R.E.A. HOLDINGS PLC
Shortages of necessary inputs to Disruption of operations or increased The group maintains stocks of necessary
the operations, such as fuel and input costs leading to reduced profit inputs to provide resilience and has
fertiliser margins established biogas plants to improve its
self-reliance in relation to fuel
FFB crops becoming rotten or over-ripe The group endeavours to maintain a sufficient
leading either to a loss of CPO complement of harvesters within its workforce
A hiatus in harvesting, production (and hence revenue) or to to harvest expected crops and to maintain
collection or processing of FFB the production of CPO that has an above resilience in its palm oil mills with each of
crops average free fatty acid content and is the mills operating separately and some
saleable only at a discount to normal ability within each mill to switch from steam
market prices based to biogas or diesel based electricity
generation
The group's bulk storage facilities have
Disruptions to river transport The requirement for CPO and CPKO adequate capacity and further storage
between the main area of storage exceeding available capacity facilities are afforded by the fleet of
operations and the Port of and forcing a temporary cessation in barges. Together, these have hitherto always
Samarinda or delays in collection FFB harvesting or processing with a proved adequate to meet the group's
of CPO and CPKO from the resultant loss of crop and requirements for CPO and CPKO storage and may
transhipment terminal consequential loss of potential revenue be expanded to accommodate anticipated
increases in production
Occurrence of an uninsured or
inadequately insured adverse The group maintains insurance at levels that
event; certain risks (such as it considers reasonable against those risks
crop loss through fire or other Material loss of potential revenues or that can be economically insured and
perils), for which insurance claims against the group mitigates uninsured risks to the extent
cover is either not available or reasonably feasible by management practices
is considered disproportionately
expensive, are not insured
Produce prices
Volatility of CPO and CPKO prices Price swings should be moderated by the fact
which as primary commodities may that the annual oilseed crops account for the
be affected by levels of world Reduced revenue from the sale of CPO major proportion of world vegetable oil
economic activity and factors and CPKO production and a consequent production and producers of such crops can
affecting the world economy, reduction in cash flow reduce or increase their production within a
including levels of inflation and relatively short time frame
interest rates
The Indonesian government allows the free
Restriction on sale of the export of CPO and CPKO but applies sliding
group's CPO and CPKO at world Reduced revenue from the sale of CPO scales of charges on exports, which are
market prices including and CPKO production and a consequent varied from time to time in response to
restrictions on Indonesian reduction in cash flow prevailing prices, to allow producers
exports of palm products and economic margins. The export levy charge
imposition of high export charges funds biodiesel subsidies and thus supports
the local price of CPO and CPKO
Distortion of world markets for The imposition of controls or taxes on CPO or
CPO and CPKO by the imposition of Depression of selling prices for CPO CPKO in one area can be expected to result in
import controls or taxes in and CPKO if arbitrage between markets greater consumption of alternative vegetable
consuming countries, for example, for competing vegetable oils proves oils within that area and the substitution
by imposition of reciprocal trade insufficient to compensate for the outside that area of CPO and CPKO for other
barriers or tariffs between major market distortion created vegetable oils
economies
Expansion
The group holds significant fully titled or
Failure to secure in full, or Inability to complete, or delays in allocated land areas suitable for planting.
delays in securing, the land or completing, the planned extension It works continuously to maintain up to date
funding required for the group's planting programme with a consequential permits for the planting of these areas and
planned extension planting reduction in the group's prospective aims to manage its finances to ensure, in so
programme growth far as practicable, that it will be able to
fund any planned extension planting programme
A shortfall in achieving the
group's planned extension
planting programme impacting A possible adverse effect on market The group maintains flexibility in its
negatively the continued growth perceptions as to the value of the planting programme to be able to respond to
of the group company's securities changes in circumstances
Climate change
A negative effect on production would
similarly affect many other oil palm growers
Changes to levels and regularity in South East Asia leading to a reduction in
of rainfall and sunlight hours Reduced production CPO and CPKO supply, which would be likely to
result in higher prices for CPO and CPKO in
turn providing at least some offset against
reduced production
Increasing requirement for bunding or Only five to ten per cent of the group's
Increase in water levels in the loss of plantings in low lying areas existing plantings are in low lying or flood
rivers running though the estates susceptible to flooding prone areas. These areas are being bunded,
subject to environmental considerations
Environmental, social and
governance practices
Failure by the agricultural The group has established standard practices
operations to meet the standards designed to ensure that it meets its
expected of them as a large Reputational and financial damage obligations, monitors performance against
employer of significant economic those practices and investigates thoroughly
importance to local communities and takes action to prevent recurrence in
respect of any failures identified
Criticism of the group's The group is committed to sustainable
environmental practices by development of oil palm and has obtained RSPO
conservation organisations certification for most of its current
scrutinising land areas that fall operations. All group oil palm plantings are
within a region that in places Reputational and financial damage on land areas that have been previously
includes substantial areas of logged and zoned by the Indonesian
unspoilt primary rain forest authorities as appropriate for agricultural
inhabited by diverse flora and development. The group maintains substantial
fauna conservation reserves that safeguard
landscape level biodiversity
Community relations
The group seeks to foster mutually beneficial
economic and social interaction between the
Disruption of operations, including local villages and the agricultural (MORE TO FOLLOW) Dow Jones Newswires
April 27, 2021 02:01 ET (06:01 GMT)
