in
   the coming weeks and thereafter expects to be in a position to produce
   some 50,000 tonnes of sand per month, scaling up to some 100,000 tonnes
   per month in the second half of the year. The market for sand appears to
   be large, but under greater price pressure than the market for stone.
   Nonetheless, offtake agreements should be at prices and for volumes that
   will support commercial production.

    

   Agreements have been put in place to establish ATP as a 95 per cent
   subsidiary of the company and MCU as a 49 per cent owned associate
   company. Both companies are now being run and accounted for on that basis.
   Applications to complete formalisation of the new ownership structure are
   in progress.

    

   Finance

    

   The semi-annual dividends arising on the preference shares in June and
   December 2024 were paid on their respective due dates.

    

   During 2024, a total of £9,186,000 nominal of the 8.75 per cent guaranteed
   sterling notes 2025 issued by the company’s wholly owned subsidiary, REAF,
   were purchased for cancellation. The purchases were made through Guy
   Butler Limited as to £3,000,000 nominal in September 2024, as to
   £4,626,000 nominal in October 2024 and as to £1,560,000 nominal in
   December 2024. Following the purchase and cancellation in January 2025 of
   a further £300,000 nominal of sterling notes, currently there remain in
   issue £21,366,000 nominal of sterling notes due for redemption at 104 per
   cent of their nominal amount on 31 August 2025.

    

   In preparation for that redemption, the group has been taking steps to
   secure additional local bank funding in Indonesia. As a result, agreements
   were reached with Bank Mandiri during 2024 for an additional Rp 350
   billion ($21.4 million) loan to REA Kaltim, a new loan of Rp 250 billion
   ($15.3 million) to CDM, a repackaged loan facility for KMS providing an
   additional Rp 157 billion ($9.6 million), and to permit immediate draw
   down of all three loans. Net of 2024 repayments totalling Rp 230 billion
   ($14.1 million) of existing Bank Mandiri loans, these new loans provided
   the group with additional cash resources of Rp 527 billion ($32.2
   million).

    

   Outlook

    

   The historically high CPO price ruling in the second half of 2024
   reflected the lower levels of CPO production seen during the year. Whilst
   it is likely that there will be some recovery in production going forward,
   supplies remain tight and are expected to stay that way well into 2025 as
   Indonesia continues to push increased use of biodiesel in transport
   fuel. This encourages the hope that prices will be sustained at levels
   above the average for 2024. 

    

   The better average price for CPO over 2024 more than offset the decline in
   crop. As a result, the group will report improved results for
   2024. Looking forward, yields are expected to recover from the slightly
   depressed levels of 2024 and, if prices do remain at above the average
   level of 2024, this should mean a further improvement in the profitability
   of the agricultural operations. With the addition in 2025 of positive
   contributions from the stone and sand operations, the prospects for the
   group are encouraging. 

    

   Publication of results

    

   In line with the timetable adopted in previous years, the final results
   for 2024 are due to be announced, and the annual report in respect of 2024
   published, at the end of April 2024.

    

    

   Enquiries:

   R.E.A. Holdings plc

   Tel: 020 7436 7877

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   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.

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   ISIN:          GB0002349065
   Category Code: TST
   TIDM:          RE.
   LEI Code:      213800YXL94R94RYG150
   Sequence No.:  372188
   EQS News ID:   2072865


    
   End of Announcement EQS News Service

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