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R.E.A. Holdings plc (RE.)
R.E.A. Holdings plc: Trading Statement
31-Jan-2018 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
EQS Group.
The issuer is solely responsible for the content of this announcement.
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R.E.A. Holdings plc ("REA" or the "company")
Trading update
Highlights
• Total FFB up 14 per cent in 2017 to 644,570 tonnes (2016: 566,423
tonnes)
• Group FFB up 13 per cent in 2017 to 530,565 tonnes (2016: 468,371
tonnes)
• Stronger extraction rates in second half of 2017: CPO at 23 per cent
(first half 2017: 22 per cent) and CPKO at 39 per cent (first half
2017: 37 per cent)
• Negotiations around the divestment of certain outlying plantation
assets progressing well with indicative proposals expected in February
• Plans to reopen the coal concession at Kota Bangun progressing well,
with anticipated acquisition of adjacent mine and associated permits
expected to lead to subsequent sale of existing 16,000 tonne stockpile
Agricultural operations
Key agricultural statistics for the year to 31 December 2017 (with
comparative figures for 2016) were as follows:
2017 2016
FFB crops (tonnes):
Group harvested 530,565 468,371
Third party harvested 114,005 98,052
Total 644,570 566,423
Production (tonnes):
Total FFB processed 630,600 560,957
CPO 143,916 127,697
Palm kernels 29,122 26,371
CPKO 11,052 9,840
Extraction rates (percentage):
CPO 22.8 22.8
Palm kernel 4.6 4.7
CPKO 38.0 34.7
Rainfall (mm):
Average across the estates 3,620 3,449
Production showed a marked improvement in 2017; the recovery which started
in the middle of 2017 continued into the second half. This is
particularly encouraging following the harvesting and transportation
difficulties experienced at the end of 2016 and into the first half of
2017. Cropping was up 18 per cent to 342,000 tonnes of FFB from 290,000
tonnes of FFB in the first half, notwithstanding that the outcome for the
last quarter of the year was more muted than had been envisaged. This was
partly because the remedial action required across the group's estates in
both the field and infrastructure took longer than expected to complete
and partly because of the number of harvesting days disrupted by rain
during the traditional peak cropping period.
Mill extraction rates also improved in the second half of the year,
averaging consistently above 23 per cent for CPO and 39 per cent for CPKO,
compared with 22 per cent and 37 per cent in the first half.
Development work at PBJ was hampered by the weather conditions throughout
2017 as extension planting, planned to occur predominantly in lower lying
areas in the north west section, had to be postponed until consistently
drier weather would permit bunding to control flooding to be completed. As
weather conditions become more favourable and with certain land issues in
respect of the remaining pockets of immediately plantable land in PBJ now
resolved, clearing and planting of PBJ will accelerate over the coming
months.
Towards the end of 2017, the group conducted a review of the development
programme for CDM. As a consequence of this review, the planting of 1,000
hectares originally planned in CDM has been cancelled in order to
concentrate on larger, near contiguous blocks within this estate with a
view to completing this development in the most cost-effective manner
while at the same time protecting the important conservation reserves in
the wetland area.
Delays in the PBJ planting and the review of the CDM development programme
meant that the previously announced target of completing 3,000 hectares in
PBJ and CDM combined in 2017 was not achieved. The balance of the
targeted 3,000 hectares has been carried over to 2018 and, following
completion of this, extension planting in 2018 is now expected to be
concentrated on PU and areas of PBJ2 contiguous with SYB.
Actual development in 2017 was as follows:
Hectares 2017
Cleared, not yet planted at 1 January 2017 1,581
Cleared during the period 780
Cleared, not yet planted at end of period (1,200)
Planted during the period 1,161
Pricing
The CPO price, CIF Rotterdam, had a strong start to the year rising from
$790 per tonne at the beginning of January to $857 per tonne by the middle
of the month on the back of generally lower production. Thereafter, with
stock levels increasing and expectations of significant production growth
in the second half of the year, the price declined, reaching a low point
of $645 at the end of June and ending the year at $670. Prices are
currently at $667.50 per tonne and expectations are that they will be
stable around this level at least for the first half of 2018, as growing
consumption in India and Asia continues to absorb the projected supply
increases in the early months of the year.
CPKO maintained high premia over CPO throughout 2017. The price peaked at
$1,860 per tonne, CIF Rotterdam, in late January, reflecting concerns at
the continued inadequacy of supplies of coconut oil for which CPKO can be
a substitute. As concerns about supplies of alternatives abated, prices
drifted down to end the year at $1,242 per tonne. They are currently
stable at around this level, nearly double the price of CPO.
Divestment
Negotiations for the divestment of certain outlying plantation assets, as
noted in the group's half yearly report in September 2017, are progressing
well. A number of potential purchasers have registered their interest and
indicative proposals for the purchase of the assets concerned should be
received in February.
Stone and coal operations
The limestone quarry adjacent to the group's PBJ property commenced
operations in May 2017 delivering stone to the crushing facility that has
been established on PBJ land. Crushing operations commenced in September
and crushed stone is now being used for road hardening in PBJ. The
balance of stone not required by PBJ will be sold to third parties.
The group has commenced discussions with a third party interested in
establishing a joint venture to develop and operate the group's andesite
stone concession. The discussions are at an early stage, but it is
contemplated that the third party would operate the quarry, market the
crushed stone production and provide the development funding required in
exchange for a share of future profits.
Plans to reopen the coal concession at Kota Bangun are progressing well.
The group expects shortly to complete the acquisition of an adjacent mine
and the relicensing of the established loading point on the Mahakam River,
together with a coal conveyor that crosses the group's concession and runs
to the loading point. This will permit completion of the sale of the
existing coal stockpile at the concession of some 16,000 tonnes, followed
by dewatering and recommencement of mining.
Outlook and publication of results
After a difficult two years, the group has made positive strides in
turning round its operations. Whilst it has taken time to address the
consequences for field disciplines of a shortage of skilled harvesters and
infrastructure deficiencies, the more robust and experienced estate
management team now in place is working to restore the group's operations
to their previous high standards.
Building on the stronger production in the second half of 2017, the
directors remain optimistic about the outlook for the group in 2018 with
FFB production expected to be materially ahead of the 530,000 tonnes in
2017 and 468,000 tonnes in 2016.
In line with the timetable adopted in previous years, it is expected that
the final results for 2017 will be announced, and the annual report in
respect of 2017 published, at the end of April 2018.
Enquiries:
R.E.A Holdings plc
Tel: 020 7436 7877
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ISIN: GB0002349065
Category Code: TST
TIDM: RE.
LEI Code: 213800YXL94R94RYG150
Sequence No.: 5158
End of Announcement EQS News Service
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649737 31-Jan-2018
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