26 May 2023
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
The Group, which is a major producer of palm oil and to a lesser extent rubber with plantations across Indonesia and Malaysia, amounting to approximately 128,000 hectares, today announces a trading update in respect of the first quarter ended 31 March 2023.
Operational and financial performance
For the first three months ended 31 March 2023, our own production of fresh fruit bunches ("FFB") from continuing operations was 243,500mt, a decrease of 6% compared to the same period in 2022 (3M22: 260,100mt). FFB production from discontinued operations was 7,020mt against 8,610mt for the corresponding period last year. Lower production trends were experienced in all regions except for Bangka and Kalimantan. Rainfalls were close to normal except for CPA in North Sumatera and Bengkulu where the rainfall recorded in March 2023 exceeded 520mm and 460mm respectively, disrupting harvesting activities.
The lower productions in Bengkulu and North Sumatera were due mainly to seasonal variation and the reduction of matured areas as 1,581 hectares were replanted from 2022 to the first quarter of 2023. FFB bought-in was also lower at 204,700mt (3M22: 261,200mt), a decrease of 22%. All the AEP mills experienced a drop in external crop purchases, except for the mill in Kalimantan, in line with the lower crop trend and the intense competition for external crops. As a result, crude palm oil ("CPO") production was lower by 14% at 92,600mt compared to 107,300mt for the same period last year.
The CPO price ex-Rotterdam averaged $1,016/mt for the first three months to 31 March 2023, a decrease of 36% from the average price of $1,592/mt recorded in the first quarter of 2022 and was below $1,060/mt at the start of the year. The ex-mill price, as a result, was lower by 27% at $763/mt compared to $1,041/mt for the same period last year. Rising soft-oil stocks, declining soybean oil prices and fragile demand on the back of inflationary pressure are the likely reasons for the decline in CPO prices.
The Group's balance sheet remains strong with no outstanding bank loans. The Group has net cash of $284.6 million as at 31 March 2023 compared to $252.5 million for the same period last year.
AEP has plantations across Indonesia and Malaysia, amounting to approximately 90,700 hectares from continuing operations, of which approximately 68,350 hectares including plasma are planted. For discontinued operations, AEP has 37,300 hectares of plantations in which 7,750 hectares including plasma are planted. New planting for the first three months ended 31 March 2023 was higher at 202 hectares (3M22: 192 hectares) including plasma. Another 329 hectares were replanted in Bengkulu in the first three months of 2023.
On 9 May 2023, AEP announced an unfortunate incident at the HPP mill causing a tragic loss of lives of four employees of the contractor. As a result, the Group expects a delay in completion to the operational date for the newly built, seventh mill in Indonesia, of approximately six months. The HPP plantation's operation in the production of FFB is unaffected by this incident, and the Group expects no financial impact as a result of this incident of the delay.
The design works for the eighth mill in KAP in Kalimantan are being finalised. The earthworks is scheduled to begin after approval of the necessary building permits and environmental impact assessment. We are hopeful to start the earthworks by the end of the third quarter of 2023.
The CPO price ex-Rotterdam started the year at $1,060/mt. Since then, it has trended downwards to close at $925/mt on 24 May 2023.
CPO's rare premium, of late, over its rival soft oils is likely to be short-lived as Indonesia relaxes its rules on the domestic market obligation ("DMO") and allows more exports after the Eid holidays. Global palm supplies were artificially tight as Indonesia imposed curbs on exports in March 2023 in anticipation of higher local demand for cooking oil ahead of the festivities.
Rapeseed production has rebounded in Europe and Canada, whilst it has been reported that Russia and Ukraine have been trying to liquidate their sunflower seeds quickly putting further pressure on CPO prices. A pullback in CPO prices is likely as crop production improves from the second half of the year.
There is also a likelihood of El-Nino weather phenomenon developing in the second half of the year inducing drought and fire in some parts our plantations thus affecting crop production and CPO prices.
For further enquiry, contact:
Anglo-Eastern Plantations Plc
Dato' John Lim Ewe Chuan +44 (0)20 7216 4621
Panmure Gordon (UK) Limited
Dominic Morley / Amrit Mahbubani +44 (0)20 7886 2500
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.