Feronia Inc. ("Feronia" or the "Company") (TSX VENTURE:FRN) today
released its unaudited consolidated financial results for the three
months and nine months ended September 30, 2011. All amounts in
this release are expressed in US dollars unless otherwise
indicated.
Key 3rd Quarter Highlights:
-- Produced 1,917 tonnes of Crude Palm Oil ("CPO"), up 90% from third-
quarter 2010
-- Replanted 729 hectares of oil palm during the quarter bringing the total
area replanted in the nine months ended September 30, 2011 to 1,768
hectares
-- Achieved gross margin of 50% for the quarter and 45% for the nine months
ended September 30, 2011 compared to -6% and 8% for the respective
comparable periods in 2010
-- Realized average sales price for CPO of $991/tonne compared to
$742/tonne in the third quarter of 2010
-- Completed preparation of land at arable operations for first commercial
crop of rice
Bill Dry, CEO stated, "Feronia continues to make significant
progress at its oil palm division as measured by our two key
operational drivers: increased CPO production and new plantings. On
a year-over-year basis, palm oil production was up 90% to 1,917
tonnes in Q3 2011, and a total of 1,768 hectares of new oil palms
have been planted in the nine months ending September 30, 2011. The
arable farming operations have also continued to progress according
to our development plan with land preparation, including the
application of lime completed during the third quarter. This will
allow us to sow the Company's first commercial crop of rice during
the fourth quarter."
Third Quarter 2011 Financial Highlights:
-- Revenue was $1,345,302, an increase of 4% from $1,290,793 in the third
quarter of 2010.
-- Net loss was $607,533 for the third quarter of 2011 compared to a loss
of $1,516,095 in the third quarter of 2010.
-- Cash, cash equivalents and short-term investments as at September 30,
2011 were $19,438,731 compared to $27,883,375 as at June 30, 2011 and
$8,907,686 as at December 31, 2010.
Revenue
During the third quarter of 2011, Feronia's revenue was
$1,345,302, an increase of 4% from $1,290,793 in the third quarter
of 2010. Revenue for the nine months to September 30, 2011 was
$4,438,045, an increase of 47% from $3,027,263 in the nine months
ended September 30, 2010.
During the third quarter of 2011, the Company's major CPO
customer engaged in normal course maintenance at its plant which
resulted in temporary closures and reduced operating capacity. As a
result, CPO sold during the quarter ended September 30, 2011 was
approximately 1,200 tonnes compared to 1,917 tonnes produced. It is
anticipated that in the fourth quarter of 2011, the Company will
sell more CPO than it will produce and the CPO held in inventory
will be reduced.
The following table provides a summary of palm fruit production,
CPO and revenues:
Three months ended Sept 30 Nine months ended Sept 30
----------------------------------------------------------------
% %
2011 2010 Change 2011 2010 Change
Palm Fruit
Production
Total Tonnes 11,608 6,549 77% 36,362 23,209 57%
Crude Palm
Oil (CPO)
Total Tonnes 1,917 1,007 90% 6,212 3,764 65%
Oil
Extraction
rate 16.5% 15.4% 17.1% 16.2%
Revenues $1,345,302 $1,290,793 4% $4,438,045 $3,027,263 46%
As a result of the replanting programme and the focus on
replacing older, lower yielding oil palms, there were fewer
producing hectares in the third quarter of 2011 (12,753) compared
to the third quarter of 2010 (13,338). Notwithstanding the reduced
productive area the total tonnage of fruit production increased 77%
on a year-over-year basis. This increase is attributed to improved
harvesting and collection practices that have resulted in higher
realized yields. The improved harvesting and collection can be
attributed to investments made in road improvements and the
introduction of additional vehicles. Oil production increased by
90% over the same periods. Oil production improved by a greater
rate than fruit production due to higher oil extraction rates
("OERs"). The improvement in OERs is attributed to the
rehabilitation of the oil palm mills.
It is anticipated that the ongoing investment in road
improvement and transportation will result in further improvements
in harvesting and collection. OERs are anticipated to continue to
show a positive trend through improved harvesting and collection
practices and the application of fertilizer.
Operating Costs
Operating costs for the third quarter of 2011 were $2,072,572,
an increase of $518,460, or 33%, compared to the third quarter of
2010. The increase in the third quarter of 2011 was primarily a
result of increases in professional fees, and general and operating
expenses of $173,532 and $216,901 respectively, partially offset by
a decrease in share-based payments.
Gain in Valuation of Biological Assets
Biological assets for the Company have been identified as bearer
assets: these are the plantations which will continue to generate
revenue for the Company. The Company values the biological assets
on the basis of discounted cash flows over the assets expected
25-year economic life using the three-year rolling average price of
CPO and a discount rate of 22%. As the price of CPO has risen over
the last nine months, the valuation of the plantations has
increased which gives rise to a gain on valuation of biological
assets. Under IFRS, plantation costs are not capitalized and have
been expensed in 2011. In prior years, these costs were capitalized
and have now been expensed in 2010.
Net Income for the Year
The Company had a net loss for the third quarter of $607,533
compared to a loss of $1,516,095 in the third quarter of 2010. The
net loss for the nine months ended September 30, 2011 was $454,561
compared to a loss of $4,276,655 for the nine months ended
September 30, 2010.
Cash Flows and Liquidity
Cash, cash equivalents and short-term investments were
$19,438,731 as at September 30, 2011, compared to $8,907,686 at the
end of 2010 and $27,883,375 as at June 30, 2011.
For the quarter and nine months ended September 30, 2011,
working capital requirements resulted in cash outflows of
$6,092,278 and $6,698,895 respectively. For the quarter ended
September 30, 2011 the net cash outflow of $6,092,278 was driven
primarily by an increase in prepaid expenses of $4,387,040 and an
increase in inventory of $1,413,671. The increase in prepaid
expenses was primarily driven by payments made in advance towards
purchases of equipment, machinery for the arable farms, vehicles
and fertilizer. The increase in inventory is primarily driven by
CPO being produced during the quarter but not shipped due to normal
course maintenance at a major customer`s plant. It is anticipated
that inventory will decline in the fourth quarter as the CPO
produced in the third quarter is shipped.
Investing activities resulted in cash outflows of $880,000 for
the quarter ended September 30, 2011 and $4,854,000 for the nine
months ended September 30, 2011.
Major outstanding anticipated cash requirements are related
to:
i. Completion of the new oil palm mill at Yaligimba;
ii. Completion of the rice mill to service the arable operations;
iii. Acquisition of fertilizer for use at the oil palm plantations; and
iv. Completion of the storage and drying facilities to service the arable
operations.
The Company has sufficient cash resources to complete the
currently anticipated expenditures.
Key Metrics and Recent Developments by Operating Segment
Palm Oil Operations
Key Metrics:
Nine Months Ended September 30, 2011
Lokutu Yaligimba Boteka TOTAL 2010 2009
------------------------------------------------------------
Immature
Hectares 2,091 1,785 960 4,836 2,852 2,795
Producing
Hectares 6,319 4,343 2,091 12,753 13,338 12,730
Fruit Production
(tonnes) 24,531 4,429 7,402 36,362 23,209 18,750
Oil Produced 4,435 500 1,277 6,212 3,764 2,920
Oil Extraction
Rate 18.1% 11.3% 17.3% 17.1% 16.2% 15.6%
Recent Developments:
-- Palm kernel oil mill at Lokutu plantation completed enabling commercial
production of palm kernel oil ("PKO").
-- Replanting targets met and exceeded with 729 hectares of oil palm
replanted during the quarter and 1,768 hectares replanted in the nine
months ending September 30, 2011 against an objective to replant 2,000
hectares during the calendar year.
-- Vendor selected for the construction of new oil palm mill at Yaligimba
plantation.
Arable Farm Operations
Recent Developments:
-- Reclamation of 2,000 hectares of land completed.
-- Import and delivery of required equipment and inputs completed.
-- Application of lime completed.
-- Seed bed prepared for planting of first crop of rice.
Outlook
"The key drivers for the success of Feronia are new plantings
and increasing production volumes" said Feronia Chairman Ravi Sood.
"The short and medium-term objectives reflect the focus on these
key metrics."
In the fourth quarter the key objectives for the Company
are:
i. Completion of the 2,000 hectare oil palm replanting programme;
ii. Production of 2,000 tonnes of CPO; and
iii.Completion of the sowing of the first commercial crop of rice on at
least 1,000 ha.
"The demand for edible oils and staple crops remains robust both
locally and globally. Feronia is well positioned to displace
high-cost imports and to service increasing demand in local markets
for our products driven by both population and per capita economic
growth. We are optimistic that the Company can continue to build on
its recent successes and the 100 years of operating history in the
DRC to extend its leading position, creating substantial
shareholder value in the process," added Sood.
Second Quarter Financial Statements Amended
The Company has refiled its unaudited condensed consolidated
interim financial report for the three and six months ended June
30, 2011 (the "Q2 Report").
During the preparation of the financial statements for the
quarter ended September 30, 2011, an error in the computation of
the gain on biological assets for the quarter ended June 30, 2011
was uncovered. The accounting error is attributable to a
miscalculation of the value of the current portion of biological
assets at June 30, 2011.
The impact of correcting this error on the Q2 Report is as
follows:
Three Months Six Months
Ended Ended
June 30, 2011 June 30, 2011
------------------------------
Decrease gain on biological assets 691,340 691,340
Decrease income tax expense 276,536 276,536
------------------------------
Decrease income (loss) and total comprehensive
income for the year 414,804 414,804
Decrease earnings per share, basic 0.00 0.00
Decrease earnings per share, diluted 0.00 0.00
The Company has recently strengthened its accounting department
through the hiring of a full-time Financial Controller and other
support personnel. To reflect the changes made in the amended Q2
Report, the Company has also refiled its MD&A for the
corresponding period. The Company has also amended the "Warrant
Reserve" table on page 25 of the Q2 Report, under Note 8 -
Share-based payment and warrant reserves.
About Feronia Inc.
Feronia Inc. is a large-scale commercial farmland and plantation
operator in the Democratic Republic of the Congo ("DRC"). The
Company uses modern agricultural practices to operate and develop
its oil palm plantations and arable farming business division.
Feronia believes in the immense agricultural potential of the DRC
for high-quality foodstuffs and edible oils given its ideal
climate, excellent soil and highly skilled and experienced
workforce. Feronia's management team is comprised of senior
agriculturalists with extensive experience in managing both
plantations and large-scale mechanized farming operations in
emerging markets. Feronia is committed to sustainable agriculture,
environmental protection and providing support for local
communities. For more information please see www.feronia.com.
Cautionary Notes
Except for statements of historical fact contained herein, the
information in this press release constitutes "forward-looking
information" within the meaning of Canadian securities law. Such
forward-looking information may be identified by words such as
"anticipates", "plans", "proposes", "estimates", "intends",
"expects", "believes", "may", "will" and include without
limitation, statements regarding proposed capital expenditure; the
Company's plan of operations and comparative advantages; plans
regarding sowing rice and replanting oil palms; sales estimates and
inventory levels in the fourth quarter of 2011; improvements in
harvesting and collection; and positive trends regarding OERs.
There can be no assurance that such statements will prove to be
accurate; actual results and future events could differ materially
from such statements. Factors that could cause actual results to
differ materially include, among others, regulatory risks, risks
inherent in foreign operations, commodity prices, competition, and
investments having no history of operations. Most of these factors
are outside the control of the Company. Investors are cautioned not
to put undue reliance on forward-looking information. Except as
otherwise required by applicable securities statutes or regulation,
the Company expressly disclaims any intent or obligation to update
publicly forward-looking information, whether as a result of new
information, future events or otherwise.
Neither the TSX Venture Exchange nor its regulation services
provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Feronia Inc. Ravi Sood Chairman (416)
907-2026Ravi.Sood@feronia.com Feronia Inc. Bill Dry CEO 44 (0) 7887
525 046Bill.Dry@feronia.comwww.feronia.com
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