R.E.A. HOLDINGS PLC R.E.A. Holdings plc (RE.) R.E.A. Holdings plc: Half yearly results 08-Sep-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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R.E.A. HOLDINGS PLC (the "company")
HALF YEARLY REPORT 2021
HIGHLIGHTS
Overview
-- Performance turned around and group returned to profit
-- Stronger CPO and CPKO prices holding firm
-- Direct impacts of Covid remain limited
Financial
-- Revenue up 41 per cent to USD87.7 million (2020: USD62.4 million), benefitting from higher average sellingprices, including premia for certified oil, for CPO and CPKO of, respectively, USD696 (2020: USD551) and USD1,029 (2020:USD625)
-- Cost of sales, excluding FFB purchases, increased 7 per cent to USD46.5 million (2020: USD43.5 million); costof FFB purchases increased in line with higher CPO prices and volume
-- EBITDA increased 147 per cent to USD27.7 million (2020: USD11.2 million)
-- New Indonesian banking arrangements for the group's principal operating subsidiary successfullyconcluded, with extended repayment period and reduced interest rate significantly improving group cash flow
-- Net indebtedness decreased by USD14.0 million to USD175.4 million (31 December 2020: USD189.4 million)
-- Further initiatives to improve financial resilience progressing
-- Payment of preference dividends resumed
Agricultural operations
-- FFB production increased to 361,167 tonnes (2020: 342,653 tonnes)
-- Third party FFB purchases increased to 114,924 tonnes (2020: 98,297 tonnes)
-- CPO extraction rates averaged 22.3 per cent (2020: 22.9 per cent)
Stone and coal interests
-- MoU signed by stone concession holding company ATP to supply andesite to a neighbouring coal company andnegotiations with quarrying contractor progressing
-- Coal contractor preparing to resume mining at IPA's concession and deliveries from neighbouring coalcompany to IPA's port facilities recently commenced
-- Group intends to recover coal loans and to withdraw from coal interests as soon as practicable
Sustainability
-- Recertification audits successfully completed and licences renewed pending conclusion of outstandingonsite audit work when travel restrictions permit
-- Pilot project underway with an international body to establish financing mechanism in support of localsmallholders with objective of improved traceability of the FFB supply chain
-- Gold certificate awarded by the Ministry of Manpower for the group's Covid prevention and controlprogramme
Outlook
-- More favourable trading environment and new banking arrangements in place afford opportunity tostrengthen the group's finances
-- With CPO and CPKO prices expected to remain at remunerative levels, the group looks forward to a periodof prosperity
SUMMARY OF RESULTS
For the six months ended 30 June 2021
6 months to 6 months to
30 June 30 June
2021 2020
Results USD'000 USD'000
Revenue 87,667 62,356
Earnings before interest, tax, depreciation and amortisation* 27,670 11,242
Profit / (loss) before tax 7,648 (7,231)
Loss attributable to ordinary shareholders (2,366) (7,881)
Cash generated by operations** 29,187 29,809
Return per ordinary share
Loss (US cents) (5.4) (17.9) * See note 5
** See note 17
INTERIM MANAGEMENT REPORT
Results
The result for the first half of 2021 was a profit before tax of USD7.6 million. This compared with the loss of USD7.2 million reported for the first half of 2020 and confirmed a turnaround in the performance of the group.
The results benefitted from higher average selling prices as shown by the following table:
6 months 6 months Year to
to 30 June to 30 June 31 December
2021 2020 2020
Average selling prices per tonne*: USD USD USD
CPO 696 551 579
CPKO 1,029 625 615 * Including premia for certified oil
With sales volumes also above 2020 levels, revenue of USD87.7 million showed a 41 per cent increase compared with the same period in 2020.
Earnings before interest, depreciation, amortisation and tax amounted to USD27.7 million (2020: USD11.2 million).
Specific components of the results
Cost of sales for the six months to 30 June 2021, with comparative figures for 2020, was made up as follows:
6 months 6 months Year to
to 30 June to 30 June 31 December
2021 2020 2020
USD'm USD'm USD'm
Purchase of external FFB* 15.7 10.4 23.1
Estate operating costs 31.2 28.4 59.4
Depreciation and amortisation 14.1 14.1 28.0
Stock movement at historic cost 1.2 1.0 (0.3)
62.2 53.9 110.2 * Purchase of external FFB in 2021 includes purchases of FFB from plantings that are being reallocated from group to plasma
The overall increase of USD8.3 million in cost of sales against the corresponding period in 2020 was principally the result of the higher volumes of FFB harvested and processed during the period and an increase in the cost of external FFB purchases. The latter arose from the adjustment of buying prices in line with the increased selling prices of CPO and CPKO and, to a limited extent, the reclassification as external FFB of the FFB harvested from areas that were previously treated as group areas and that have been reclassified as plasma from the start of 2021.
Administrative expenses amounted to USD8.4 million against USD6.2 million in 2020, the increase reflecting the timing of certain employee expenses which in 2020 were accrued in the second half of the year rather than being accrued evenly over the course of the year as in 2021. For the full year 2021, administrative expenses are expected to be in line with 2020.
Finance costs for the half year amounted, before capitalisation, to USD6.2 million against USD4.6 million in 2020. The increase was wholly attributable to the reduced contribution from foreign exchange profits which amounted to USD3.2 million against USD5.7 million.
The tax charge for the period was USD4.6 million against USD0.8 million in 2020. USD1.0 million of the 2021 charge relates to tax paid by one of the Indonesian subsidiaries in respect of a prior year and USD2.5 million represents a release of a deferred tax asset as losses of previous years are utilised to offset current year profits.
Dividends
As anticipated in the company's 2020 annual report, the fixed semi-annual dividend on the company's preference shares that fell due on 30 June 2021 was duly paid.
The cumulative arrears of preference dividend currently amount to 18p per share and the directors intend that 1p per share of this should be paid on 31 December 2021 together with the semi-annual preference dividend arising on that date. The directors recognise the importance of eliminating the arrears of the preference dividend and will aim progressively to reduce such arrears as rapidly as the performance of the group permits.
While the dividends on the preference shares are more than six months in arrears, the company is not permitted to pay dividends on its ordinary shares.
Agricultural operations
Key agricultural statistics were as follows:
6 months to 6 months to
30 June 30 June
2021 2020
FFB?harvested (tonnes)*
Group 361,167 342,653
Third party 114,924 98,297
Total 476,091 440,950
Production (tonnes)
Total FFB processed 464,045 430,293
FFB sold 8,121 11,773
CPO 103,299 98,651
Palm kernels 21,905 21,443
CPKO 8,310 6,912
Extraction rates (percentage)
CPO 22.3 22.9
Palm kernel 4.7 5.0
CPKO 38.6 39.8
Rainfall (mm)
Average across the estates 1,785 1,543 * Group harvested FFB for both periods excludes crops from plantings that are being reallocated from group to plasma
Despite high average rainfall and the Ramadan holiday period falling in the first half of 2021, production in the first half was at good levels, with the typical year end peak crop period of 2020 extending into the early months of the year. Group FFB increased by 5 per cent compared with the previously reported crop for 2020, notwithstanding the exclusion of crops from former group areas that are being reallocated to plasma and which, accordingly, are now treated as third party FFB.
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