TIDMAEP
RNS Number : 3078E
Anglo-Eastern Plantations PLC
08 April 2014
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Preliminary announcement of results for year ended 31 December
2013
Anglo-Eastern Plantations Plc, and its subsidiaries are a major
producer of palm oil and rubber with plantations across Indonesia
and Malaysia amounting to some 127,800 hectares, has today released
its results for the year ended 31 December 2013.
Financial Highlights
Restated
2013 2012
$m $m
Revenue 201.9 237.4
Profit before tax
- before biological asset ("BA")
adjustment 59.7 88.6
- after biological asset adjustment 153.4 81.9
EPS before BA adjustment 90.70cts 133.99cts
EPS after BA adjustment 235.95cts 119.41cts
Dividend (pence) 3.0p 2.9p
Dividend (cents) 5.0*cts 4.5cts
Note: * Based on exchange rate at 1 April 2014 of
$1.6638/GBP
Enquiries:
Anglo-Eastern Plantations Plc
Dato' John Lim Ewe Chuan 020 7216 4621
Charles Stanley Securities
Russell Cook / Karri Vuori 020 7149 6000
Chairman's Statement
The past year has been extremely challenging. Crude Palm Oil
("CPO") price declined to a 3-year low in January 2013 on
expectation of a bumper soybean harvest and rising palm oil
inventories. It experienced further volatility as the Indian Rupee
tumbled past 64 Rupee per dollar on concerns that foreign outflows
would accelerate as the US Federal Reserve prepared to trim
monetary stimulus. The depreciation in Rupee put some pressure on
the imports of palm oil of which India is the largest importer. The
Indian government also raised import duties on CPO and refined
bleached and deodorized palm oils ("RBD") after much lobbying by
local refiners as former tariffs encouraged the import of larger
volumes of RBD for direct sale than CPO for domestic
processing.
CPO price gradually recovered some ground in the last quarter of
2013 as higher seasonal rainfall interrupted Fresh Fruit Bunch
("FFB") production in Indonesia and Malaysia resulting in lower CPO
inventory.
The Group's revenue was $201.9 million, compared to $237.4
million achieved in 2012, a decline of 15% which was accounted
largely by the decline in CPO price over the period. The average
CPO price in 2013 was $857/mt, 14% lower than the figure of $995/mt
in 2012, but ended the year at $905/mt.
FFB production for 2013 was 787,500mt, 1% higher than the
previous year (2012: 783,400mt) with a 5% increase in matured
trees. Yields remained low due primarily to the lagged effect from
dry weather in 2011 affecting trees over 15 years and also heavy
monsoon rain in the early and later part of 2013 which caused
logistical problems. Lorries were unable to transport FFB to mills
as roads were either cut off from flooding or too muddy. FFB
bought-in from surrounding smallholders during 2013 was 496,600mt
(2012: 537,100mt), 8% lower compared to 2012, due to competition
from other millers despite the Group increasing its purchase price
of external crops. The unfavourable weather also contributed to a
lower crop production in the vicinity of the mills. The Group's
mills processed 5% less FFB, but increased CPO production to
262,600mt (2012: 260,500mt) due to higher oil extraction rate from
a better quality crop.
The Group operating profit for 2013, before biological asset
("BA") adjustment was $59.6 million, 30% down on $85.4 million
achieved in 2012. Earnings per share, before BA adjustment
decreased to 90.70cts, compared to 133.99cts in 2012 and post BA
adjusted earnings per share were 235.95cts compared to 119.41cts
for the previous year. The higher biological asset adjustment was
due to an increase in the 10 year average CPO price and a reduction
in discount rate applied. With the weakening of Rupiah, a foreign
exchange loss of $2.8 million in 2013 (2012: nil) also contributed
to a lower profitability.
As at 31 December 2013, the Group had cash and cash equivalents
of $98.7 million and borrowings of $35.0 million, resulting in a
net cash position of $63.7 million, compared to $91.2 million at 31
December 2012.
In spite of the challenging market conditions the Board has
continued to invest in the development of new assets. The Group
planted 2,522ha of oil palms in 2013 of which 400ha comprised of
replanting. This was less than planned, due primarily to delays in
finalising agreement with villagers for land compensation payments
in Bengkulu and Bangka and in securing the necessary land release
permits in Kalimantan. The Indonesian government issued a decree
effective on 2 October 2013 restricting plantation permits for oil
palm planting to 100,000ha for plantation companies that are not
state owned, cooperatives or majority publicly owned companies.
According to the Indonesian Palm Oil Association, the decree would
curtail the expansion and growth of plantation companies in
Indonesia. However, based on the lawyers' opinions, it would appear
that the decree would not apply to the Group as the Group's
ownership of its land bank precedes the issuing of the decree.
Despite the heavy rainfall also disrupting the earthworks for
construction of the mill in Central Kalimantan in second quarter of
2013, the earthworks are now almost completed and the construction
of mill buildingsis in progress. Thismill with an initial capacity
of 45mt/hr is expected to be operational in second quarter of 2015.
As previously reported the construction of another mill in North
Sumatera is deferred while the Board considers further the relative
cost advantages of two selected sites.
AEP embraces the Group's responsibility for the impact of its
activities on the environment, consumers, employees, communities,
stakeholders and all other members of wider society. In meeting the
Group's Corporate Social Responsibility ("CSR") obligations it is
cognisant of the contribution and welfare of its employees while
continuing to contribute to improve the well-being of the
community.
The $5 million biogas and biomass project for one of the mills
in North Sumatera is nearing completion with the installation of
equipment and commissioning expected in the second quarter of 2014.
Redesign of some equipment as well as inclement weather delayed the
external works and implementation. When the plant is fully
operational, it will result in a significant reduction in the
greenhouse gas emissions which are presently discharged from the
effluent treatment in the anaerobic lagoons. The biogas reactor
tank and covered lagoons will trap the biogas which will be used to
generate power in place of fossil fuel. The biomass plant will
utilize this power to process the empty fruit bunches into dried
long fibres for export. The successful implementation and running
of this project will pave the way for further similar undertaking
in the Group's other palm oil mills. Although the biogas and biomas
project is not a requirement of ISPO, it is nevertheless
environmental friendly and is expected to have a return on
investment of about six years.
The Indonesian Sustainable Palm Oil ("ISPO") certification of
the Group estates and mills will continue in 2014. In 2013 the
Group completed and submitted the certification audit of 3
plantations to the ISPO Committee. At the time of reporting, ISPO
Committee has approved the certification of the 3 plantations.
The majority of our employees working at the Group's plantations
and mills, together with their families and dependents, are housed
in self-contained communities constructed by the Group. Employees
and their dependents are provided with free housing, clean water
and electricity. Within these communities we also build and
maintain places of worship, schools and sports facilities. In 2013,
the Group spent $212,000 to build additional facilities and
maintain these amenities and will continue to incur community
development expenditure in 2014.
The Group also recognises its obligations to the wider farming
communities in which it operates. The Indonesian authorities have
established that not less than 20% of the new planted areas
acquired from 2007 onwards are to be reserved for the benefit of
smallholder cooperatives, known as Plasma Scheme and the Group is
integrating such smallholder developments alongside its estates. In
order to aid the development of Plasma Scheme, a subsidiary
provided a corporate guarantee during the year to a local bank in
excess of $18 million to cover loans raised by cooperatives.
The Board supported Kebun Kas Desa (village's scheme)
development programme to supplement the livelihood of the villages.
The Group provides technical and management expertise to villagers
and has to-date financed, developed and managed 22 smallholder
village schemes across four companies.
The Board is mindful that given the anticipated further capital
commitments the level of dividend needs to be balanced against the
planned expenditure. The Board is also mindful of shareholders'
sentiment and therefore declared a final dividend of 3.0p per share
in respect of the year to 31 December 2013 (2012: 4.5cts)
notwithstanding the Group achieved a lower profitability. Subject
to approval by shareholders at the Annual General Meeting, the
final dividend will be paid on 17 June 2014 to those shareholders
on the register on 16 May 2014.
The Board views the prospects for 2014 with cautious optimism.
As the continuing rise in income levels and population growth in
China, India and Indonesia would be expected to drive the
consumption of CPO and likely lead to a gradual recovery in CPO
prices. The price differential between CPO and soya oil which has
narrowed from a near four-year high of over $300/mt to just over
$67/mt would nevertheless remain a concern as a smaller spread
could prompt CPO buyers to switch to rival soya oil. However, as
reported, the Indonesian government efforts to rein in fiscal
deficits by introducing mandatory blending of biodiesel up to 10%
effective from 1 January 2014 for industrial and commercial
purposes may provide some price support.
Rising fertiliser consumption and increasing wage inflation in
Indonesia are expected to increase the overall production cost in
2014.
The Board nevertheless hopes that, against a backdrop of a
global economic recovery, trading prospects will improve in
2014.
The year saw the resignation of a Board member Drs. Kanaka
Puradiredja. The Board thanked him and wish him the best. Mr.
Jonathan Law Ngee Song, a lawyer by profession was appointed to the
Board on 4 July 2013.
On behalf of the Board of Directors, I would like to convey our
sincere thanks to our management and all employees of the Group for
their dedication, loyalty, resourcefulness, commitment and
contribution to the success of the Group.
I would also like to take this opportunity to thank
shareholders, business associates, government authorities and all
other stakeholders for their continued confidence, understanding
and support for the Group.
Madam Lim Siew Kim
Chairman
8 April 2014
Strategic Report
Business Model
The Group will continue to focus on planting oil palm trees and
building mills to process the FFB, its area of strength and
expertise. The Group has over the years created value to
shareholders through expansion in a responsible way. We have in the
last few years bought and invested in new tracts of land and a
portion remains to be planted. The Board feels vindicated as price
of land appreciates substantially and the Indonesian government has
recently moved to introduce law to cap the size of new plantations.
The Group remains committed to use its available resources to
develop the land bank in Indonesia as regulatory constraints
permit.
The Group's objectives are to provide appropriate returns to
investors in the long term from operation as well as expansion of
the Group's business, to foster economic progress in the localities
of the Group's activities and to develop the Group's operations in
accordance with the best corporate social responsibility and
sustainability standards.
We believe that sustainable success for the Group is best
achieved by acting in the long-term interests of our shareholders,
our partners and society.
Our Strategy
The Group's objectives are to provide an appropriate level of
returns to the investors and to enhance shareholder value.
Profitability however is very much dependent on the CPO price which
is volatile and determined by world supply and demand.
The Group's strategies therefore focus on maximising yield per
hectare above 22mt/ha, mill production efficiency of 110%,
minimising production costs below $300/mt and streamlining estate
management. For the year under review, the Group achieved a yield
of 19.5mt/ha, 102% mill efficiency and production cost of $276/mt.
Despite stiff competition for external crops from surrounding
millers, the Group is committed to purchase more external crops
from third parties at competitive yet fair prices to maximise the
efficiency of the mills.
In line with the commitment to reduce its carbon foot prints,
the Group plans for progressive introduction of biogas projects at
all its mills to tap methane gas to power its own boilers and at
the same time reduces its consumption of fossil fuel. It plans to
reduce greenhouse gas emissions per CPO produced.
The Group will continue to follow-up and offer competitive and
fair compensation to villagers so that land can be cleared and
planted.
Financial Review
The financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB") as adopted by the European
Union ("EU") and with those parts of the Companies Act 2006
applicable to companies preparing their accounts under IFRS.
For the year ended 31 December 2013, revenue for the Group was
$201.9 million, 15% lower than $237.4 million reported in 2012 due
primarily to lower CPO prices. Expectation of plentiful harvest of
soybean, the main competing oil for CPO coupled with a high CPO
inventory at the beginning of the year drove CPO prices downward
for most of 2013. The price gradually recovered some lost ground in
the last quarter of 2013 as higher seasonal rainfall interrupted
production in Indonesia and Malaysia resulting in lower CPO
inventory.
Group operating profit for 2013 before biological asset
adjustment was $59.6 million, 30% less than $85.4 million in
2012.
FFB production for 2013 was 787,500mt, 1% higher than the
783,400mt produced in 2012. The yield remains low and was primarily
due to the lagged effect from dry weather in 2011 affecting trees
over 15 years and also heavy monsoon rain in the early and later
part of 2013 which caused logistical problems. FFB bought-in from
local smallholders for 2013 was 496,600mt (2012: 537,100mt), 8%
lower compared to 2012. During the year, FFB processed by the
Group's mills was 1.2 million mt, 5% lower but CPO production was
1% higher at 262,600mt, compared to 260,500mt in 2012 due to higher
oil extraction rate a from better quality crop.
Profit before tax and after BA adjustment for the Group was
$153.4 million, 87% higher compared to $81.9 million in 2012. The
BA adjustment was a credit of $93.7 million, compared to a debit of
$6.7 million in 2012, reflecting higher biological value. The
higher biological value was due to an increase in the 10 year
average CPO price to $700/mt from $675/mt and a reduction in
discount rate applied from 17.5% to 15.8%.
The average CPO price for 2013 was $857/mt, 14% lower than 2012
of $995/mt.
Earnings per share before BA adjustment decreased by 32% to
90.70cts compared to 133.99cts in 2012.
The Group's balance sheet remains strong notwithstanding an
unrealised exchange loss on translation of foreign subsidiaries of
$112.8 million compensated by a land revaluation gain of $23.9
million net of deferred tax. As at 31 December 2013, the Group had
cash and cash equivalents of $98.7 million and borrowings of $35.0
million, giving it a net cash position of $63.7 million, compared
to $91.2 million in 2012. Net Group's borrowings in the year rose
by $9.9 million to $35.0 million (2012: $25.1 million).
On 28 February 2014, the Group restated its prior year operating
results for 2012 and 2011 following the conclusion of its
discussions with the Financial Reporting Council ("FRC") on the use
of current market data to estimate notional rent for the use of
land in its discounted cash flow for the determination of
biological assets. The following is a chronology of the FRC
enquiry.
The FRC wrote to the Company on 14 November 2011 in respect of
its policies and methodologies for valuing and accounting for its
biological assets and non-biological assets in its accounts for the
year ended 31 December 2010.
As a result of discussions with the FRC, the Company's interim
accounts for the period ended 30 June 2012, announced on 30 August
2012, stated that the Company had revisited its policies and
methodologies for valuing and accounting for its estate assets. The
Directors had concluded that the biological and non-biological
assets needed to be restated.
Between 19 October 2012 and 14 February 2014 the FRC and the
Company exchanged correspondence. Additional information and
explanations were provided to the FRC in respect of the restatement
of biological assets and land at 31 December 2010 and 2011,
including in respect of the measurement of notional rent. In
October 2013, the Company engaged a specialist valuation firm in
the UK to determine the basis for the measurement of the notional
charge for its land. As a result, the Company applied a notional
rent equivalent to 9% of the value of planted land in the valuation
of its biological assets and this has resulted in a reduction in
the valuation of those assets, although the profit before
biological asset adjustment of the Group remained unchanged. In
February 2014 the FRC confirmed that it regarded its enquiries into
the Company's annual report and accounts for the year ended 31
December 2010 as concluded.
Business Review
Indonesia
FFB production in North Sumatera, which aggregates the estates
of Tasik, Anak Tasik, Labuhan Bilik, Blankahan, Rambung, Sg Musam
and CPA, produced 339,093mt in 2013 (2012: 346,329mt), 2% lower
than 2012. The lower yield was most likely attributed to the lagged
effect from the prolonged drought in 2011 affecting trees over 15
years. In 2013, Sg Musam also experienced extreme heavy rain of
over 4,000 mm per annum when the ideal rainfall is between 2,500 to
3,000 mm in a year. Ganoderma fungus which attacks the root system
of palm oil was discovered in Anak Tasik covering 766ha. Good
sanitation and high standards of agronomic practices remain the
main priority to avoid spreading of the infection. There were two
incidences of insect damage by Oryctes beetle and termites
resulting in significant loss of newly planted palm in Labuhan
Bilik. Combination of treatment with pheromone-trap and insecticide
were carried out to control the insect population. A replanting
programme covering 400ha in Tasik was completed in December
2013.
FFB production in Bengkulu (South Sumatera), which aggregates
the estates of Puding Mas, Alno, KKST, ELAP and RAA produced
277,831mt (2012: 284,794mt), 2% lower than 2012. Unusual heavy rain
at the beginning and later part of the year damaged roads and
affected the transport of FFB to the mills. With the delay in
processing of FFB, the mills in Bengkulu also faced high Free Fatty
Acid ("FAA") which resulted in lower selling price of its CPO. The
protracted negotiation with the villagers over land compensation
will have an effect on the future planting in Bengkulu.
FFB production in the Riau region, comprising Bina Pitri
estates, produced 116,200mt in 2013 (2012: 119,671mt), 3% lower
than 2012. Although FFB production is down only marginally, CPO
production dropped 16% due to the lower purchase of FFB from
smallholders due to the competitiveness for external crops from
millers. Our mill has since offered a higher price for external
crops raising the mill utilization rate at the expense of a lower
operating margin.
FFB production in Kalimantan comprising Sawit Graha Manunggal
estates produced 25,395mt in 2013 (2012: 3,574mt) mainly from newly
matured oil palm area of 500ha.
Overall bought-in crops for Indonesian operations were 8% lower
at 496,600mt for the year 2013 (2012: 537,100mt). The average oil
extraction rate from our mills was 21.4% in 2013 (2012: 20.2%). The
extraction rate was higher due to better quality crops and
implementation of a stricter sorting process.
Malaysia
FFB production in 2013 was marginally lower at 28,950mt,
compared to 29,000mt in 2012. The Malaysian operations faced
difficulty in recruiting foreign workers hampering harvesting and
estate work. In December 2013, the harvest was interrupted for over
a week as the estates were inaccessible due to flooding and
landslide from incessant rain. The Malaysian plantations was
breakeven in 2013 as compared to 2012 of $0.4 million pre-tax
loss.
Commodity Prices
The CPO CIF Rotterdam price started the year at $835/mt (2012:
$1,045/mt) and reached a low point of $805/mt in October 2013
before picking some lost ground in the final quarter of 2013. It
ended the year at $905/mt (2012: $810/mt), averaging $857/mt for
the year (2012: $995/mt).
The continuing rise in income levels and population growth in
China, India and Indonesia would be expected to drive the
consumption of CPO and likely lead to a gradual recovery in CPO
prices. The price differential between CPO and soya oil which has
narrowed from a near four-year high of over $300/mt to just over
$67/mt would nevertheless remain a concern as a smaller spread
could prompt CPO buyers to switch to rival soy oil. However the
Indonesian government efforts to rein in fiscal deficits by
introducing mandatory blending of biodiesel up to 10% effective
from 1 January 2014 for industrial and commercial purposes may
provide some price support.
Rubber prices averaged $2,361/mt for 2013 (2012: $2,967/mt). Our
small area of 668ha of mature rubber contributed a revenue of $2.5
million in 2013 (2012: $2.5 million).
Corporate Development
In 2013, the Group opened up new land and planted 2,122ha of oil
palm mainly in Kalimantan, boosting planted area by 3.6% to
61,099ha (2012: 59,000ha). This excludes the replanting of 400ha of
oil palm in North Sumatera. New plantings remain behind schedule
due to protracted negotiations over settlement of land compensation
with villagers in Bengkulu and Bangka and with delay in the
issuance of land release permit (Izin Pelepasan) in Kalimantan.
However, the plantation has since obtained the necessary permit and
shall proceed to negotiate with villagers for compensation of land
before clearing for planting.
The earthworks for construction of the mill in Central
Kalimantan were disrupted by heavy rainfall in the second quarter
of 2013. The earthworks are now almost completed and construction
of mill buildings is in progress. This mill with an initial
capacity of 45mt/hr is expected to be operational in second quarter
of 2015. As previously reported the construction of another mill in
North Sumatera is deferred while the board considers further the
relative cost advantages of two selected sites.
The $5 million biogas and biomass project for one of the mills
in North Sumatera is nearing completion with the installation of
equipment and commissioning expected in the second quarter of 2014.
Redesign of some equipment as well as inclement weather delayed the
external works and implementation. When the plant is fully
operational, it will result in a significant reduction in
greenhouse gas emission which is presently discharged from effluent
treatment in the anaerobic lagoons. The biogas reactor tank and
covered lagoons will trap biogas which will be used to generate
power in place of fossil fuel. The biomass plant will utilize this
power to process the empty fruit bunches into dried long fibres for
export.
The successful implementation and running of this project will
pave the way for further similar undertakings for the rest of the
Group's mills.
Corporate Social Responsibility
Corporate Social Responsibility ("CSR") is an integral part of
corporate self-regulation incorporated into our business model. Our
Group embraces responsibility for the impact of its activities on
the environment, consumers, employees, communities, stakeholders
and all other members of the public sphere. In engaging the social
dimension of CSR, the Group's business has taken cognizance of the
contribution and further enrichment of its employees while
continuing to make contributions to improve the well-being of the
surrounding community.
The majority of employees and their dependents in the
plantations and mills are housed in self-contained communities
built by the Group. The employees and theirdependents are provided
with free housing, clean water and electricity. The Group also
builds, provides and repair places of worship for workers of
different religious faith as well as schools and sports facilities
in these communities.In 2013, the Group spent $212,000 to build
additional facilities and maintain these amenities in 2013 and will
continue to incur community development expenditure in 2014.
Staff and selected employees are given the opportunity to be
trained and to attend seminars to enhance their working skills and
capacity. The Group provides free education for allemployees'
childrenin the local plantations and communities where they work.
In 2013, 25 scholarships amounting to $21,000 were provided
tochildren in surrounding villages and selected employees' children
to further their tertiary education in collabration with a
university in Bengkulu. In addition the Group provides funding to
construct educational facilities such as laboratories, libraries,
and computers. The salaries of teachers in the estates and the cost
ofschool buses to transport employees' children to the school are
provided by the Group. Over the years a total of 33 schools have
been built with 125 teachers currently employed within our Group
estates. In 2013, the Groupspentsome $574,000 on running the
schools.
The Group continues to provide free comprehensive health care
for all its workers as we believe that every employee and their
dependents should have easy access to health services. We have
established 21 clinicsoperated by qualified doctors, nurses and
hospital assistants in the estates.Related healthcare expenses for
2013 were $696,000.
A strong commitment to CSR has a positive impact on employees'
attitudes and boosts employee engagement. The Group realizes that
employees are valuable assets in order to run an efficient,
effective, profitable and sustainable business and operations.
The Group also recognises its obligations to the wider farming
communities in which it operates. The Indonesian authorities have
established that not less than 20% of the new planted areas
acquired from 2007 onwards are to be reserved for the benefit of
smallholder scheme cooperatives, known as Plasma scheme and the
Group is integrating such smallholder developments alongside its
estates. In order to aid the development of Plasma scheme, a
subsidiary provided a corporate guarantee during the year to a
local bank in excess of $18 million to cover loans raised by
cooperatives.
The Board supported Kas Desa smallholder village development
programme to supplement the livelihood of the villages. The Group
has to-date financed, developed and managed 22 smallholder village
schemes across four companies.
In addition to education and healthcare which includes the
construction of schools, provision of scholarships, books, the
Group also develops infrastructure such as construction and repair
of bridges and roads. The Group also provides aid to villagers such
as fruit seedlings and fish fries to start community sustaining
programs.
Indonesian Sustainable Palm Oil
The Indonesian Sustainable Palm Oil ("ISPO") certification is
legally mandatory for all plantations in Indonesia. In March 2012,
ISPO, which is fundamentally aligned to RSPO (Roundtable on
Sustainable Palm Oil) principles, has become the mandatory standard
for Indonesian planters.
A Steering Committee was established to work out a roadmap to
support the ISPO implementation at mills and estates. Workshops and
training sessions on occupational safety and healthcare were
carried out to inculcate a safety culture in workplaces at the
estates and mills in North Sumatera and Riau. During the year the
Group continued to upgrade its agricultural chemical stores and
diesel fuel storage tanks in various plantations and mills to meet
safety and environmental standards. Standard operating procedures
were refined and documented based on sustainable oil palm best
practices. The Group also conducts internal audits using an audit
checklist adopted from the above practices to determine level of
compliance. The Group worked closely with appointed certification
consultants in the implementation of ISPO standard. In 2013, the
consultants have completed and submitted the audit of 3 plantations
to the ISPO Committee for evaluation. At the time of reporting,
ISPO Committee has approved the certification of the 3 plantations.
In the first and second quarter of 2014, the consultants will begin
certification audits for another 8 plantations.
Care For The Environment and Sustainable Practices
As a Group, we highlight the importance of creating awareness
and implementation of good environmental management practices
throughout the organisation. The Group has been consistently
practising good agricultural practices such as zero burning,
integrated pest management, land terracing and recycling of
biomass. Where the land is undulating, we build terraces for
planting which helps to prevent landslides and provide less
hazardous accessibility for employees.
Effluent discharged from some mills is initially treated in
lagoons before being applied to trenches located between rows of
palm trees. Once the effluent dries up, it becomes organic
fertilizer for the oil palm and reduces the application and buying
of inorganic fertilizers. Composting of processing waste produces a
nutrient rich compost that can be applied in the oil palm in
substitution of inorganic fertilizer. In some estates, empty
bunches are applied to land where it biodegrades to
fertilizers.
On completion of the Group's first biogas and biomass project in
North Sumatera, it will enhance the waste management treatment in
the mill and at the same time mitigate greenhouse biogas emissions.
Under this project, the methane gas will be trapped and will be
used to generate and supply power to its biomass plant without
dependency on fossil fuel. Further similar undertakings for the
Group's mills are planned and shall be implemented in stages.
The Group is committed to implementing good agricultural
practices as spelled out in its standard operating procedures for
the planting of oil palm. Integrated Pest Management has been
adopted to control pests and to improve biological balance.
Barn Owls were introduced to control rats. Beneficial plants of
Turnera sp, Cassia cobannesisand Antigonon leptosus were planted to
attract predator insects of caterpillar pests. Weeds are controlled
selectively by using more environmental friendly herbicide such as
Glyphosate.
The usage of Paraquat herbicide and chemicals has been reduced
and minimized to control weeds and vermins.The sprayers are also
trained insafety and spraying techniques. The chemicals are kept in
designated storage and examined at regular intervals. Employees who
handled the use of chemicals undergo medical examination. Natural
vegetation on uncultivable land such as deep peat, very steep areas
and riparian zones along watercourses are maintained to preserve
biodiversity and wildlife corridors.
Two mills in Bengkulu region will be installed with Extended
Aeration to enhance treatment of the mill effleunts by mechanical
aeration. The construction works for these plants are expected to
cost more than $500,000 and will be operational in 2014.
Some of our mills utilize the waste mesocarp fibre from the oil
palm fruits as fuel to generate steam from boilers to produce
power. The power generated drives all of the processing equipment
in mills and estate housing. This helps to reduce reliance on
fossil fuel such as diesel in our milling operations.
The Group continues to comply and preserve the High Conservative
Value (HCV) areas recognised by the Department of Forestry.
Principal risks and uncertainties
The Group's business involves risks and uncertainties of which
the Directors currently consider the following to be material.
There are or may be other risks and uncertainties faced by the
Group that the Directors currently deem immaterial, or of which
they are unaware, that may have a material adverse impact on the
Group. The Board reviews risk management on an annual basis.
Country
The Group's operations are located substantially in Indonesia
and therefore significantly rely on economic and political
stability in Indonesia. The country has recently benefited from a
period of relative political stability, steady economic growth and
stable financial system. Whilst the risks may exist with the
impending Presidential election in 2014, the Board perceives that
the Group will be able to continue to extract profits from its
subsidiaries in Indonesia for the foreseeable future.
The Group acquires the land exploitation rights ("HGU") after
paying land acquisition and HGU processing costs. These costs are
capitalized as land asset costs since the asset characteristics
fulfill the recognition criteria. The Group holds its land under 25
or 35 year renewable leases (HGU's) which the Directors believe
will be renewed when due by complying with existing law and
regulations. Any changes in law and regulations relating to land
tenure could have negative impact on the Group's activities.
Exchange Rates
CPO is a US-Dollar-denominated commodity and a significant
proportion of revenue costs in Indonesia (such as fertiliser and
fuel) and development costs (such as heavy machinery and mills
equipment) are imported and are US-Dollar related. Adverse
movements of Rupiah against US Dollar can have a negative effect on
the operating costs. The Rupiah has depreciated by 26% against US
dollar since the beginning of 2013. The Board has taken the view
that these risks are inherent in the business and feels that
adopting hedging mechanisms to counter the negative effects of
exchange controls are both difficult to achieve and would not be
cost effective.
Weather and natural disasters
Oil palms rely on regular sunshine and rainfall but these
weather patterns can vary and extremes such as unusual dry periods
or, conversely, heavy rainfall leading to flooding in some
locations do occur. Dry periods, in particular, will affect yields
in the short and medium terms but any deficits so caused tend to be
made up at a later date. High levels of rainfall can disrupt estate
operations and result in harvesting delays with loss of oil palm
fruits or deterioration in fruit quality. This high rainfall was
experienced by the plantations in Bengkulu at the first and last
two months of 2013. It caused floods and damaged the roads
resulting in difficulty in transportation of FFB to the mills.
Where appropriate, bunding is built around flood prone areas and
drainage constructed and adapted either to evacuate surplus water
or to maintain water levels in areas quick to dry out. Where
practical, natural disasters are covered by insurance policy.
Cultivation risks
As in any plantations business, there are risks that crops from
the Group's estate operations may be affected by pests and
diseases. Agricultural best practice and husbandry can to some
extent mitigate these risks but they cannot be entirely
eliminated.
Other operational factors
The Group's plantation productivity is dependent upon necessary
inputs, including, in particular fertilizer, spare-parts, chemicals
and fuel. Whilst the Directors have no reason to anticipate
shortages of such inputs, Group's operations could be materially
disrupted should such shortages occur over an extended period.
Increase in prices would significantly increase production costs.
The average price of diesel has increased by 13% to Rp10,668/litre
from Rp9,417/litre in 2013 and will continue to put pressure on
other production inputs.
The Group has bulk storage facilities located within its mills
which are adequate to meet the Group's requirements for CPO
storage. Nevertheless, delays in collection of CPO sold could
result in CPO production exceeding the available CPO storage
capacity. This would likely force a temporary halt in FFB
processing resulting in loss of crop.
The Group maintains insurance to cover those risks against which
the Directors consider it economical to insure. Certain risks
(including the risk of crop loss through fire, earthquake and other
perils potentially affecting the planted areas on the Group's
estates), for which insurance cover is either not available or
would in the opinion of the Directors be disproportionately
expensive, are not insured. These risks are mitigated by the
geographical spread of the plantations and to the extent feasible
by management practices but an occurrence of an adverse uninsured
event could result in the Group sustaining material losses.
There have been substantial increases in governmental directed
minimum wage levels in Indonesia. The Group pays not less than the
minimum wage and the increase will result in a significant rise in
Group's employment costs. The regional hikes in minimum wages for
2014 ranges from 7.1% in Bengkulu to 29.6% in Bangka.
Produce prices
The profitability and cash flow of the plantation operations
depend upon world prices of CPO and upon the Group's ability to
sell CPO at price levels comparable with world prices.
CPO is a primary commodity and is affected by the world economy,
including levels of inflation. This may lead to significant price
swings although, the Directors believe that such swings should be
moderated by continuous demand in economies like China, India and
Indonesia.
Expansion
The Group is planning to plant more oil palm. In areas where the
Group holds the land rights (or Izin lokasi), the settlers and land
owners are compensated before land is cleared for planting. The
Group compensates the settlers and land owners in a transparent and
fair way. The negotiation for compensation can, however, involve a
considerable number of local individuals with differing views and
this can cause difficulties in reaching agreement with all affected
parties. Such difficulties have in the past caused delays to the
planting programmes. It is rather difficult to foretell with
reliable accuracy what area will be available for planting out of
the total area covered by land rights. Much depends upon the
success of negotiations with settlers and land owners and
satisfactory resolution of land title issue. The Group has to-date
mixed success in managing such periodic delays and disruptions
especially in Bengkulu, Bangka and Kalimantan.
The Directors believe that when the land become available for
planting, the development programmes can be funded from available
Group cash resources and future operational cash flows,
supplemented with external debt funding. Should, however, land or
cash availability fall short of expectations and the Group is
unable to secure alternative land or funding, the Group's continued
growth may be delayed or curtailed.
Environmental and governance practices
The Group's management and Directors take seriously their
environmental and social responsibilities. The ISPO which
fundamentally aligns with RSPO principles became the mandatory
standard for all Indonesian planters in March 2012.
The estates in North Sumatera are long established. Management
follows industry best-practice guidelines and abides by Indonesian
law with regard to such matters as application of fertilisers,
health and safety. The Group has started to use empty fruit bunches
for mulching in the estates which is a form of fertiliser and
reduces the consumption of inorganic fertilisers. The liquid
effluent from the mills after treatment is applied to trenches in
the estates as a form of fertiliser. The Group's $5 million
investment in the biogas and biomass project started for one of the
mills in North Sumatera which is expected to be completed in the
second quarter of 2014 will enhance the waste management treatment
of that mill and at the same time mitigate emissions of biogas. The
project is also expected to generate economic returns by the sale
of dried long fibres which is processed from empty fruits bunches.
The successful implementation and running of this project will pave
the way for further similar undertakings for the rest of the
Group's mills.
The Group has had an environmental impact assessment undertaken
by independent consultant for its new project in Kalimantan.
The Group recognises that its plantations hire large numbers of
people and have significant economic importance for local
communities in the areas of the Group's operations. This imposes
social and governance obligations which bring with them risks that
any failure by the Group to meet the standards expected of it may
result in reputational and financial damage. The Group seeks to
mitigate such risks by establishing standard procedures to ensure
that it meets its obligations, monitoring performance against those
standards and investigating thoroughly and taking action to prevent
recurrence in respect of any failures identified. The Group
undertakes periodic reviews of its management performance in
relation to various matters and this review pays particular
attention to the manner in which the Group has discharged its
corporate social responsibilities including setting up of plasma
schemes for its new plantations.
Social, community and human rights issues
Any material breakdown in relations between the Group and the
host population in the vicinity of the operations could disrupt the
Group's operations. The Group therefore endeavours to mitigate this
risk by liaising regularly with representatives of surrounding
villages and by seeking to improve local living standards through
mutually beneficial economic and social interaction with the local
villages. In particular, the Group, when possible, gives priority
to applications for employment from members of the local population
and supports specific initiatives to encourage local farmers and
tradesmen to act as suppliers to the Group, its employees and their
dependents. The Group spends considerable sums of money
constructing new roads and bridges and maintaining existing roads
used by villagers and the Group for the transportation of FFB. The
Group also provides technical and management expertise to villagers
to develop oil palm plots or Kebun Kas Desa (village's scheme)
surrounding the operating estates. The returns from these plots are
used to improve villages' community welfare. As at end of 2013, a
total of 22 Kebun Kas Desa plots have been developed. The Group
also provides corporate guarantee to cooperatives who borrow from
local bank to finance the development of the Plasma scheme mandated
by the government.
Gender diversity
The AEP Plc Board is composed of three men and one woman with
extensive knowledge in their respective fields of experience. The
Board has taken note of the recent legislative initiatives with
regard to the representation of women on the boards of Directors of
listed companies and will make every effort to conform to its
composition based on legislative requirement.
2013 average employed during
the year
Group Headcount Women Men Total
Board 2 9 11
Senior Management (GM
and Above) 1 13 14
Managers & Executive 32 360 392
Full Time 152 4,878 5,030
Part-time Field Workers 2,968 7,854 10,822
Total 3,155 13,114 16,269
% 19.4% 80.6% 100%
Although the Group provides equal opportunities for female
workers in the plantations, due to the nature of work and the
remote location of plantations from the towns and cities, the male
workers make up a majority of the field workers.
Employees
In 2013, the number of full time workforce averaged 5,447 while
the part-time labour averaged 10,822.
The Group has formal processes for recruitment particularly key
managerial positions, where psychometric testing is conducted to
support the selection and hiring decisions. Exit interviews are
also conducted with departing employees to ensure that management
can address any significant issues.
The Group has a programme for recruiting graduates from
Indonesian universities to join existing employees selected on
regular basis to training programmes organised by the Group's
training centre that provides grounding and refresher courses in
technical aspects of oil palm estate management. The training
centre also conducts regular programmes for all levels of employees
to raise the competency and quality of employees in general. These
programmes are often supplemented by external management
development courses including attending industry conferences for
technical updates. A wide variety of topics is covered including
work ethics, motivation, self-improvement, company values, health
and safety.
A large workforce and their families are housed in the Group's
housing across the Group's plantations. The Group further provides
at its own cost water and electricity and a host of other amenities
including places of worship, schools and clinics. On top of
competitive salaries and bonuses, extensive benefits and privileges
help the Group to retain and motivate its employees.
The Group promotes a policy for creation of equal and ethnically
diverse employment opportunities including with respect to
gender.
The Group has in place key performance linked indicators to
determine increment and bonus entitlements for its employees.
Outlook
FFB production for two months to February 2014 was 11% higher
against the same period in 2013. Although the weather has been
relatively dry so far this year, it is too early to forecast
whether the production will be better for the rest of the year.
The CIF (Cost, Insurance, Freight) Rotterdam CPO price opened
the year 2014 at $905/mt and prices are expected to be in the range
of $800/mt to $1,000/mt for the first half of 2014.
The US dollar appreciated by approximately 26% (2012: 10%)
against the Indonesian Rupiah in 2013. There was no adverse
fluctuation against the US dollar in early 2014. The Rupiah may be
subjected to some degree of volatility with the Presidential
election in 2014.
The continuing rise in income levels and population growth in
China, India and Indonesia would expected to drive the consumption
of CPO and likely lead to a gradual recovery in CPO prices. The
price differential between CPO and soya oil which has narrowed from
a near four-year high of over $300/mt to just over $67/mt would
nevertheless remain a concern as a smaller spread could prompt CPO
buyers to switch to rival soya oil. However the Indonesian
government efforts to rein in fiscal deficits by introducing
mandatory blending of biodiesel up to 10% effective from 1 January
2014 for industrial and commercial purposes would provide some
price support.
The rising material costs and wages in Indonesia are expected to
increase the overall production cost in 2014. Indonesia's minimum
wage has increased at an average rate of between 10% and 15% per
annum over the last few years. The Indonesian government recently
announced regional hikes in 2014 minimum wage ranging from 7.1% in
Bengkulu to 29.6% for Bangka province. These wage hikes will raise
overall estate costs and erode profit margins.
Nevertheless barring any unforeseen circumstances, the Group is
confident that CPO demand will be sustainable in the long term on
the backdrop of global economic recovery and we can expect a
satisfactory profit level and cash flow for 2014.
By order of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate Affairs
8 April 2014
Consolidated Income Statement
For the year ended 31 December 2013
(Restated)
2013 2012
Result
Result before
Continuing before BA BA BA
operations Note BA adjustment adjustment Total adjustment adjustment Total
$000 $000 $000 $000 $000 $000
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Revenue 3 201,917 - 201,917 237,352 - 237,352
Cost of sales (133,400) - (133,400) (142,755) - (142,755)
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Gross profit 68,517 - 68,517 94,597 - 94,597
Biological asset
revaluation
movement - 93,661 93,661 - (6,729) (6,729)
Administration
expenses (8,898) - (8,898) (9,201) - (9,201)
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Operating profit 59,619 93,661 153,280 85,396 (6,729) 78,667
Exchange losses (2,781) - (2,781) (24) - (24)
Finance income 4 4,676 - 4,676 3,336 - 3,336
Finance expense 4 (1,774) - (1,774) (117) - (117)
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Profit before tax 5 59,740 93,661 153,401 88,591 (6,729) 81,862
Tax expense (16,178) (23,415) (39,593) (22,476) 1,682 (20,794)
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Profit for the
year 43,562 70,246 113,808 66,115 (5,047) 61,068
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Attributable to:
- Owners of the
parent 35,950 57,571 93,521 53,108 (5,777) 47,331
-
Non-controlling
interests 7,612 12,675 20,287 13,007 730 13,737
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
43,562 70,246 113,808 66,115 (5,047) 61,068
------------------ ----- ----------------- ----------- ---------- ------------- ------------- ----------
Earnings per
share
for profit
attributable
to the owners of
the parent
during
the year
7 235.95cts 119.41cts
* basic
7 235.67cts 119.27cts
* diluted
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2013
(Restated)
2013 2012
$000 $000
------------------------------------------------------ ----------- --- ------------
Profit for the year 113,808 61,068
------------------------------------------------------ ----------- --- ------------
Other comprehensive income:
Items may be reclassified to profit or loss:
Loss on exchange translation of foreign
operations (112,824) (25,337)
Net other comprehensive expense may be reclassified
to profit or loss (112,824) (25,337)
------------------------------------------------------ ----------- --- ------------
Items not to be reclassified to profit or
loss:
Unrealised gain / (loss) on revaluation
of the estates 31,807 (4,064)
Deferred tax on revaluation of assets (7,951) 1,015
Remeasurement of retirement benefit plan 278 -
Deferred tax on retirement benefit (71) -
Net other comprehensive income / (expense)
not being reclassified to profit or loss 24,063 (3,049)
------------------------------------------------------ ----------- --- ------------
Total other comprehensive expenses for the
year, net of tax (88,761) (28,386)
Total comprehensive income for the year 25,047 32,682
Attributable to:
- Owners of the parent 21,508 23,172
- Non-controlling interests 3,539 9,510
------------------------------------------------------ ----------- --- ------------
25,047 32,682
------------------------------------------------------ ----------- --- ------------
Consolidated Statement of Financial Position
As at 31 December 2013
(Restated) (Restated)
2013 2012 2011
Note $000 $000 $000
------------------------------------------- ------ ----------- ------------ ---- ------------
Non-current assets
Biological assets 10 265,835 207,679 197,410
Property, plant and equipment 10 213,342 212,177 214,840
Receivables 5,649 5,033 1,551
484,826 424,889 413,801
------------------------------------------- ------ ----------- ------------ ---- ------------
Current assets
Inventories 8,448 6,075 9,439
Tax receivables 8,464 4,734 5,098
Trade and other receivables 7,271 7,419 4,877
Cash and cash equivalents 98,738 116,250 90,482
122,921 134,478 109,896
------------------------------------------- ------ ----------- ------------ ---- ------------
Current liabilities
Loans and borrowings (84) (52) (6,465)
Trade and other payables (15,331) (15,635) (20,878)
Tax liabilities (4,988) (6,996) (11,019)
(20,403) (22,683) (38,362)
------------------------------------------- ------ ----------- ------------ ---- ------------
Net current assets 102,518 111,795 71,534
------------------------------------------- ------ ----------- ------------ ---- ------------
Non- current liabilities
Loans and borrowings (34,937) (25,026) (58)
Deferred tax liabilities (55,298) (37,236) (43,098)
Retirement benefits - net liabilities (3,099) (3,057) (1,593)
------------------------------------------- ------ ----------- ------------ ---- ------------
Net assets 494,010 471,365 440,586
------------------------------------------- ------ ----------- ------------ ---- ------------
Issued capital and reserves attributable
to owners of the parent
Share capital 15,504 15,504 15,504
Treasury shares (1,171) (1,171) (1,507)
Share premium 23,935 23,935 23,935
Capital redemption reserve 1,087 1,087 1,087
Revaluation reserves 56,767 36,799 39,480
Exchange reserves (181,107) (88,838) (67,360)
Retained earnings 493,031 401,006 355,914
------------------------------------------- ------ ----------- ------------ ---- ------------
408,046 388,322 367,053
Non-controlling interests 85,964 83,043 73,533
------------------------------------------- ------ ----------- ------------ ---- ------------
Total equity 494,010 471,365 440,586
------------------------------------------- ------ ----------- ------------ ---- ------------
.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2013
Capital Foreign
Share Treasury Share redemption Revaluation exchange Retained Non-controlling Total
capital shares premium reserve reserve reserve earnings Total interests equity
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Balance as at
31 December
2011 15,504 (1,507) 23,935 1,087 39,480 (67,602) 380,633 391,530 77,369 468,899
Restatement
(note 2) - - - - - 242 (24,719) (24,477) (3,836) (28,313)
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Balance at 31
December 2011
after
restatement 15,504 (1,507) 23,935 1,087 39,480 (67,360) 355,914 367,053 73,533 440,586
Items of other
comprehensive
income
-Unrealised
loss on
revaluation
of estates,
net of tax - - - - (2,681) - - (2,681) (368) (3,049)
-Loss on
exchange
translation - - - - - (21,478) - (21,478) (3,859) (25,337)
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Total other
comprehensive
expenses - - - - (2,681) (21,478) - (24,159) (4,227) (28,386)
Profit for year - - - - - - 47,331 47,331 13,737 61,068
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Total
comprehensive
income
and expenses
for the year - - - - (2,681) (21,478) 47,331 23,172 9,510 32,682
Share options
exercised - 336 - - - - 133 469 - 469
Dividends paid - - - - - - (2,372) (2,372) - (2,372)
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Balance at 31
December 2012
after
restatement 15,504 (1,171) 23,935 1,087 36,799 (88,838) 401,006 388,322 83,043 471,365
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Items of other
comprehensive
income
-Unrealised
gain on
revaluation
of estates,
net of tax - - - - 20,062 - - 20,062 3,794 23,856
-Disposal of
land - - - - (94) - 94 - - -
-Remeasurement
of retirement
benefit plan,
net of tax - - - - - - 194 194 13 207
-Loss on
exchange
translation
of foreign
operations - - - - - (92,269) - (92,269) (20,555) (112,824)
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Total other
comprehensive
income /
(expenses) - - - - 19,968 (92,269) 288 (72,013) (16,748) (88,761)
Profit for year - - - - - - 93,521 93,521 20,287 113,808
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Total
comprehensive
income
and expenses
for the year - - - - 19,968 (92,269) 93,809 21,508 3,539 25,047
Dividends paid - - - - - - (1,784) (1,784) (618) (2,402)
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Balance at 31
December 2013 15,504 (1,171) 23,935 1,087 56,767 (181,107) 493,031 408,046 85,964 494,010
---------------- -------- --------- -------- ----------- ------------ ---------- --------- --------- ---------------- ----------
Consolidated Statement of Cash Flows
For the year ended 31 December 2013
(Restated)
2013 2012
$000 $000
----------------------------------------------- --------- -------------
Cash flows from operating activities
Profit before tax 153,401 81,862
Adjustments for:
BA adjustment (93,661) 6,729
(Profit) / Loss on disposal of tangible
fixed assets (319) 19
Depreciation 6,406 6,135
Retirement benefit provisions 1,325 1,898
Net finance income (2,902) (3,219)
Unrealised loss in foreign exchange 2,781 24
Property, plant and equipment written 97 -
off
Operating cash flow before changes in
working capital 67,128 93,448
(Increase) / Decrease in inventories (3,591) 2,821
Decrease / (Increase) in non-curent,
trade and other receivables 2,456 (6,646)
Increase / (Decrease) in trade and other
payables 2,400 (4,143)
----------------------------------------------- --------- -------------
Cash inflow from operations 68,393 85,480
Interest paid (1,774) (144)
Retirement benefit paid (244) (294)
Overseas tax paid (23,981) (26,622)
----------------------------------------------- --------- -------------
Net cash flow from operations 42,394 58,420
----------------------------------------------- --------- -------------
Investing activities
Property, plant and equipment
* purchase (49,938) (49,054)
* sale 641 786
Interest received 4,676 3,336
----------------------------------------------- --------- -------------
Net cash used in investing activities (44,621) (44,932)
----------------------------------------------- --------- -------------
(Restated)
2013 2012
$000 $000
------------------------------------------- --------- ---------------
Financing activities
Dividends paid by Company (1,784) (2,372)
Drawdown of long term loans 10,000 25,000
Finance lease repayment (30) (27)
Dividends paid to minority shareholders (618) -
Repayment of existing long term loans - (6,438)
Share options exercised - 469
------------------------------------------- --------- ---------------
Net cash used in financing activities 7,568 16,632
------------------------------------------- --------- ---------------
Increase in cash and cash equivalents 5,341 30,120
Cash and cash equivalents
At beginning of year 116,250 90,482
Foreign exchange (22,853) (4,352)
------------------------------------------- --------- ---------------
At end of year 98,738 116,250
------------------------------------------- --------- ---------------
Comprising:
Cash at end of year 98,738 116,250
------------------------------------------- --------- ---------------
.
1 Accounting policies
Anglo-Eastern Plantations Plc ("AEP") is a company incorporated
in the United Kingdom under the Companies Act 2006 and is listed on
the London Stock Exchange. The registered office of AEP is located
at Quadrant House, 6(th) Floor, 4 Thomas More Square, London E1W
1YW, United Kingdom. The principal activity of the Group is
plantation agriculture.
The financial information set out below does not constitute the
Company's statutory accounts for 2013 or 2012. Statutory accounts
for the year 31 December 2012 have been reported on by the
Independent Auditors. The Independent Auditors' Report on that
Annual Report and Financial Statement for 2012 was qualified on the
basis of a limitation in scope, did not draw attention to any
matters by way of emphasis, and contained statements under 498(2)
or 498(3) of the Companies Act 2006.
The results for 2013 are audited and are based on the
information presented in this announcement. The Independent
Auditors' Report on the Annual Report and Financial Statements for
2013 is unqualified, did not draw attention to any matters by way
of emphasis, and did not contain a statement under 498(2) or 498(3)
of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2012 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2013, prepared under IFRS, will be
delivered to the Registrar in due course.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented,
except as detailed in the following paragraph.
The 2012 Annual Report stated that the Company was in the
process of resolving a query from the Financial Reporting Council
("FRC") concerning the measurement of the notional rent used in the
valuation of the Group's biological assets. Following further
discussion with the FRC, the Group has changed the determination of
notional rent, one of the assumptions used in the valuation of the
Group's biological assets in accordance with its stated policy to
reflect current market data in the estimate of the cost for the use
of the land. The change in measurement of the notional rent has
significant impact on the carrying amount of biological asset and
thus the accounts for the years ended 31 December 2012 and 2011
were restated. The restatements and related adjustments are
disclosed in these accounts in note 2.
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB") as adopted by the EU and with
those parts of the Companies Act 2006 applicable to companies
preparing their accounts under IFRS.
Changes in accounting standards
a) The following new standards, interpretations and amendments
are effective for the first time in these financial statements.
-- IFRS 13 Fair Value Measurement
-- IAS 1 Amendments - Presentation of Items of Other Comprehensive Income
-- IAS 19 Amendments - Employee Benefits
The nature and the impact of each new standard/amendment are
described below.
IAS 1 Amendments - Presentation of Items of Other Comprehensive
Income
The amendments to IAS 1 introduce a grouping of items presented
in other comprehensive income (OCI). Items that could be
reclassified to profit or loss at a future point in time have to be
presented separately from items that will never be reclassified to
profit and loss. The amendment affected presentation only and had
no impact on the Group's financial position or performance.
IFRS 13 Fair Value Measurement
The application of IFRS 13 has not materially impacted the fair
value measurements carried out by the Group but has resulted in
additional disclosures. See note 9.
IAS 19 Amendments - Employee Benefits
IAS 19 amends the accounting for employment benefits and the
impact on the Group has been in the following areas:
-- The standard requires past service cost to be recognised
immediately in profit or loss. This has resulted in unrecognised
past service cost at 1 January 2013 of $197,000 being recognised in
Income Statement during the period.
Reconciliation of current service cost:
$000
Current service cost
- prior year 197
Current service cost
- current 936
------
Current service cost
- total 1,133
------
-- The standard introduces a new term called "remeasurements".
This is made up of actuarial gains and losses, the difference
between actual investment returns and the return implied by the net
interest cost which should be recognised in Other Comprehensive
Income. This has resulted in actuarial loss on defined benefit plan
at 1 January 2013 of $1,839,000 and return on plan asset of $70,000
being charged to other comprehensive income during the period.
Reconciliation of remeasurement of retirement benefit plan:
$000
--------
Actuarial loss / (gain)
- prior year 1,839
Actuarial loss / (gain)
- current (1,413)
--------
Actuarial loss / (gain)
- total 426
--------
Return on plan asset
- prior year 70
Return on plan asset
- current (218)
--------
Return on plan asset
- total (148)
--------
Remeasurement of retirement
benefit plan as per
other comprehensive
income 278
--------
The impact on the prior year's comprehensive income and other
comprehensive income (as shown in previous page) as a result of the
change in accounting policy is immaterial. Thus, the comparative
figures have not been restated and the impact has been accounted
for in the current year.
b) New standards, interpretations and amendments not yet effective.
The following new standards, interpretations and amendments,
which have not been applied in these financial statements, will or
may have an effect on the Group's future financial statements but
this is not expected to be material:
-- IFRS 9 Financial Instruments (effective for accounting
periods beginning on or after 1 January 2015)*
-- IFRS 10 Consolidated Financial Statements (effective for
accounting periods beginning on or after 1 January 2014)
-- IFRS 11 Joint Arrangements (effective for accounting periods
beginning on or after 1 January 2014)
-- IFRS 12 Disclosures of Interest in Other Entities (effective
for accounting periods beginning on or after 1 January 2014)
-- IAS 27 Separate Financial Statements (effective for
accounting periods beginning on or after 1 January 2014)
-- IAS 28 Investments in Associates and Joint Ventures
(effective for accounting periods beginning on or after 1 January
2014)
-- IAS 32 Amendments - Offsetting Financial Assets and Financial
Liabilities (effective for accounting periods beginning on or after
1 January 2014)
-- IAS 36 Amendments - Recoverable Amounts Disclosures for
Non-financial Assets (effective for accounting periods beginning on
or after 1 January 2014)
-- IAS 39 Amendments - Defined Benefit Plans: Employee
Contributions (effective for accounting periods beginning on or
after 1 July 2014)
-- IFRIC 21 Levies (effective for accounting periods beginning on or after 1 January 2014)
*These standards and interpretations are not endorsed by the EU
at present.
None of the new standards, interpretations and amendments, which
are effective for periods beginning after 1 January 2014 and which
have not been adopted early, are expected to have a material effect
on the Group's future financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using the purchase method. In the
consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
Acquisitions of entities that comprise principally land with no
active plantation business do not represent business combinations,
in such cases, the amount paid for each acquisition is allocated
between the identifiable assets/liabilities at the acquisition
date.
Foreign currency
The individual financial statements of each subsidiary are
presented in the currency of the country in which it operates (its
functional currency) with the exception of the Company and its UK
subsidiaries which are presented in US dollars. The presentation
currency for the consolidated financial statements is also US
dollars, chosen because, as internationally traded commodities, the
price of the bulk of the Group's products are ultimately link to
the US dollar.
On consolidation, the results of overseas operations are
translated into US dollars at average exchange rates for the year
unless exchange rates fluctuate significantly in which case the
actual rate is used. All assets and liabilities of overseas
operations are translated at the rate ruling at the balance sheet
date. Exchange differences arising on re-translating the opening
net assets at opening rate and the results of overseas operations
at actual rate are recognised directly in equity (the "foreign
exchange reserve"). Exchange differences recognised in the income
statement of Group entities' separate financial statements on the
translation of long-term monetary items forming part of the Group's
net investment in the overseas operation concerned are reclassified
to the foreign exchange reserve if the item is denominated in the
presentational currency of the Group or of the overseas operation
concerned.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to date of disposal are transferred to the income
statement as part of the profit or loss on disposal.
All other exchange profits or losses are credited or charged to
the income statement.
Revenue recognition
Revenue includes
- amounts receivable for produce provided in the normal course
of business, net of sales related taxes and levies, including
export taxes;
- amounts received for sales of palm kernel shell, rubber wood
and other income of an operating nature.
Sales of CPO, palm kernel and rubber slab are recognised when
goods are delivered or allocated to a purchaser. Delivery or
allocation does not take place until contracts are paid for. Sales
of latex are recognised on signing of sales contract, this being
the point at which the significant risks and rewards of ownership
are passed over to the buyer. Other income mainly consists of
amounts received from sales of nut shell, which is recognised when
the goods are delivered.
Share based payments
Share options are measured at fair value (excluding the effect
of non market-based vesting conditions) at the date of grant. This
fair value is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non market-based
vesting conditions.
Fair value is measured by use of a binomial model. The expected
life used in the model has been adjusted, based on management's
best estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
Provided that all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied.
Capitalisation on development activities
Interest capitalisation
Interest on third party loans directly related to field
development is capitalised in the proportion that the opening
immature area bears to the total planted area of the relevant
estate. Interest on loans related to construction in progress (such
as an oil mill) is capitalised up to the commissioning of that
asset. These interest rates are booked at the rate prevailing at
the time.
Plantation development
Plantation development comprises cost of planting and
development on oil palm and other plantation crops. Costs of new
planting and development of plantation crops are capitalised from
the stage of land clearing up to the stage of maturity or subject
to certificate of Land Exploitation Rights (HGU) being obtained,
whichever is earlier. The costs of immature plantations consist
mainly of the accumulated cost of land clearing, planting,
fertilising and maintaining the plantation, borrowing costs and
other indirect overhead costs up to the time the trees are
harvestable and to the extent appropriate.
Tax
UK and foreign corporation tax is provided at amounts expected
to be paid or recovered using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Dividends
Equity dividends are recognised when they become legally
payable. The Company pays only one dividend each year as a final
dividend which becomes legally payable when approved by the
shareholders at the next following annual general meeting.
Property, plant and equipment
All items of property, plant and equipment are initially
measured at cost. Cost includes expenditure that is directly
attributable to the acquisition of the items. After initial
recognition, all items of property, plant and equipment except land
and construction in progress, are stated at cost less accumulated
depreciation and any accumulated impairment losses.
The Indonesian authorities have granted certain land
exploitation rights and operating permits for the estates. The land
rights are usually renewed without significant cost subject to
compliance with the laws and regulations of Indonesia. Therefore,
the Group has classified the land rights as leasehold land and
accounted for as an indefinite finance lease. Estate land is
subsequently carried at fair value, based on periodic valuations on
an open market basis by a professionally qualified valuer. These
revaluations are made with sufficient regularity to ensure that the
carrying amount does not differ materially from that which would be
determined using fair value at the end of the reporting period.
Changes in fair value are recognised in other comprehensive income
and accumulated in the revaluation reserve except to the extent
that any decrease in value in excess of the credit balance on the
revaluation reserve, or reversal of such a transaction, is
recognised in income statement. On the disposal of a revalued
estate, any related balance remaining in the revaluation reserve is
transferred to retained earnings as a movement in reserves.
Construction in progress is stated at cost. The accumulated
costs will be reclassified to the appropriate class of assets when
construction is completed and the asset is ready for its intended
use. Construction in progress is also not depreciated until such
time when the asset is available for use.
Buildings and oil mills are depreciated using the straight-line
method. All other property, plant and equipment items are
depreciated using the double-declining-balance method. The yearly
rates of depreciation are as follows:
Buildings - 5% to 10% per annum
Oil Mill - 5% per annum
Estate plant, equipment & vehicle - 12.5% to 50% per
annum
Office plant, equipment & vehicle - 25% to 50% per annum
Biological assets
During the year the Company has changed one of its assumptions,
notional rent, used in the valuation of the Group's biological
assets. The details of the change are disclosed in note 2 - Prior
year restatement.
Biological assets comprise oil palm trees and nurseries. The
biological process commences with the initial preparation of land
and planting of seedlings and ceases with the delivery of crop in
the form of fresh fruit bunches ("FFB") to the manufacturing
process in which crude palm oil and palm kernel are extracted from
the FFB.
Biological assets are carried at fair value less costs to sell
determined on the basis of the net present value of cash flows
arising in producing FFB. No account is taken in the valuation of
future replanting. Biological assets are valued at each accounting
date based upon a valuation of the planted areas using a discounted
cash flow method by reference to the FFB expected to be harvested
over the full remaining productive life of the trees up to 20
years. Areas are included in the valuation once they are planted.
However oil palm which are not yet mature at the accounting date,
and hence are not producing FFB, are valued on a similar basis but
with the discounted value of the estimated cost to complete
planting and to maintain the assets to maturity being deducted from
the discounted FFB value. Movement in valuation surplus of
biological assets is charged or credited to the income statement
for the relevant period (BA adjustment).
Leased assets
Assets financed by leasing agreements which give rights
approximating to ownership (finance leases) are capitalised at
amounts equal to the original cost of the asset to the lessors and
depreciation is provided on the asset over the shorter of the lease
term or its useful economic life in accordance with Group
depreciation policy for those held at cost. Land rights are held at
fair value and revalued at the balance sheet date. The capital
elements of future obligations under finance leases are included as
liabilities in the balance sheet and the current year's interest
element is charged to the income statement to produce a constant
rate of charge on the balance of capital repayments outstanding.
There are no operating leases.
Impairment
Impairment tests on tangible assets are undertaken annually on
31 December. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use or fair value,
less costs to sell), the asset is written down accordingly.
Impairment charges are included in the administrative expenses in
the income statement, except to the extent they reverse gains
previously recognised in the statement of recognised income and
expense.
Inventories
FFB harvested from the biological assets are stated at fair
value less costs to sell at the point of harvest. The fair value
gain arising on the initial recognition of harvested produce is the
result of the FFB weight produced multiplied by the FFB price
adjusted for transportation costs to sell. There is an active
market for FFB and the price is based on statistics provided by the
government for each region.
The gain/(loss) arising on the initial recognition at the point
of harvest is recognised in the income statement within the
biological asset revaluation. The FFB is transferred to the mill,
processed in to CPO and sold within 24 hours so the write off of
the FFB is netted off against the initial recognition within the
biological asset revaluation.
All other inventories are initially recognised at cost, and
subsequently at the lower of cost and net realisable value. In the
case of processed produce for sale which comprises palm oil and
kernel, cost represents the monthly weighted-average cost of
production, and appropriate production overheads. Estate and mill
consumables are valued on a weighted average cost basis.
Financial assets
All the Group's receivables and loans are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. They are recognised at fair value at
inception and subsequently at amortised cost. No impairment
provisions have been considered necessary.
Cash and cash equivalents consist of cash in hand and short term
deposits at banks with an original maturity of not exceeding three
months. Bank overdrafts are shown within loans and borrowings under
current liabilities on the balance sheet.
There are no assets in hedging relationships and no financial
assets or liabilities available for sale.
Financial liabilities
All the Group's financial liabilities are non-derivative
financial liabilities.
Bank borrowings and long term development loans are initially
recognised at fair value and subsequently at amortised cost, which
is the total of proceeds received net of issue costs. Finance
charges are accounted for on an accruals basis and charged in the
income statement, unless capitalised according to the policy as set
out under Interest capitalisation above.
Trade and other payables are shown at fair value at recognition
and subsequently at amortised cost.
Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the balance sheet
differs from its tax base except for differences in the initial
recognition of an asset or liability in a transaction which is not
a business combination and at the time of the transaction affects
neither accounting nor taxable profit.
The Group recognises deferred tax liabilities arising from
taxable temporary differences on investments in subsidiaries,
except where the Group is able to control the reversal of the
temporary differences and it is probable that the temporary
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is possible that taxable profit will be
available against which the difference can be utilised.
Deferred tax is recognised on temporary differences arising on
property revaluation surpluses.
Deferred tax is determined using the tax rates that are enacted
or substantively enacted at the balance sheet date. Deferred tax is
charged or credited in the income statement, except when it relates
to items charged or credited directly to equity, such as
revaluations, in which case the deferred tax is also dealt with in
equity; in this case assets and liabilities are offset.
Retirement benefits
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated income statement in the year to which
they relate.
Defined benefit schemes
The Group operates a number of defined benefit schemes in
respect of its Indonesian operations. These schemes' surpluses and
deficits are measured at:
-- The fair value of plan assets at the reporting date; less
-- Plan liabilities calculated using the projected unit credit
method discounted to its present value using yields available on
high quality corporate bonds that have maturity dates approximating
to the terms of the liabilities; plus
-- Unrecognised past service costs; less
-- The effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined obligation are recognised
directly within equity. The remeasurements include:
-- Actuarial gains and losses;
-- Return on plan assets (interest exclusive);
-- Any asset ceiling effects (interest inclusive).
Service costs are recognised in comprehensive income, and
include current and past service costs as well as gains and losses
on curtailments.
Net interest expense / (income) is recognised in comprehensive
income, and is calculated by applying the discount rate used to
measure the defined benefit obligation / (asset) at the beginning
of the annual period to the balance of the net defined benefit
obligation / (asset), considering the effects of contributions and
benefit payments during the period.
Gains or losses arising from changes to scheme benefits or
scheme curtailment are recognised immediately in comprehensive
income.
Settlements of defined benefit schemes are recognised in the
period in which the settlement occurs.
Prior to 1 January 2013, the difference between the fair value
of the assets held in the Group's defined benefit schemes and the
schemes' liabilities measured on an actuarial basis using the
projected unit method are recognised in the Group's balance sheet
as retirement benefits assets or liabilities as appropriate. The
carrying value of any resulting defined benefit schemes' assets is
restricted to the extent that the Group is able to recover the
surplus either through reduced contributions in the future or
through refunds from the schemes. Changes in the defined benefit
schemes' assets or liabilities arising from factors other than cash
contribution by the Group are charged to the comprehensive
income.
Treasury shares
Consideration paid or received for the purchase or sale of the
Company's own shares for holding in treasury is recognised directly
in equity, where the cost is presented as the treasury share
reserve. Any excess of the consideration received on the sale of
treasury shares over the weighted average cost of shares sold, is
taken to the share premium account.
Any shares held in treasury are treated as cancelled for the
purpose of calculating earnings per share.
Critical accounting estimates and judgements
The preparation of the Group financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect
the reported assets and liabilities and reported revenue and
expenses. Actual results could differ from those estimates and
accordingly they are reviewed on an on-going basis. The main areas
in which estimates are used are: fair value of biological assets,
property, plant and equipment, deferred tax and retirement
benefits.
Revisions to accounting estimates are recognised in the period
in which the estimate is revised or the revision affects only that
period, or in the period of revision and future periods if the
revision affects both current and future periods.
Assumptions regarding the valuation of biological assets,
property, plant and equipment are set out in note 10. Assumptions
regarding the valuation of agricultural produce at the point of
harvest less costs to sell are set out in the inventories
accounting policy. The Group's policy with regard to impairment of
such assets is set out above.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts and
guarantees the indebtedness of other companies within the Group,
the Company considers these to be insurance arrangements and
accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time that
it becomes probable that the Company will be required to make a
payment under the guarantee.
2 Prior year restatement
The 2012 Annual Report stated that the Company was in the
process of resolving a query from the Financial Reporting Council
("FRC") concerning the measurement of the notional rent used in the
valuation of the Group's biological assets. In October 2013, the
Group engaged a professional valuer in United Kingdom ("UK valuer")
for an independent opinion on the measurement of the notional rent.
As a result, the Group has adopted a notional rent equivalent to 9%
of the value of planted land as proposed by the UK valuer in
valuing its biological asset. This resulted in the accounts for the
years ended 31 December 2012 and 2011 being restated and the
closure of the discussions with the FRC. The effect of the
restatements is summarised below.
The impact of these prior year adjustments:-
(Restated)
2012
After Biological Assets $000 $000
------------------------------------------------- -------- ----- ------------
Profit for the year before restatement 62,703
Effect of change in restatement:
Biological asset revaluation movement (2,180)
Tax expense 545
--------
(1,635)
Profit for the year after restatement 61,068
------------
Other comprehensive expenses for the year
before restatement (30,108)
Effect of change in restatement:
Profit on exchange translation of foreign
operations 1,722
------------
Other comprehensive expenses for the year
after restatement (28,386)
------------
The effect of these prior year adjustments had a negative impact
on the earnings per share of 3.69cts for the year to 31 December
2012.
The following table summarises the impact of these prior year
adjustments on the Consolidated Statement of Financial
Position:
Deferred
Biological tax Exchange Retained Non-controlling
assets liabilities reserve earnings interest
$000 $000 $000 $000 $000
Balance as reported 1 January
2012 235,158 (52,533) (67,602) 380,633 77,369
Effect of restatement (37,748) 9,435 242 (24,719) (3,836)
Restated balance as at 1 January
2012 197,410 (43,098) (67,360) 355,914 73,533
----------- ------------- --------- ---------- ----------------
Balance as reported 31 December
2012 245,313 (46,644) (90,571) 427,186 86,822
Effect of restatement up to
1 January 2012 (37,748) 9,435 242 (24,719) (3,836)
Effect of restatement during
the year 114 (27) 1,491 (1,461) 57
Restated balance as at 31 December
2012 207,679 (37,236) (88,838) 401,006 83,043
----------- ------------- --------- ---------- ----------------
3 Revenue
2013 2012
$000 $000
Sales of produce: -
* CPO 198,803 232,717
* Rubber 2,497 2,527
Other income 617 2,108
--------- ---------
201,917 237,352
--------- ---------
4 Finance income and expense
2013 2012
$000 $000
Finance income
Interest receivable on:
Credit bank balances and time deposits 4,676 3,336
Finance expense
Interest payable on:
Development loans (1,774) (117)
--------
Net finance income recognised in income statement 2,902 3,219
--------- --------
5 Profit before tax
2013 2012
$000 $000
Profit before tax is stated after charging
Depreciation (note 10) 6,406 6,135
Exchange losses 2,781 24
Operating lease expense
- Property 410 429
Professional fees 1,015 2,080
Staff costs 28,698 23,545
Remuneration received by the group's auditor
or associates of the group's auditor:
Audit of parent company 6 6
Audit of consolidated financial statement 155 151
-------- --------
Total audit services 161 157
-------- --------
Audit of overseas subsidiaries
- Malaysia 23 22
- Indonesia 71 64
-------- --------
Total audit services 94 86
-------- --------
Fees payable to the group's auditor for other
services 170 59
Total auditors' remuneration 425 302
-------- --------
6 Segment information
Measurement of operating segment profit or loss, assets and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with IFRS but
excluding non-recurring losses, such as share based payments.
Inter-segment transactions are made based on terms mutually
agreed by the parties to maximise the utilisation of Group's
resources at a rate acceptable to local tax authorities. This
policy was applied consistently throughout the current and prior
period.
The Group's assets and liabilities are allocated to segments
based on geographical location.
North South Total
Sumatra Bengkulu Sumatra Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2013
Total sales
revenue (all
external)
* CPO 90,764 63,019 18 38,166 - 2,516 194,483 4,318 2 198,803
* Rubber 2,497 - - - - - 2,497 - - 2,497
Other income 827 112 6 91 - (419) 617 - - 617
--------- --------- -------- -------- ------- ------------- ----------------- --------- -------- -----------
Total revenue 94,088 63,131 24 38,257 - 2,097 197,597 4,318 2 201,917
--------- --------- -------- -------- ------- ------------- ----------------- --------- -------- -----------
Profit/(loss)
before tax 33,879 15,700 (443) 19,017 1 (6,633) 61,521 206 (1,987) 59,740
BA movement 93,661
-----------
Profit for the
year before
tax per
consolidated
income
statement 153,401
-----------
Depreciation (2,248) (2,268) (475) (585) (32) (540) (6,148) (258) - (6,406)
Inter-Segment
Transactions 2,821 (2,236) (242) (656) - (1,512) (1,825) 845 980 -
Income tax (24,567) (8,086) (554) (6,542) 79 (288) (39,958) 585 (220) (39,593)
Total Assets 195,447 148,268 59,285 67,739 12,744 89,882 573,365 29,720 4,662 607,747
Non-Current
Assets 153,524 122,485 57,673 38,726 12,462 76,259 461,129 22,334 1,363 484,826
Non-Current
Assets -
Additions 13,164 5,952 10,172 1,513 1,069 17,828 49,698 240 - 49,938
2012 (restated)
Total sales
revenue (all
external)
* CPO 95,755 78,385 - 52,915 - 322 227,377 5,340 - 232,717
* Rubber 2,527 - - - - - 2,527 - - 2,527
Other income 1,030 359 - 712 - 7 2,108 - - 2,108
--------- --------- -------- -------- ------- ------------- ----------------- --------- -------- -----------
Total revenue 99,312 78,744 - 53,627 - 329 232,012 5,340 - 237,352
--------- --------- -------- -------- ------- ------------- ----------------- --------- -------- -----------
Profit/(loss)
before tax 44,456 25,609 (52) 20,422 (2) (73) 90,360 555 (2,324) 88,591
BA movement (6,729)
-----------
Profit for the
year before
tax per
consolidated
income
statement 81,862
-----------
Depreciation (1,899) (2,430) (489) (629) (19) (421) (5,887) (248) - (6,135)
Inter-Segment
Transactions 1,487 (1,714) (168) (503) - (1,123) (2,021) 1,771 250 -
Income tax (12,637) (2,052) 645 (7,932) 115 887 (20,974) 180 - (20,794)
Total Assets 170,233 138,552 54,889 72,908 11,495 83,405 531,482 22,577 5,308 559,367
Non-Current
Assets 120,603 118,984 52,770 38,959 10,960 66,104 408,380 15,146 1,363 424,889
Non-Current
Assets -
Additions 9,770 7,615 14,168 1,409 497 15,229 48,688 390 - 49,078
In year 2013, revenues from 4 customers of the Indonesian
segment represent approximately $110.1m (2012: $128.1m) of the
Group's total revenue. An analysis of these revenues is provided as
below. Although customer 1 to 4 are over 10% of the Group total
revenue, there is no over reliance on these Customers as tenders
are performed on a monthly basis.
North South Total
Sumatra Bengkulu Sumatra Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2013
Customer 1 22,958 - - 8,408 - - 31,366 - - 31,366
Customer 2 9,100 16,139 - 5,270 - - 30,509 - - 30,509
Customer 3 23,617 1,182 - 813 - - 25,612 - - 25,612
Customer 4 11,206 - - 11,374 - - 22,580 - - 22,580
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
66,881 17,321 - 25,865 - - 110,067 - - 110,067
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
2012
Customer 1 - 33,999 - - - - 33,999 - - 33,999
Customer 2 15,976 1,890 - 13,749 - - 31,615 - - 31,615
Customer 3 17,907 - - 13,326 - - 31,233 - - 31,233
Customer 4 31,205 - - - - - 31,205 - - 31,205
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
65,088 35,889 - 27,075 - - 128,052 - - 128,052
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
% % % % % % % % % %
2013
Customer 1 11.4 - - 4.2 - - 15.6 - - 15.6
Customer 2 4.5 8.0 - 2.6 - - 15.1 - - 15.1
Customer 3 11.7 0.6 - 0.4 - - 12.7 - - 12.7
Customer 4 5.5 - - 5.6 - - 11.1 - - 11.1
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
33.1 8.6 - 12.8 - - 54.5 - - 54.5
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
2012
Customer 1 - 14.3 - - - - 14.3 - - 14.3
Customer 2 6.7 0.8 - 5.8 - - 13.3 - - 13.3
Customer 3 7.5 - - 5.6 - - 13.1 - - 13.1
Customer 4 13.1 - - - - - 13.1 - - 13.1
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
27.3 15.1 - 11.4 - - 53.8 - - 53.8
--------- --------- --------- ------- ------- ----------- ----------- --------- ----- --------
Save for a small amount of rubber, all the Group's operations
are devoted to oil palm. The Group's report is by geographical
area, as each area tends to have different agricultural
conditions.
7 Earnings per ordinary share (EPS)
(Restated)
2013 2012
$000 $000
Profit for the year attributable to owners
of the Company before BA adjustment 35,950 53,108
Net BA adjustment 57,571 (5,777)
----------- ------------
Earnings used in basic and diluted EPS 93,521 47,331
----------- ------------
Number Number
'000 '000
Weighted average number of shares in issue
in year
- used in basic EPS 39,636 39,636
- dilutive effect of outstanding share options 48 48
----------- ------------
- used in diluted EPS 39,684 39,684
----------- ------------
Basic EPS before BA adjustment 90.70cts 133.99cts
Basic EPS after BA adjustment 235.95cts 119.41cts
Dilutive EPS before BA adjustment 90.59cts 133.83cts
Dilutive EPS after BA adjustment 235.67cts 119.27cts
8 Dividends
2013 2012
$000 $000
Paid during the year
Final dividend of 4.5cts per ordinary share
for the year ended 31 December 2012 (2011:
6.0cts) 1,784 2,372
---------- ---------
Proposed final dividend of 3.0p per ordinary
share for the year ended 31 December 2013 (2012:
4.5cts) 1,969 1,784
---------- ---------
The proposed dividend for 2013 is subject to shareholders'
approval at the forthcoming annual general meeting and has not been
included as a liability in these financial statements.
9 Fair value measurement of financial instruments
IFRS 7 'Financial Instruments: Disclosures' (IFRS 7) requires
certain disclosures which require the classification of financial
assets and financial liabilities measured at fair value using a
fair value hierarchy that reflects the significance of the inputs
used in making the fair value measurement. These disclosures
include the classification of fair values within a three-level
hierarchy. The three levels are defined based on the observability
of significant inputs to the measurement, as follows:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly;
-- Level 3 - unobservable inputs for the asset or liability.
The Group's biological assets and land are stated at fair value.
Details of the information about the fair value hierarchy in
relation to biological assets and land at 31 December 2013 are as
follows:
Level Level Level Fair
1 2 3 value
$000 $000 $000 $000
Biological assets - - 265,835 265,835
Land - - 149,871 149,871
There were no items classified under Level 1 and Level 2 and
thus there were no transfers between Level 1 and Level 2 during the
year.
The following table set out the valuation technique used in
determination of the fair value of the land including the key
inputs used:
Item Valuation approach and inputs used
Land The fair values of the land for five
major companies in Indonesia and a Malaysia
company are derived using the sale comparison
approach. Although there is observable
market data, there is a significant
degree of judgement in determining the
adjustments required in deriving at
the final land valuation. Sale prices
of comparable land in similar location
are adjusted for differences in key
attributes such as location, legal title,
land area, land type and topography.
The valuation model is based on price
per hectare. The growth rates per hectare
obtained by comparing the current valuation
against the valuation undertaken in
year 2011 were then applied to the 2011
land value of the remaining companies
in the same geographical location to
derive year 2013 fair value of land.
Unplantable land was excluded in this
exercise since it has zero value.
The valuation methodology of biological assets is disclosed in
note 10. The significant unobservable inputs used in the fair value
measurement of biological assets and its relationship to fair value
are exhibited below:
Significant unobservable Relationship of unobservable inputs to
inputs fair value
CPO selling price The higher the CPO selling price, the
higher the fair value
Discount rate The higher the discount rate, the lower
the fair value
Notional rent The higher the notional rent, the lower
the fair value
The derivation of the above unobservable inputs and the
sensitivity of the Group's biological assets to the fluctuation in
these unobservable inputs are disclosed in note 10.
There is no financial instrument that is measured at fair value
at the balance sheet date.
The fair value of the following financial assets and liabilities
approximate their carrying amounts at the balance sheet date:
-- Non-current receivables
-- Trade and other receivables
-- Cash and cash equivalents
-- Borrowings
-- Trade and other payables
--
10 Biological assets, property, plant and equipment
Estate Office PPE
plant, plant, Total
Biological equipment equipment Construction
assets Mill Land Buildings & vehicle & vehicle in progress Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
Cost or valuation
At 1 January 2012
(restated) 197,410 41,887 157,390 22,574 14,251 1,351 2,979 240,432 437,842
Exchange
translations (11,531) (2,546) (8,643) (1,527) (769) (30) (156) (13,671) (25,202)
Reclassification 848 - (848) 4,350 - - (4,350) (848) -
Decrease due to
harvest (20,522) - - - - - - - (20,522)
Revaluations 13,793 - (4,064) - - - - (4,064) 9,729
Additions 3,749 2,509 4,246 7,674 2,571 81 2,165 19,246 22,995
Development costs
capitalised 23,932 - - - - - 2,151 2,151 26,083
Disposals - (97) - (142) (462) (2) (690) (1,393) (1,393)
----------- -------- --------- ---------- ---------- ---------- ------------- --------- ----------
At 31 December
2012 (restated) 207,679 41,753 148,081 32,929 15,591 1,400 2,099 241,853 449,532
Exchange
translations (58,857) (9,762) (33,978) (8,011) (3,354) (228) (505) (55,838) (114,695)
Reclassification (1,194) 106 (2) 9,991 - - (10,095) - (1,194)
Decrease due to
harvest (14,092) - - - - - - - (14,092)
Revaluations 107,753 - 31,807 - - - - 31,807 139,560
Additions 105 6,546 2,712 53 2,383 125 7,157 18,976 19,081
Development costs
capitalised 24,770 1,206 1,460 - - - 3,421 6,087 30,857
Disposals /
Written off (329) (286) (209) (226) 23 (1) - (699) (1,028)
At 31 December
2013 265,835 39,563 149,871 34,736 14,643 1,296 2,077 242,186 508,021
-------- --------- ---------- ---------- ---------- --------- ----------
Accumulated
depreciation
and impairment
At 1 January 2012 - 10,812 - 5,599 8,437 744 - 25,592 25,592
Exchange
translations - (704) - (305) (431) (23) - (1,463) (1,463)
Charge for the
year - 2,344 - 1,640 1,963 188 - 6,135 6,135
Disposal - (77) - (102) (408) (1) - (588) (588)
----------- -------- --------- ---------- ---------- ---------- ------------- --------- ----------
At 31 December
2012 - 12,375 - 6,832 9,561 908 - 29,676 29,676
Exchange
translations - (2,864) - (1,573) (2,031) (161) - (6,629) (6,629)
Charge for the
year - 2,305 - 2,044 1,867 190 - 6,406 6,406
Disposal /
Written off - (264) - (118) (226) (1) - (609) (609)
At 31 December
2013 - 11,552 - 7,185 9,171 936 - 28,844 28,844
-------- --------- ---------- ---------- ---------- --------- ----------
Carrying amount
At 31 December
2011 (restated) 197,410 31,075 157,390 16,975 5,814 607 2,979 214,840 412,250
At 31 December
2012 (restated) 207,679 29,378 148,081 26,097 6,030 492 2,099 212,177 419,856
At 31 December
2013 265,835 28,011 149,871 27,551 5,472 360 2,077 213,342 479,177
Net (loss) / gain
arising
from changes in
fair value
of biological
assets
At 31 December
2012 (restated) (6,729) - - - - - - - (6,729)
At 31 December
2013 93,661 - - - - - - - 93,661
-------- --------- ---------- ---------- ---------- -------------
.
The fair value less costs to sell of FFB harvested during the
period, determined at the point of harvest is exhibited below:
2013 2012
Fair value of FFB
Crop production and yield - FFB (mt) 787,000 783,000
Fair value of FFB ($000) 116,578 128,750
Fair value of FFB less costs to sell ($000) 106,889 122,783
The gain arising on the fair value of FFB at the point of
harvest is recognised in the income statement within the biological
asset revaluation. A reconciliation of the amount included within
the income statement and the biological asset has been included
below:
(Restated)
2013 2012
$000 $000
Harvest included in the biological asset valuation
from estimated production and pricing assumptions
less costs to sell in the prior year 14,092 20,522
Gain from actual production and pricing 92,797 102,261
------------- ---------
Fair value of FFB harvested from own production 106,889 122,783
------------- ---------
The decrease of $14,092,000 (2012: $20,522,000) from harvest was
included in the prior year valuation for the current year and is
therefore deducted from biological asset valuation in the current
year as the FFB is harvested. The actual fair value of harvested
FFB varies to forecast due to the changes in actual production,
actual FFB price and actual costs incurred. The gain on fair value
of the harvested FFB is written off as the FFB is processed in to
CPO.
The biological asset revaluation movement included within the
income statement is calculated as follows:
(Restated)
2013 2012
$000 $000
Decrease due to harvest (14,092) (20,522)
Revaluations 107,753 13,793
------------ ----------
Net gain / (loss) arising in the income statement
from changes in fair value of biological assets 93,661 (6,729)
------------ ----------
During the year, the Group has engaged a new firm, Muttaqin
Bambang Purwanto Rozak Uswatun & Rekan with its head office
located in Jakarta, Indonesia, to undertake the valuation of
biological assets. The carrying amount of the Group's biological
assets as at 31 December 2012 was based on valuations undertaken by
independent valuers, Doli Siregar & Rekan with its head office
located in Jakarta, Indonesia. Except for an adjustment on discount
rate and the measurement of the notional rent which is determined
by the Directors and the UK valuer respectively, the valuation was
carried out independently by the Indonesian valuers. All the three
firms have the appropriate professional qualifications and recent
experience in the location and category of the properties being
valued. Further information of the Indonesian firms can be obtained
from 'www.ds-r.co.id' and 'www.kjpp-mbpru.com' respectively. In the
year 2013, independent land valuation was undertaken for five major
companies in Indonesia and a Malaysia company. The growth rates per
hectare obtained by comparing the current valuation against the
valuation undertaken in year 2011 were then applied to the 2011
land value of the remaining companies in the same geographical
location to derive year 2013 fair value of land. Unplantable land
was excluded in this exercise since it has zero value. The Group's
land as at 31 December 2012 has been valued by the Directors with
reference to independent valuation undertaken as at 31 December
2011. Had the revalued land been measured on a historical cost
basis, their net book value would have been US$44,848,000 (2012:
US$49,853,000). Refer to note 9 for further disclosure of the fair
value measurement of land.
The methodology of the biological asset valuations was using
discounted cash flow ("DCF") over the expected 20-year economic
life of the asset. The assumption applied in the valuation were,
inter alia, an assumed CPO selling price of $700/mt (2012:
$675/mt), discount rate of 15.8% (2012: 17.5%) and notional rent
equivalent to 9% (2012: 9%) of the value of planted land. The
discount rates were determined by the Directors based on their
assessment of various risks including financial, business and
country risk of where the plantations are located as well as taking
into account the Company's weighted average cost of capital. The
CPO price is taken to be the 10-year average (2012: 10-year
average) rounded to the nearest $25 based on historical
widely-quoted commodity price for CPO and represents the Directors'
best estimate of the price sustainable over the longer term. An
inflation rate of 5% (2012: 5%) was applied to the second to sixth
years of the DCF. The notional rent charge is based on key capital
market and property indicators in the countries and regions of
operations. Refer to note 9 for further disclosure of the fair
value measurement of biological asset.
The following table exhibits the sensitivity of the Group's
biological assets to the fluctuation in CPO price, discount rate
and notional rent:
(Restated)
2013 2012
$000 $000
A change of $50 in the price assumption for
CPO
-$50 in the price assumption (53,411) (43,991)
+$50 in the price assumption 53,381 45,273
A change of 1% in the discount rate
-1% in the discount rate 15,687 12,079
+1% in the discount rate (14,363) (11,084)
A change of notional rent equivalent to 1% of
the value of planted land
-1% in the value of planted land 5,192 4,840
+1% in the value of planted land (5,192) (4,716)
Included within reclassifications in the current year is an
amount of $1,194,000 in biological assets that has been
reclassified to non-current receivables - Due from cooperatives
under Plasma Programme in relation to planted land transferred to
smallholders under the plasma scheme.
The estates include $1,427,000 (2012: $276,000) of interest and
$5,606,000 (2012: $9,308,000) of overheads capitalised during the
year in respect of expenditure on estates under development.
The Indonesian authorities have granted certain land
exploitation rights and operating permits for the estates. In the
case of established estates in North Sumatra these rights and
permits expire between 2023 and 2038 with rights of renewal
thereafter. As of estates in Bengkulu land titles were issued
between 1994 and 2008 and the titles expire between 2028 and 2034
with rights of renewal thereafter for two consecutive periods of 25
and 35 years respectively. In Riau, land titles were issued in 2004
and expire in 2033. In the case of PT Cahaya Pelita Andhika's
estate acquired in 2007 land titles were issued in 1996 to expire
in 2029.
Subject to compliance with the laws and regulations of
Indonesia, land rights are usually renewed. The cost of renewing
the land rights is not significant.
The land title of the estate in Malaysia is a long-term lease
expiring in 2084.
11 Posting of Annual Financial Report
The Annual Financial Report will be posted to shareholders in
due course. Copies of this announcement are available from the
offices of the Company Secretary, CETC (Nominees) Limited, Quadrant
House, 6(th) Floor, 4 Thomas More Square, London E1W 1YW and on the
Company's website at www.angloeastern.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKFDNOBKKNQK
Anglo-eastern Plantations (LSE:AEP)
Historical Stock Chart
From Sep 2024 to Oct 2024
Anglo-eastern Plantations (LSE:AEP)
Historical Stock Chart
From Oct 2023 to Oct 2024
