TIDMPAL
RNS Number : 1546Z
Equatorial Palm Oil plc
08 December 2014
8 December 2014
EQUATORIAL PALM OIL plc
("EPO" or the "Company")
Audited Results for the period ended 30 September 2014
Equatorial Palm Oil plc (AIM: PAL), the AIM listed palm oil
development and production company with operations in Liberia, West
Africa, announces its audited results for the 9 months ended 30
September 2014.
Financial Highlights:
-- Loss for 9 months of US$1,143,000 (12 months ended 31 December 2013: US$8,201,000)
-- Cash held by EPO at period end was US$2,061,000 (31 December 2013: US$10,364,000)
Operational Highlights:
-- Introduction of preventative and precautionary measures to fight the Ebola virus
-- Stringent processes and procedures to ensure the health and
safety of our employees being the absolute priority at all
times
-- 1,800 hectares planted at Palm Bay Estate and 200 hectares planted at Butaw Estate
-- Signed Joint Venture Agreement with KLK Agro Plantations Pte. Ltd. ("KLK Agro")
-- US$35.5mil in cash and funding commitments for Liberian Palm
Developments Limited ("LPD") from KLK Agro and EPO
-- Management Agreement signed with Taiko Plantations Sdn. Bhd.
to manage and conduct LPD's operations
-- Final stages of negotiating the lease for land at the port of
Buchanan for storage and tank farm facility
Notice of Annual General Meeting:
Notice is hereby given that the Annual General Meeting of the
Company will be held at the offices of SGH Martineau LLP, 5(th)
Floor, One America Square, Crosswall, London EC3N 2SG on Thursday
29(th) January 2015 at 11.00 a.m.
For further information, please visit www.epoil.co.uk or
contact:
Equatorial Palm Oil plc +44 (0) 20 7493
Geoffrey Brown (Executive Director) 7671
Strand Hanson Limited (Nominated Adviser) +44 (0) 20 7409
James Harris / Andrew Emmott / James Bellman 3494
Mirabaud Securities LLP (Broker) +44 (0) 20 7484
Peter Krens 3510
CHAIRMAN'S STATEMENT
Introduction
As a result of the change in the Company's accounting year end,
the results the subject of this Chairman's Statement are for the 9
months ended 30 September 2014 ("the Period").
The year 2014, sadly, will be remembered for the Ebola virus.
Ebola is the focus of not only EPO but also increasingly of the
international community. At the time of publishing these results,
we do not have any Ebola on our estates; everything we do in
Liberia is geared towards the health and safety of our employees.
As such a great deal of this report is setting out in detail our
approach to this human crisis.
Ebola Update and EPO's Response
As has been well documented the Ebola outbreak in West Africa is
unquestionably the most severe acute public health emergency in
modern times.
The first cases of the epidemic were reported in March 2014,
with infections in Guinea closely followed by outbreaks in Sierra
Leone and Liberia.
It was clear at the outset that those companies which had a
presence in the Ebola affected countries needed to act fast and
play a lead role in the co-ordination and communication with the
outside world.
EPO joined, together with a group which has now expanded to over
40 other private sector companies, to form the Ebola Private Sector
Coordination Group ("EPSCG"). The EPSCG's purpose is to be the
focus point for the coordination and understanding of the disease
across the West African private sector and be an efficient point of
access for government, the UN and NGOs to share information and
collaborate with the private sector. Furthermore the EPSCG has been
instrumental in focusing the attention of the plight of the
affected countries to the world community at large which was
initially slow to act. The EPSCG does not seek to replace or
compete with any government, UN, NGO's or the like, but exists to
ensure that these entities have a simple access point into the
private sector.
Containment and treatment of the Ebola virus, be it individuals,
communities or the whole region requires a significant deployment
of resources and coordination between local, national and
international governments, the UN and various NGOs.
Since the announcement of the US government's decision, on 16
September 2014, to get involved in combatting Ebola in Liberia,
international donors have provided hundreds of millions of dollars
to support Ebola response activities in West Africa.
So far, we have not had any instances of Ebola on or around our
Palm Bay and Butaw estates where our operations are based in
Liberia. We currently have over 1,500 persons employed of whom 12
are expatriate staff. No expatriate employees have left the country
because of Ebola nor have any of them indicated that they wish to
do so.
We have introduced a number of preventative and precautionary
measures at all of our sites in accordance with government
guidelines. We have provided hand sterilisation points at multiple
sites and have provided "Thermo Flash" thermometers for checking on
the temperature of both our workers and visitors to our locations.
We have also provided isolation gowns, gloves and face masks to our
clinics on the estates for use, if found to be necessary, in
screening patients for the virus. Our health clinic staff provide
outreach services to neighbouring villages to ensure that everyone
in the vicinity of our concession areas fully understand the
necessary procedures that must be followed to prevent both the
introduction of the disease and the prevention of infection.
Recently, we have increased our alert level to include restrictions
on non-essential domestic travel for our employees.
We have donated necessary medical equipment and supplies to the
County Task Force in Grand Bassa, and Sinoe counties, where our
concessions lie and also to the County Task Force of River Cess
County. Furthermore our joint venture partner, Kuala Lumpur Kepong
Berhad ("KLK"), from Malaysia has donated $110,000 together with
other Malaysian oil palm corporates for the purchase of rubber
gloves, which is an essential item in the fight against the Ebola
disease.
United Nations
The UN Global Compact ("UNGC") is supporting the UN Mission for
Ebola Emergency Response ("UNMEER") private sector mobilisation
efforts by spearheading a Chief Executive Officer action pledge on
Ebola. The UNGC has asked the EPSCG to drive this pledge and appeal
to companies to support Ebola eradication, take leadership within
their own companies to stop Ebola's spread, and help communities
and the economy recover.
EPO has signed up to the pledge, which emphasises the following
key points:
-- Our company is committed to sustainable economic development in Western Africa.
-- We will continue to operate our business in Ebola-affected
areas, pay our staff, and honour financial commitments for as long
as we possibly can in the context of this emergency.
-- We will train and tell our own staff about Ebola, asking them
to pass that knowledge to their families, neighbours and
communities to prevent infection and fight stigma.
-- We will prepare procedures and assets to respond to an
outbreak within our own company. We will ask the same of our
suppliers, and pay particular attention to the preparedness of SMEs
in our supply chain.
-- We will identify assets, resources and financial support we
can provide to help the UN, governments and NGOs leading on Ebola
response. We will make these offers and contributions known through
the appropriate coordinating actors: EPSMG, UNMEER, and the UN
Global Compact.
-- We will contribute to post-outbreak recovery efforts, and
will collaborate to help rebuild stronger healthcare systems in
affected countries.
-- We will participate in collective efforts with civil society,
intergovernmental organisations, affected communities and other
businesses with a view to forge long term partnerships in support
of regional economic and sustainable development.
-- We will share our learning with other companies and support
collective private sector efforts to combat Ebola and prevent its
spread.
Liberian Palm Developments Limited (LPD) - Funding and
Operational Review
Joint Venture Agreement
In April 2014, EPO signed a joint venture agreement ("JVA") with
KLK Agro Plantations Pte Ltd ("KLK Agro"), for the funding and
operation of LPD.
Funding
Under the terms of the JVA, LPD will receive up to US$35.5m in
cash and funding commitments, of which US$15m was received in April
2014 as a result of the issue of new equity in LPD to KLK Agro and
EPO (through its wholly owned subsidiary Equatorial Biofuels
(Guernsey) Limited), which have each subscribed for US$7.5m of such
new equity in LPD (the "Initial Funding").
In addition to the Initial Funding, KLK Agro has agreed to
provide any further funding required by LPD up to a maximum of
US$20.5m (the "KLK Funding Commitment") which may, at the
discretion of KLK Agro, be provided by way of debt or preferential
equity finance which will incur interest or preferential dividends
(as appropriate) at USD LIBOR plus a maximum of 500 basis points.
LPD also has the option to obtain financing from parties other than
KLK irrespective of whether or not the KLK Funding Commitment has
been fully invested in LPD and provided that the terms of such
external financing are better than that of KLK's Funding
Commitment.
The Initial Funding and the KLK Funding Commitment were also
achieved with no further dilution for EPO shareholders.
In April 2014, LPD also entered into an agreement with Taiko
Plantations Sdn. Bhd. ("Taiko"), a wholly owned subsidiary of Kuala
Lumpur Kepong Berhad ("KLK"), (the "Management Agreement"), under
the terms of which Taiko has been appointed to manage and conduct
LPD's operations. The Management Agreement can be terminated by
either party giving three months' written notice to the other
party.
Under the terms of the Management Agreement, Taiko shall be paid
a management fee by LPD as follows:
i. US$1m per annum for the first four years from the date of
signing of the Management Agreement; and
ii. thereafter, a fee equivalent to 2.0 per cent. of the gross
sale proceeds of palm products achieved by LPD.
Palm Bay and Butaw Estates
Our estates have been operating on as near to a normal basis as
possible, despite the challenges that it is facing from Ebola. One
of the significant impediments is travelling in the country, as the
government is encouraging its citizens to only travel if absolutely
essential and a night-time curfew has further restricted movement
of people and vehicles. This means that it is often very difficult
to get heavy machinery to site, especially to Butaw which is in the
south-east of the country in Sinoe County.
Despite the challenges, LPD planted 2,000 hectares combined at
Palm Bay and Butaw estates during the Period. Therefore, in total,
LPD has planted over 5,500 hectares of new plantings since
2011.
The first production, from the oil palms planted by LPD in 2011,
is due to come on-stream at the end of 2015, when those palms will
yield sufficient fruit to begin harvest and the palm oil mill will
be operational. This will mark a significant milestone for LPD.
Our employees on our estates continue to thrive and learn new
skills as our operations grow. LPD employ a small number of
Indonesian staff on short term contracts to teach the local
workforce the key skills in the management of an oil palm estate,
including nursery work, field work, harvesting and mill
operations.
Palm Oil Mill
Our oil mill at Palm Bay is due to be brought back into
operation once the new production comes on stream at the end 2015.
This mill is the only commercial scale mill in Liberia. The
capacity of the mill is currently 5MT of fresh fruit bunches
("FFB") per hour, which can be increased to 10MT of FFB per hour to
accommodate new production as yield increases.
In time, the Company intends to install larger mills at both
Palm Bay and Butaw which will enable 60MT of FFB to be processed
per hour. In essence, a new 60MT mill will be installed for every
10,000 ha of oil palms planted.
The importance of having a working mill for the purpose training
of staff cannot be underestimated. As our new production ramps up,
we have the comfort of knowing that our Liberian staff will have
been sufficiently trained to run larger milling operations where
the technology and know-how is the same as that of our existing
mill.
Port Access
LPD is in final negotiations with the National Port Authority of
Liberia ("NPA") regarding a lease for land at the Port of Buchanan.
This land has been identified as suitable to build a tank farm and
storage facility for oil palm products. Once the tank farm facility
has been built, LPD will use road tankers to transport its products
from Palm Bay estate to the Port of Buchanan. The products will be
stored in tanks of suitable size from where they will then be
transferred onto parcel tankers that can berth at the port.
The Port of Buchanan has been operating well for the last three
years and is also a place of export for iron ore, logs, and
rubber.
LPD has also entered into discussions with the NPA with regard
to securing land in the Port of Greenville, which is close to Butaw
estate, for the establishment of a tank farm and storage
facility.
River Cess Expansion Area
With an expansion potential of up to 80,000 ha and an optimum
location between our two existing concessions, River Cess Expansion
Area remains a key development for LPD. Detailed business plans
have been submitted to the National Investment Commission of
Liberia. The next step is for a Joint Ministerial Committee to be
formed by the Liberian Government in order to draw up a concession
agreement, however we believe that this is unlikely to take place
until the cessation of the Ebola outbreak given the restriction on
the movement of people and vehicles around River Cess County.
LPD has strong support from the local communities in River Cess
County for a concession to be granted to LPD. There is no industry
of any magnitude in River Cess County such that the development of
an oil palm industry will bring great benefits to the local
population whilst helping to reinvigorate the Liberian agricultural
industry.
EPO Board Changes
During the Period the following appointments were made to the
EPO Board: Mr Lee Oi Hian, aged 63 who is the current Chief
Executive Officer of KLK; Mr Teh Sar Moh Nee who is the current
Regional Director (Peninsular Malaysia) of KLK and Ms Yap Miow Kien
who is the current Company Secretary and Senior General Manager
(Legal and Secretarial) of KLK. In addition, Mr Joseph Jaoudi and
Mr Anthony Samaha resigned from the Board during the Period. Mr
Michael Frayne became the Non-executive Chairman with Mr Geoffrey
Brown continuing as Executive Director.
Financial Review
The loss of the Group for the 9 months ended 30 September 2014
of $1,143,000 (12 months ended 31 December 2013: $8,201,000) was in
line with expectations but significantly lower than in the prior
period, partly due to the shorter accounting period, but mostly due
to the absence of costs and a one-off loan write-down related to
the successful completion of the KLK transaction in 2013.
Cash held by the Group as at 30 September 2014 was $2,061,000
(31 December 2013: $10,364,000).
Community Development
LPD has increased its workforce to 1,500 people and currently
provides training by a number of oil palm experts, recruited from
Indonesia and Malaysia. Over 50% of our workforce is women.
Our health workers at our clinics on both Palm Bay and Butaw
have been providing the necessary support to raise awareness on
Ebola within the estate as well as in surrounding communities. It
is important the Ebola prevention measures are disseminated far and
wide including communities that live outside of our concession
areas.
During the Ebola outbreak our schools on the estates have been
closed on the recommendation of the Liberian government. We do
however provide rice for all employees, housing accommodation,
potable water and infrastructure including roads and bridges to
support the communities in which we operate.
Sustainability is a long term objective for all our operations
in Liberia. Having become a member of the Roundtable on Sustainable
Palm Oil ("RSPO") in 2007, we have consistently adopted best
practices and procedures to ensure that the CPO produced from our
new plantings will meet with international sustainability
standards, thereby enabling our CPO to be labelled "sustainable"
palm oil.
Personnel
Our staff members are working in a very challenging environment
as they look to not only drive the business forward but also fight
Ebola. Our team in Liberia is ably led by Mr Sashi Nambiar as
Country Manager who leads a very experienced and capable senior
management team.
I would like to take this opportunity to thank all our staff for
their continued dedication in supporting the Company's efforts to
fight Ebola and continue with the growth of the business.
Outlook
Ebola is certainly playing out as a horrific virus. However our
team in Liberia are working very hard to ensure that, with the
right precautions in place, it is something that is avoidable and
containable. LPD now has the foundations in place on the estates to
ramp up operations once we get through the Ebola outbreak.
Much has happened on our estates since our first plantings in
2011. In particular we now have a workforce of over 1,500 people
that is being well trained in order to meet the demands of the
business in the medium term. Having a well trained workforce in
Liberia cannot be underestimated and is a key objective for the
business which we believe will deliver value and growth to
shareholders.
Through its concession, we have made long term commitments to
Liberia and their people and we intend to honour these commitments.
We have strong ties to the local communities that depend on our
operations. Despite the challenging environment, we are continuing
where possible with normal operations, with the health and safety
of our employees being the absolute priority at all times.
I would like to thank KLK and all our shareholders for their
continued support through what has been a difficult time with
Ebola, and I look forward to updating you on our progress in the
year ahead and the creation of value for all stakeholders.
Michael Frayne
Chairman
GROUP Statement OF COMPREHENSIVE INCOME
Year ended
Period ended
30 September 31 December
2014 2013
Note $'000 $'000
Revenue - 36
Administrative expenses (858) (3,282)
Share options expense - (98)
Operating loss (858) (3,344)
Interest income 3 313 366
Write down of loan to joint venture 3 - (3,828)
Share of operating loss of associate
(2013 - joint venture) 2 (598) (1,395)
Loss for the year before and after
taxation attributable to owners of
the parent (1,143) (8,201)
Other comprehensive income
Exchange gains arising on translation
of foreign operations 88 541
Total comprehensive income for the
year attributable to owners of the
parent (1,055) (7,660)
Loss per share expressed in cents
per share
- Basic & diluted (0.3) cents (4.4) cents
Group STATEMENT OF FINANCIAL POSITION
Registered Number 5555087
As at As at
Note 30 September 31 December
2014 2013
$'000 $'000
ASSETS
Non-current assets
Investment in associate (2013
- joint venture) 2 24,611 17,708
Receivables from associate (2013
- joint venture) 3 5,537 5,150
30,148 22,858
Current assets
Trade and other receivables 67 128
Cash & cash equivalents 2,061 10,364
2,128 10,492
LIABILITIES
Current liabilities
Trade and other payables 113 394
113 394
Net current assets 2,015 10,098
NET ASSETS 32,163 32,956
SHAREHOLDERS' EQUITY
Share capital 5,598 5,565
Share premium 46,791 46,562
Warrant and option reserve 729 1,810
Foreign exchange reserve 709 621
Retained loss (21,664) (21,602)
Total equity 32,163 32,956
STATEMENT OF Cash FlowS
Group Group Company Company
Period ended Year ended Period ended Year ended 31 December 2013
30 September 2014 31 December 2013 30 September 2014 $'000
$'000 $'000 $'000
Cash flows from
operating
activities
Loss for the year
before and after
taxation (1,143) (8,201) (1,134) (8,181)
Decrease /
(increase) in
receivables 61 (31) 61 (31)
(Decrease) /
increase in
payables (282) 211 (282) 211
Write down of loan
to joint venture - 3,828 - 3,828
Share options
expensed - 98 - 98
Interest income (313) (366) (313) (366)
Operating expenses
settled in shares - 375 - 375
Share of operating
loss of associate
/ joint venture 598 1,395 598 1,395
Net cash outflow
from operating
activities (1,079) (2,691) (1,070) (2,671)
Cash flows from
investing
activities
Funds invested in
and loaned to
associate / joint
venture (7,574) (9,045) (7,574) (9,045)
Proceeds from
assignment of loan - 2,000 - 2,000
Net cash outflow
from investing
activities (7,574) (7,045) (7,574) (7,045)
Cash flows from
financing
activities
Issue of ordinary
share capital 262 19,701 262 19,701
Share issue costs - (693) - (693)
Net cash inflow
from financing
activities 262 19,008 262 19,008
Net (decrease) /
increase in cash
and cash
equivalents (8,391) 9,272 (8,382) 9,292
Cash and cash
equivalents at
beginning of
period 10,364 551 10,364 551
Exchange gains on
cash and cash
equivalents 88 541 79 521
Cash and cash
equivalents at end
of period 2,061 10,364 2,061 10,364
GROUP Statement of Changes IN EQUITY
Share Foreign Warrant and
Called up premium exchange option Retained
share capital reserve reserve reserve earnings Total equity
GROUP $'000 $'000 $'000 $'000 $'000 $'000
As at 1
January 2013 1,969 30,402 80 1,466 (13,881) 20,036
Share capital
issued 3,596 17,579 - - - 21,175
Cost of share
issue
including
warrants
issued - (1,419) - 726 - (693)
Expiry of
warrants - - - (480) 480 -
Share based
payments - - - 98 - 98
Loss for the
period - - - - (8,201) (8,201)
Other
comprehensive
income for
the period - - 541 - - 541
As at 31
December 2013
and 1 January
2014 5,565 46,562 621 1,810 (21,602) 32,956
Share capital
issued 33 229 - - - 262
Exercise and
expiry of
warrants and
options - - - (1,081) 1,081 -
Loss for the
period - - - - (1,143) (1,143)
Other
comprehensive
income for
the period - - 88 - - 88
As at 30
September
2014 5,598 46,791 709 729 (21,664) 32,163
Notes to financial statements
For the period 1 January 2014 to 30 September 2014
1. Basis of preparation
These financial statements have been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and IFRIC interpretations and with those parts of the
Companies Act, 2006 applicable to companies reporting under
IFRS.
These financial statements have been prepared on a going concern
basis.
2. Investment in associate (2013 - joint venture)
The Company, through its investment in Equatorial Biofuels
(Guernsey) Limited, owns a 50% interest in Liberian Palm
Developments Limited ("LPD").
During the period, a new Joint Venture Agreement ("JVA") was
signed pursuant to which cash and funding commitments of up to
$35.5m is being made available to be provided to LPD. Under the
JVA, the Company retained a 50% economic and voting interest in
LPD. Also under the JVA, KLK has the power to appoint the Chairman
to the Board of LPD and in the case of a tied vote the Chairman has
the casting vote. For this reason, the Company accounts for its
investment in LPD as an equity investment in which it has
significant influence. There is no change to the recognition and
measurement of the Company's investment in LPD when compared to the
prior periods. However, the investment is now described within the
statement of comprehensive income and the statement of financial
position as "Investment in associate" rather than "Investment in
joint venture".
The Company's interest in LPD is as follows:
30 September 31 December
2014 2013
$'000 $'000
Interest in associate (2013 - joint
venture) at beginning of period 17,708 19,103
Investment in associate 7,500 -
Share of losses of associate (2013 -
joint venture) (598) (1,395)
Interest in associate (2013 - joint
venture) at end of period 24,611 17,708
The results of Liberian Palm Developments Limited for the period
ended 30 September 2014 were as follows:
30 September 31 December
2014 2013
$'000 $'000
Non-current assets 54,093 40,155
Current assets 11,989 10,574
Non-current liabilities (14,884) (13,874)
Current liabilities (1,976) (1,439)
TOTAL NET ASSETS 49,222 35,416
Group's share (50%) 24,611 17,708
Income 105 160
Expenses (1,300) (2,949)
Loss after tax (1,195) (2,789)
Group's share (50%) (598) (1,395)
3. Non-current receivables
Group Group Company Company
30 September 31 December 2013 30 September 2014 31 December
2014 $'000 $'000 2013
$'000 $'000
------------------------------------------ --------------- ------------------- -------------------- --------------
Receivable due from associate (2013 -
joint venture) 5,537 5,150 5,537 5,150
5,537 5,150 5,537 5,150
------------------------------------------ --------------- ------------------- -------------------- --------------
The receivable due from the associate relates to a loan, with a
five year term, that will accrue interest at a rate of LIBOR + 4%
or 8% per annum, whichever is higher. Interest will accrue on the
principal amount of the loan (including any accrued interest) and
is repayable in full at the end of the five year term or earlier,
at the discretion of LPD. Interest accrued for the period amounted
to $313,000 (2013: $366,000).
On 7 November 2013, the Company announced that, for a
consideration of $2 million payable to the Company, $6 million of
the value of the loan to LPD was assigned to Kuala Lumpur Kepong
Berhad ("KLK"). As such, a one-off $3,828,000 write down of the
value of the loan to LPD was recognised.
30 September 31 December
2014 2013
$'000 $'000
Receivable due from associate (2013
- joint venture) at beginning of period 5,150 468
Funds loaned to associate (2013 -
joint venture) 74 8,144
Interest income 313 366
Write down of loan to joint venture - (3,828)
Receivable due from associate (2013
- joint venture) at end of period 5,537 5,150
Availability of accounts
The audited Annual Report and Financial Statements for the
period ended 30 September 2014 will shortly be sent to shareholders
and published at www.epoil.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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