Dekel Agri Vision : 2020 Annual Report Audited Accounts

Annual Report & Financial Statements

2020

DEKEL AGRI-VISION PLC

CONSOLIDATED FINANCIAL STATEMENTS

AS OF 31 DECEMBER 2020

EUROS IN THOUSANDS

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INDEX

Chairman's Statement

Company Information

Information on the Board of Directors

Professional Advisers

Directors' Report

Chairman's Statement on Corporate Governance

Statement of Directors' Responsibilities

Independent Auditors' Report

Consolidated Statements of Financial Position

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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CHAIRMAN'S STATEMENT

2020 was very much a year of two halves for Dekel Agri-Vision, its established palm oil operations and its soon to be producing cashew processing plant in Cote d'Ivoire:

• Highly challenging first half due to the global pandemic and associated lockdowns
• Strong second half pick-up in activity which partially made up for the ground lost in the first half and which has since gathered further momentum in 2021

Specifically, H1 2020 saw our Ayenouan crude palm oil ('CPO') operations contend with a near halving in global prices from US$850 per tonne in January to US$500-550 per tonne in April and May 2020, a price trajectory that was in line with other commodities following the onset of the pandemic. At the same time, construction activity at our Tiebissou cashew plant was held back due to delays in the manufacture and shipping of milling and infrastructure equipment in Italy and China, two countries that were severely impacted by the pandemic in the first half.

H2 2020 witnessed a sharp rebound. Global CPO prices soared to the US$1,000 per tonne level they currently trade at today following a strong recovery in CPO demand, which has enabled us to report an improvement across all of Ayenouan's key financial metrics for the full year compared to 2019. In addition, thanks to the progress made on the ground in the second half, the commissioning of the 10,000tpa mill at Tiebissou is expected in the coming weeks.

Importantly, the strong finish to the year has laid the foundations for what promises to be a transformative 2021 for the Company. Once operations commence at Tiebissou, Dekel will have two projects producing two commodities and generating two independent revenue streams. Not only will this lead to the scaling up of our revenues and earnings, but also to the diversification of our end markets. The directors have sought to increase shareholder value by reducing risk through a combination of sustainably higher earnings and multiple end markets.

With the commissioning of the cashew processing plant at Tiebissou within sight, we believe recent corporate transactions indicate that we are already starting to see a lowering in the Company's risk profile:

• Execution of transactions during the year and post period end, which resulted in the Company securing a controlling stake in the Tiebissou cashew project in exchange for Dekel shares that were issued at premia to the then market price
• Completion of a £3.2m equity raise post period end that was oversubscribed
• c.€15.2 million bond facility secured post period end which extends the maturity of Dekel's debt profile and significantly strengthens the balance sheet - €5.9m was drawn down in January 2021

Taken together, it is clear that Dekel is entering a new phase in its history, in which a highly cash generative platform and a strong balance sheet promise to accelerate the implementation of our growth strategy. This remains focused on building a multi-project,multi-commodity agriculture company for the benefit of both shareholders and the local communities in which we operate.

Ayenouan Palm Oil

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Being a producer of crude palm oil, key performance drivers for our Ayenouan operations are global CPO prices, fresh fruit bunch ('FFB') deliveries / production levels, and extraction rates. The year under review saw significant improvements in two of these metrics: global CPO prices and extraction rates. The 22.6% increase in CPO prices to €602 per tonne and the jump in the extraction rate to 22.1% from 21.4% the previous year were more than enough to offset a 12.5% drop in FFB delivered to the mill and a 9.6% fall in volumes of CPO produced during the year. In turn, this has driven a material improvement in our full year financial performance at the revenue, EBITDA and net profit / loss levels compared to 2019, as detailed in the table below.

The average realised price of €602 per tonne of CPO achieved during the year does not tell the whole story. Global CPO prices began and ended the year under review at over US$800 per tonne, a level rarely seen in the eight years since our 60,000tpa mill was commissioned in 2013. Had prices traded at or around this level throughout the year then, despite lower volumes of CPO produced at Ayenouan in 2020, it is likely we would be reporting results closer to those of 2017, a record year in terms of revenue generation and profitability with €30.2m revenues, €4.5m EBITDA and €1.6m net profits posted. During 2020 CPO prices were anything but stable,, dropping below €500 per tonne as the pandemic took hold and societies around the world went into lockdown, before rebounding equally dramatically in the second half of the year, as major importers in Asia replenished inventories.

The above paragraph has not been included to illustrate a 'what could have been' scenario - rather a case of 'what might be'. We are almost halfway through the current year and we have reported average realised prices of €794 per tonne for Q1 2021, €803 for April and €774 for May. Together with a material improvement in the peak harvest season, resulting in volumes of CPO produced increasing to 23,877 tonnes during the five months to 31 May 2021, compared to 21,539 tonnes in the equivalent five-month period in 2020, we believe we are on course to report another year of material revenue and profits growth at Ayenouan, one that could potentially challenge 2017's record outcome. By way of illustration, in Q1 2017 16,398 tonnes of CPO were produced and average realised prices of €731 were achieved. The relevant figures for Q1 2021 are 15,327 tonnes of CPO produced and average realised prices of €794 per tonne. Much can happen between now and the end of the year but, as things stand, at the very least we are confident of another year of progress at Ayenouan.

	FY 2020	FY 2019	FY 2018	FY 2017	FY 2016
FFB collected (tonnes)	154,151	176,019	146,036	171,696	171,301
CPO production (tonnes)	34,002	37,649	33,077	38,736	39,111
CPO Sales (tonnes)	34,008	37,713	32,692	38,373	39,498
Average CPO price tonne	€602	€491	€542	€680	€575
Revenue (All products)	€22.5m	€20.9m	€20.9m	€30.2m	€26.6m
Gross Margin	€2.3m	€1.7m	€1.7m	€6.9m	€6.6m

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