Interim Results for six months ended 30 June 2024

Anglo-Eastern Plantations Plc

("AEP", "Group" or "Company")

Announcement of interim results for the six months ended 30 June 2024

The group, comprising Anglo-Eastern Plantations Plc and its subsidiaries (the "Group"), is a major producer of palm oil and rubber with plantations across Indonesia and Malaysia, has today released its results for the six months ended 30 June 2024.

Financial Highlights

Enquiries:

Chairman's Interim Statement

The interim results for the Group for the six months to 30 June 2024 were as follows:

Revenue for the six months to 30 June 2024 was $166.7 million, 4% lower than $173.4 million reported for the same period of 2023. The Group's gross profit after BA movement for the six months of 2024 was $36.3 million, 9% higher than $33.2 million for the same period of 2023.

The BA movement for the first half of 2024 was a credit of $1.8 million representing an increase in fair value of our Fresh Fruit Bunches ("FFB") as compared to a credit of $0.3 million for the same period last year.

Profit before tax after BA movement for the first half of 2024 was 8.6% higher at $35.3 million against $32.5 million for the same period last year. The higher profit for the period, notwithstanding the lower sales revenue, was primarily driven by reduced manuring costs due to cheaper fertiliser prices and an increase in the value of biological assets, primarily because of a greater number of unripe bunches on the trees and a higher net realisable value in June 2024 as compared to December 2023.

FFB production for the first half of 2024 was 5% lower at 494,900 mt as compared to 522,700 mt for the same period last year. This was primarily due to lower FFB yield from our old-matured trees in Bengkulu region, Sumatera, which have been earmarked for replanting and their fertiliser programs have been withdrawn 18 months prior to replanting. In addition, there was a further reduction of 1,814 ha of matured palm trees in Bengkulu region this year, of which 1,074 ha of the palms were replanted in 2023, while another 740 ha were cleared for replanting during the first half of 2024. This is part of the Group's replanting program to replenish old and Dura palms with Tenera seedlings which are of better quality to ensure higher FFB yields and better crude palm oil ("CPO") extraction going forward.

Bought-in crops for the first half of 2024 decreased by 8% to 463,300 mt as compared to 501,400 mt of outside crops purchased for the same period last year. The lower quantity purchased was due to the loss of supply of fruits from a competitor's estate who is now processing their own fruits in their own mill in Central Kalimantan as well as intense competition for fruits in Bengkulu region.

Operational and Financial Performance

For the six months ended 30 June 2024, gross profit margin increased to 21.8% from 19.2% as compared to the same period last year. The higher gross margin was mainly due to lower fertiliser prices together with the increase in fair value of our biological assets as at 30 June 2024.

The average ex-Rotterdam CPO price for the first six month to 30 June 2024 was $1,018/mt, which was 3% higher as compared to $991/mt for the same period last year. The Group's average CPO ex-mill price for the first six month was slightly lower at $749/mt as compared to $751/mt for the same period last year. The ex-mill price is normally quoted at a discount to ex-Rotterdam price as buyers factored in freight and insurance charges and deduct CPO export tax and levy imposed by the Indonesian Government. Palm kernel prices averaged at $411/mt, which was 14% higher for the first half year of 2024 against $361/mt for the same period last year.

Profit after tax for the six months ended 30 June 2024 was 15.8% higher at $27.9 million, compared to a profit after tax of $24.1 million, excluding the loss of $2.5 million from the discontinued operations for the same period last year.

The resulting basic earnings per share from continuing operations for the period was 70.58cts (H1 2023: 50.73cts).

The Group's Balance Sheet remains strong with no outstanding bank loans. Net assets as at 30 June 2024 was $519.7 million as compared to $530.7 million as at 31 December 2023 and $617.1 million as at 30 June 2023 respectively. The Group's net assets decreased by $11.0 million since 31 December 2023, largely driven by a currency translation loss of $32.3 million from Rupiah to our reporting currency in USD. This loss was partially net off by a profit of $27.9 million for the six months ending 30 June 2024.

As of 30 June 2024, the Group's cash and cash equivalents including short-term investments known as fixed deposits with banks, was $150.8 million (31 December 2023: $167.1 million, H1 2023: $261.3 million). The reduction in cash & cash equivalents including short-term deposits since the beginning of 2024 was due to cash allocated for investments of $30.0 million, capital expenditure of $12.0 million and loss in foreign currency exchange of $10.0 million net of cash generated from operations for the period of $34.8 million.

Working capital increased by $3.1 million for the period as compared to a decrease in working capital of $24.3 million for the corresponding period last year. The largest component of the movement in working capital related to a $9.9 million advance payment to the Group's Share Registrar for the dividend payment in July 2023, whereas no such advance payment was made during current period. Other fluctuations in working capital are due to timing differences related to normal business operations.

Production costs

Production cost for the Group was lower during the first half of 2024 as compared to the same period in 2023. This was mainly due to savings in manuring cost arising from fertilisers procured at lower prices for first half of 2024. The Group has recently concluded a tender to procure fertilisers at rates up to 40% less than the peak prices in 2022 for the second half of 2024.

Production and Sales

The Group's seven mills processed a total of 936,500mt of FFB during the first half year of 2024, representing a decrease of 8% as compared to 1,015,600mt for the same period last year. This was mainly due to lower internal crop produced, coupled with lower third-party crops purchased for the same period.

Overall, CPO production for the first half of 2024 was 191,200mt, 9% lower than the corresponding period of 210,900 mt in 2023. The Oil Extraction Rate ("OER") for the first half year was 20.4%, which was slightly lower than 20.8% as compared to the same period last year.

Commodity prices

The ex-Rotterdam CPO price started the year at $935/mt and trended upwards during Q1 2024 before peaking at $1,140/mt in early April 2024. It retreated to a low of $980/mt in early June 2024 before it ended higher at $1,030/mt on 28 June 2024, the last business day of the period. CPO price ex-Rotterdam for the first half of 2024 averaged at $1,018/mt, 3% higher than last year (H1 2023: $991/mt). The increase in CPO price was seasonal due to a lower palm production and the higher price trend of competing vegetable oils during first half of 2024. However, despite the price surge, Indonesian CPO exporters were still not able to reap maximum profits due to reduced demand from several countries, particularly China.

Development

The Group's planted areas on 30 June 2024 comprised:

The Group's new planting and replanting for the first six months of 2024 totalled 598 ha compared to 987 ha for the same period last year. In addition, Plasma planting for the period was 42 ha (H1 2023: 89 ha).

The Group remains optimistic that planting will pick up in the second half of 2024 as rainfall normalises. The Group's total landholding comprises of 90,500 ha, of which the planted area stands at 68,469 ha (H1 2023: 68,580 ha) with an estimated remaining plantable area of 9,400 ha (H1 2023: 9,500 ha).

The seventh mill in North Sumatera has commenced processing its estate crop since the beginning of this year. Meanwhile, the Group has initiated the environmental impact assessment ("EIA") for the eighth mill in Kalimantan and the EIA has been submitted to the Ministry of Environment and Forestry for approval before construction can begin.

Dividend and Share Buyback

The Board has decided to revert to paying a final dividend based on profits for the year and it will be declared in accordance with the dividend policy of at least 25% of the profit after tax for the year. Accordingly, no interim dividend has been declared. The final dividend of 15.0 cents per share in respect of the year ended 31 December 2023 was paid on 12 July 2024.

During the period, the Group repurchased 71,852 ordinary shares pursuant to the share buyback programme announced on 24 August 2023. The Group's share buyback programme expired at the conclusion of the Company's AGM on 24 June 2024.

Outlook

In the second half of 2024, palm oil production is expected to increase. Weaker demand from major importers like India and China would exert downward pressure on CPO prices. Additionally, the recent tropical storm Beryl brought heavy rain to the soybean production belt in the USA, which could enhance yields and increase the production of competing vegetable oils for the season. Similarly, soybean production is anticipated to be higher in Brazil and Argentina compared to the previous year. The anticipated increase in supply is likely to push CPO prices downward.

Despite these challenges, Indonesia's ongoing Biodiesel B35 program and the planned implementation of the B40 mandate are expected to boost domestic consumption, thereby supporting CPO prices by tightening supply. The B35 program requires biodiesel to contain 35% palm oil, while the upcoming B40 mandate will increase this requirement to 40%. These initiatives aim to reduce dependence on fossil fuels, promote renewable energy, and absorb more palm oil domestically, which in turn helps to stabilize and support CPO prices by reducing the volume available for export.

In addition, the possibility of La Niña and other extreme weather conditions could reduce palm oil production and disrupt the supply chain, which will also help to support CPO prices.

Barring any unforeseen circumstances, the Group expects satisfactory performance for the remaining half of this financial year.  

Principal risks and uncertainties

For the remaining six months of the financial year, the principal risks and uncertainties include:

·      CPO Price Fluctuations: Variability in CPO prices can significantly impact revenue and profitability. Prices may be influenced by global supply and demand dynamics, trade policies and tariffs, shifts in consumer preferences and geopolitical crises.

·      US Dollar to Rupiah Exchange Rates: Fluctuations in the exchange rate between the US Dollar and the Indonesian Rupiah can affect financial performance. As the reporting currency is USD, changes in the Rupiah's value can lead to gains or losses when translating financial results.

·      Weather and Natural Disasters: Adverse weather conditions or natural disasters could damage palm oil plantations, affecting yields, and production levels and disrupt supply chains.

·      Regulatory Restrictions: Regulatory changes, such as the European Union Deforestation Regulation ("EUDR"), can impact market access and operational costs. Compliance with the EUDR will likely increase operational costs for palm oil companies. These costs stem from the need for enhanced monitoring, certification, and potentially shifting to more sustainable practices, which could impact profitability. The EUDR aims to prevent deforestation by requiring proof that products, including palm oil, are not linked to deforestation, potentially increasing compliance costs and affecting trade. The Group has adopted the No Deforestation, No Peat and No Exploitation ("NDPE") policy since mid-2019.

A more detailed explanation of all principal risks and mitigation steps and other considerations are listed on pages 33 to 38 and from pages 144 to 149 of the 2023 Annual Report which is available at https://www.angloeastern.co.uk/.

Mr Jonathan Law Ngee Song

Chairman

22 August 2024

Responsibility Statements

We confirm that to the best of our knowledge:

a)      The unaudited interim financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34: Interim Financial Reporting as issued by the International Accounting Standards Board and as contained in UK adopted international accounting standards;

b)       The Chairman's interim statement includes a fair review of the information required by Disclosure and Transparency Rule ("DTR") 4.2.7R (an indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year); and

c)       The interim financial statements include a fair review of the information required by DTR 4.2.8R (material related party transactions in the six months ended 30 June 2024 and any material changes in the related party transactions described in the last Annual Report) of the DTR of the United Kingdom Financial Conduct Authority.

By order of the Board

Dato' John Lim Ewe Chuan

Executive Director

22 August 2024