Press Release
Regulated information
The connection to the world of sustainable tropical agriculture
Results of the SIPEF group
as per 31 December 2019 (12m/19)
- Due to a general decline in palm crops in Indonesia and the effect of three volcanic eruptions in Papua New Guinea, the annual palm oil production of the SIPEF group fell by 11.2% compared with the previous year.
- Because of the increased contribution of the young maturing areas, the Indonesian palm activities experienced a limited volume growth (+2.5%) in the fourth quarter, compared with the same period a year ago, but the overall yearly production reduced by 0.7%.
- The oil palm plantations in Papua New Guinea gradually recovered from the three volcanic eruptions of Mount Ulawun earlier in 2019, but the palm oil production at the own plantations fell by 38.1% compared with the fourth quarter of 2018.
- The damage caused by these eruptions affected almost half of the planted hectares and it will take at least two years for up to 3 000 hectares to be returned to their optimal production conditions.
- The result before tax was KUSD 852, compared with KUSD 39 598 in 2018, chiefly due to low market prices for palm oil.
- Due to the tax expense and the negative share of the research activities, the IFRS net result, share of the Group, was KUSD -8 004, compared with KUSD 30 089 the previous year. The proposal will be not to declare a dividend for the financial year 2019, in line with the applied dividend policy.
- The expansion of the activities in South Sumatra continued steadily, in spite of the limited cash flow, with the planted hectares at the end of 2019 increasing by 2 427 hectares to 82 967 hectares (of which 76 302 hectares share of the Group).
- The investment expenses amounted to KUSD 66 746, with net debt up to KUSD 164 623.
- On an improving palm oil market, 36% of the expected palm oil production for 2020 has already been sold at an average price of USD 727 per tonne CIF Rotterdam, premiums included, and, in spite of the negative impact of the coronavirus, the expected price trend remains positive.
- Having entered in a more comforting price environment for palm oil since the end of 2019, with prices touching the USD 750 to USD 800 per tonne levels, there is a prospect for improving results in 2020.
- As an RSPO-compliant producer, SIPEF continues to supply certified, traceable sustainable palm oil to the European and Asian markets.
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1. Management report
1.1. Group production
Group production
2019 (in tonnes) | Own | Third | Q4/19 | YoY% | Own | Third | YTD | YoY% | |
parties | parties | Q4/19 | |||||||
Palm oil | 65 587 | 12 422 | 78 009 | -13.40% | 264 641 | 47 873 | 312 514 | -11.16% | |
Rubber* | 1 194 | 296 | 1 490 | -27.85% | 5 495 | 831 | 6 326 | -20.75% | |
Tea | 571 | 0 | 571 | -25.26% | 2 331 | 0 | 2 331 | -3.76% | |
Bananas | 8 563 | 0 | 8 563 | 18.52% | 32 849 | 0 | 32 849 | 18.21% |
2018 (in tonnes) | Own | Third | Q4/18 | Own | Third | YTD | |
parties | parties | Q4/18 | |||||
Palm oil | 72 929 | 17 148 | 90 077 | 290 441 | 61 316 | 351 757 | |
Rubber* | 1 740 | 325 | 2 065 | 6 930 | 1 052 | 7 982 | |
Tea | 764 | 0 | 764 | 2 422 | 0 | 2 422 | |
Bananas | 7 225 | 0 | 7 225 | 27 788 | 0 | 27 788 |
*Tolan Tiga Group rubber production has been split into own and outgrower production. The outgrower production consists of PT Timbang Deli. The figures of prior year have been restated.
The production of palm oil fruits in the fourth quarter remained below expectations for the SIPEF group in Indonesia. After drier than normal conditions in the first and third quarter, the exceptionally changeable weather continued, with a very wet October and November in North Sumatra. On the other hand, it was exceptionally dry in Bengkulu, followed by a very wet December. It can be concluded that, except for the young plantings in South Sumatra, the SIPEF plantations will follow the general annual trend of lower production for the whole of Indonesia.
In the fourth quarter, there was a 8.8% fall in the more mature plantations of North Sumatra and a 7.4% fall in the somewhat younger UMW/TUM plantations. However, the decline was limited to 3.0% in the Agro Muko plantations of Bengkulu province, primarily due to the young plantings. On an annual basis, there was a 5.7% decline for the mature plantations compared with the exceptionally good production year of 2018.
The sufficient rainfall in December meant that the young plantings in South Sumatra ended the year strongly (+31.9%). As a consequence, total production, which already accounts for 7.5% of the Indonesian volumes, rose by 42.9%. A striking increase in oil extraction rates, from 18.0% to 20.6%, was noted at the Dendymarker mill, which completely processes the total production of South Sumatra.
Due to the three volcanic eruptions of June, August and October, around 45% of the planted surface area was more or less covered with a layer of ash and small stones, up to 15 cm in places. This significantly affected the production of fruit. For the fourth quarter SIPEF recorded a 35.2% fall in production at the own plantations and a 24.5% fall at smallholders, who were less affected by the ash clouds. With harvesting and transport made more difficult, the extraction rates for the quarter were also lower than the previous year (24.5% versus 25.6%) and annual palm oil production ended 37 852 tonnes down on the previous year (-26.9%).
The aforementioned events led to a 13.4% decrease in the palm oil production of the Group in the last quarter and a 11.2% fall over the whole of 2019.
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The much-discussed fungal infection, which has already affected large parts of Southeast Asia, also considerably extended the wintering period for the SIPEF group, significantly limiting the latex production of rubber trees. Both the mature plantations in North and South Sumatra and the younger plantings at Agro Muko experienced substantial declines in production, which were 31.4% in the fourth quarter and 20.7% over the whole production year.
The year started strongly for Cibuni tea production. It exceeded production in the first quarter of 2018 by 10.7%. That was followed by five months without any rain worth mentioning in Java, which meant that annual precipitation was 28% below the 10-year average. As a result, production fell quarter after quarter, ultimately ending 3.8% lower than the annual production in 2018.
Banana production returned to normal in 2019 after a relatively poor production year. SIPEF once more recorded volumes 18.2% higher than in 2018, with an annual production of almost 33 000 tonnes. All four plantations made a positive contribution to this rise, but the Motobé plantation in particular confirmed the complete reestablishment of profitability standards, with production rising by 44.3%.
1.2. Markets
Average market prices
YTD Q4/19 | YTD Q4/18 | |||
In USD/tonne | ||||
Palm oil | CIF Rotterdam* | 566 | 598 | |
Rubber | RSS3 FOB Singapore** | 1 640 | 1 565 | |
Tea | Mombasa** | 2 226 | 2 579 | |
Bananas | CFR Europe*** | 662 | 647 |
* Oil world Price Data
** World Bank Commodity Price Data (updated database)
*** CIRAD Price Data (in EUR)
The palm oil market in the fourth quarter of 2019 experienced one of the biggest rallies in recent years where the market increased from 2 200 to 3 100 ringgit on the Malaysia Derivatives exchange (MDEX). The physical prices increased even more. This was driven by a strong reduction in production and very good demand, leading to lower stocks.
In Indonesia signs of lower production were already showing in the third quarter, following the dry weather and a strong reduction of fertiliser application from the middle of 2018 when prices started to trigger cost cutting measures. In Malaysia the production was still on par, but dropped off strongly during October. The actual reduction in production in November and December was unprecedented, and with the good demand domestically and for export, stocks reduced tremendously.
Demand for palm oil in China particularly was very strong where it was driven partially by a lower soybean crush. This was a result of the lower protein demand following the culling of the pig herd due to African swine fever as well as lower lard production for the same reason. In general, export demand for palm oil was very good as the low-price environment had triggered demand switches from other vegoils, but also an absolute stronger demand growth.
The domestic biodiesel demand in Indonesia was another very important factor. B30, where 30% palm methyl ester is blended with regular diesel, was confirmed to be mandatory from January 2020 onwards. In 2019 there was already an increase of 2 million tonnes for domestic biodiesel blending, and for 2020 this could be
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another 2.5 million tonnes. The Indonesian government really showed its commitment to realising the directive, therefore reducing their dollar outflow to import regular diesel - an important macro-economic measure of the Jokowi government - and support the suffering palm oil smallholders at the same time. The biodiesel policy is also funded by the export levy, hence a solid plan despite palm oil being traded at a premium versus gasoil. Malaysia also announced an increase from B10 to B20, but this plan is less substantiated by well- defined funding.
The trade war between the US and China kept lingering on and the South American soybean crop seemed to be in good condition. But all these factors were less important as the supply and demand in palm oil was developing at such a pace towards a future shortage, that it rallied to the highest level in three years. The palm oil prices jumped from USD 560 per tonne CIF Rotterdam in October to USD 830 in December.
As coconut oil production was coming off and the palm kernel oil market was suffering from lower yields also, the relative high palm kernel oil stocks from the third quarter reduced quickly, although not as tightly as the palm oil market. The price nearly doubled from USD 560 to USD 1 040 per tonne CIF Rotterdam by the end of the year. The current premium of lauric oils over palm oil has normalised again, around USD 200 a tonne.
Rubber prices on the futures market moved upwards during the last quarter of the year, completely overturning the drop experienced in the third quarter. However, physical trade remained subdued most of the time, as the automobile industry is still experiencing difficult times. Improved sentiment in the China-US trade war, as well as news of dropping production in the main producers, Thailand and Indonesia, added to the positive price movement. Both Thailand and Indonesia reported a higher incidence of a leaf disease heavily affecting yields. Prices for SICOM RSS3 traded from USD 1 454 per tonne early October to USD 1 684 per tonne by the end of December.
Tea prices in the Mombasa auction moved up slightly at the start of the fourth quarter as winter demand set in. However, with increased volumes entering the auction, prices retreated to the levels seen before. The government in Pakistan issued new laws for businesses also impacting tea firms, which resulted in their remaining reluctant to buy large volumes.
1.3. Consolidated income statement
Consolidated income statement
In KUSD (management presentation) | 31/12/2019 | 31/12/2018 | |
Revenue | 248 311 | 275 270 | |
Cost of sales | -212 038 | -201 040 | |
Changes in the fair value | 889 | -2 134 | |
Gross profit | 37 162 | 72 096 | |
General and administrative expenses | -31 481 | -31 759 | |
Other operating income/(charges) | - 741 | 2 352 | |
Operating result | 4 940 | 42 689 | |
Financial income | 2 161 | 2 308 | |
Financial charges | -5 473 | -3 733 | |
Exchange differences | - 775 | -1 666 | |
Financial result | -4 088 | -3 091 |
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Result before tax | 852 | 39 598 | ||||
Tax expense | -6 772 | -14 155 | ||||
Result after tax | -5 920 | 25 443 | ||||
Share of results of associated companies and joint ventures | -1 485 | - 854 | ||||
Result from continuing operations | -7 404 | 24 589 | ||||
Gain on sale BDM-ASCO | 0 | 7 376 | ||||
Result for the period | -7 404 | 31 965 | ||||
Result from continuing operations share of the group | -8 004 | 22 713 | ||||
Gain on sale BDM-ASCO share of the group | 0 | 7 376 | ||||
Result for the period share of the group | -8 004 | 30 089 | ||||
Consolidated gross profit
In KUSD (condensed) | 31/12/2019 | % | 31/12/2018 | % | |
Palm oil | |||||
34 445 | 92.7% | 68 800 | 95.4% | ||
Rubber | -2 244 | -6.0% | -1 065 | -1.5% | |
Tea | - 370 | -1.0% | 627 | 0.9% | |
Bananas and plants | 4 697 | 12.6% | 2 793 | 3.9% | |
Corporate and others | 634 | 1.7% | 941 | 1.3% | |
Total | 37 162 | 100% | 72 096 | 100% |
Total revenue fell to USD 248 million (-9.8% compared with 2018).
Palm oil revenue fell by 12.4%, due to a combination of lower production volumes, particularly at Hargy Oil Palms Ltd in Papua New Guinea (-26.9%), and the lower price for crude palm oil (CPO) on the world market. The average world market price for CPO in the most recent year was USD 32 per tonne CIF Rotterdam or 5% lower than in the same period the year before.
Rubber revenue fell by 11.7% compared with 2018, mainly due to the lower volumes sold at comparable prices.
Tea revenue fell by 7.0%, in spite of the higher volumes sold (+11.1%), due to the considerably lower sales prices (-13.7%).
Revenue in the banana and flower activities increased by 28.7%, primarily due to the higher production volumes (+18.2%). Furthermore, from 2019 turnover is reported 'Cost & Freight' rather than FOB.
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The average ex-works unit cost price for the mature oil palm plantations increased by some 9.5% compared with 2018. In Indonesia, the average ex-works unit cost increased by 6.7%, which can be viewed as a normal rise in a period without currency devaluation. The Indonesian currency has been devalued by 54.6% since 2010, but this trend has flipped somewhat recently. At Hargy Oil Palms Ltd in Papua New Guinea the ex-works unit cost rose by 26.1%, as a consequence of the major fall in production caused by the difficult weather conditions in the first half of the year and, particularly, the three volcanic eruptions between the end of June and October 2019.
The adjustment in fair value was due to the impact on the measurement of hanging fruits at their fair value (IAS 41R).
Gross profit fell from KUSD 72 096 in 2018 to KUSD 37 162 (-48.5%) in 2019.
The gross profit of the palm segment (92.7% of the gross profit) decreased by KUSD 34 335 (-49.9%) compared to 2018 due to lower productions and lower palm oil prices. The lower productions in Hargy Oil Palms Ltd alone (see above) represented a negative effect of approximately USD 9 million on the gross profit.
The contribution of the rubber segment remained negative due to the disappointing production figures and persistently low sales prices, which do not currently cover production costs.
The tea margin was also negative in 2019, because of the sharp fall in the sales price. Additionally, there was an uptick in unit cost (+7.1%) compared with the previous year.
In the banana and flower activities, the announced improvement of profitability was confirmed with a rise in the gross margin from KUSD 2 793 to KUSD 4 697 (+68.2%).
The general and administrative expenses remained virtually stable (-0.9%). On the one hand there was normal inflation, which slightly increased costs, but on the other hand there was a sharp decrease in the bonus provision for 2019.
The operating result, excluding one-off gains, was KUSD 4 940, compared with KUSD 42 689 the previous year.
Financial income primarily comprises the positive time effect of the discount of the receivable from the sale of the stake in the SIPEF-CI SA oil palm plantation in Ivory Coast at the end of 2016 (KUSD 1 689). This receivable will be settled over the next three years.
The financial charges mainly comprised the interest on long-term and short-term financing at Libor-related rates. The rise in interest charges is the consequence of a higher debt position, against which a higher margin was charged in accordance with the credit agreements with the banks.
The result before tax, excluding one-off gains, was KUSD 852, compared with KUSD 39 598 in 2018.
The tax expense was largely due to:
- The reversal of a number of active deferred tax amounts that expired in 2019 and could not be recovered due to the continued disappointing results;
- The downward adjustment of the profit forecast for the coming years, as a consequence of which the previously estimated results for 2021-2025 had been downgraded and some of the deferred tax assets had to be reversed;
- Application of the 'thin cap' rule in Indonesia, as a consequence of which interest on intergroup loans were taxed in Belgium but were not deductible in selected Indonesian group companies.
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The share of the result of 'associated companies and joint ventures' (KUSD -1 485) comprised the research activities that are centralised at PT Timbang Deli and Verdant Bioscience Pte Ltd.
Profit for the period, excluding the one-off gains, was KUSD -7 404 or KUSD 31 993 lower than the KUSD 24 589 of the previous year.
The sale of the insurance branch (BDM-ASCO) was completed in the first half of 2018 with a gain of KUSD 7 376. There were no one-off gains in 2019.
Net result, share of the Group, was KUSD -8 004.
1.4. Consolidated cash flow
Consolidated cash flow
In KUSD (management presentation) | 31/12/2019 | 31/12/2018 | |
Cash flow from operating activities | 48 227 | 81 899 | |
Change in net working capital | -1 647 | -13 680 | |
Income taxes paid | -14 693 | -34 537 | |
Cash flow from operating activities after tax | 31 887 | 33 682 | |
Acquisitions intangible and tangible assets | -66 546 | -69 428 | |
Selling price of PP&E and financial assets (excl. BDM-ASCO) | 7 108 | 2 671 | |
Acquisition financial assets | - 200 | - 300 | |
Recurring free cash flow | -27 751 | -33 375 | |
Selling price BDM-ASCO | 0 | 20 463 | |
Other financing activities | 8 809 | 6 327 | |
Net movement in investments, cash and cash equivalents | -18 942 | -6 585 |
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In USD per share | 31/12/2019 | 31/12/2018 | |
Weighted average shares outstanding | |||
10 434 244 | 10 454 309 | ||
Basic operating result | 0.47 | 4.79 | |
Basic net earnings | -0.77 | 2.88 | |
Diluted net earnings | -0.77 | 2.88 | |
Basic net earnings before sale BDM-ASCO | -0.77 | 2.17 | |
Cash flow from operating activities after tax | 3.06 | 3.22 |
The cash flow from operating activities fell by KUSD 33 672, which is in line with the lower operating result. The increased use of working capital (KUSD -1 647) was primarily due to the additional advances of approximately USD -3.5 million that were granted to smallholders in the Musi Rawas region for the development of their land within the framework of the plasma law.
In Indonesia and Papua New Guinea, in 2019 the Group made advance tax payments based on the previous year's results (2018), in accordance with local laws. Therefore, a relatively large amount of tax was paid in 2019 (KUSD 14 693) compared with the actual tax expense of KUSD 6 772. At the end of 2019, the Group has outstanding tax receivables of USD 14 787, which will be recovered over the next two years.
The total investment expenditure for the Group was KUSD 66 746, which is almost identical with last year's expenditure. The scheduled but not yet confirmed investments were reexamined and postponed where possible in 2019, as part of the reduction in liquid assets from operations from the end of 2018 and to keep the debt position under control. The expansion programme for the Musi Rawas region was geared down significantly, for example, albeit without threatening the long-term potential.
The selling price of PP&E and financial assets alongside the regular sales of fixed assets of KUSD 1 795 also include an amount of KUSD 1 500 from the sale of Galley Reach Holding and KUSD 3 813 from the sale of SIPEF-CI.
The recurring free cash flow over 2019 was KUSD -27 751, compared with KUSD -33 375 over the same period last year.
Other financing activities (KUSD 8 809) comprise the buyback of shares (KUSD -854), the dividend paid over the preceding financial year (KUSD -6 495), a net increase in the long-term financing (KUSD 41 000), paid interest (KUSD -5 042) and partial repayment of the short-term financing (KUSD -19 799).
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1.5. Consolidated balance sheet
Consolidated balance sheet
In KUSD (management presentation) | 31/12/2019 | 31/12/2018 | ||
Biological assets (depreciated costs) - bearer plants | 306 342 | 283 712 | ||
Goodwill | 104 782 | 104 782 | ||
Other fixed assets | 365 412 | 364 481 | ||
Receivables > 1 year | 13 442 | 11 112 | ||
Net assets held for sale | 0 | 0 | ||
Net current assets, net of cash | 94 013 | 91 932 | ||
Net cash position | -164 623 | -121 443 | ||
Total net assets | 719 368 | 734 576 | ||
Shareholders' equity, group share | 628 686 | 644 509 | ||
Non-controlling interest | 34 325 | 34 250 | ||
Provisions and deferred tax liabilities | 56 358 | 55 817 | ||
Total net liabilities | 719 368 | 734 576 | ||
The balance sheet positions were relatively stable on the whole, compared with 31 December 2018.
The biological assets and other fixed assets increased due to the continuing expansion.
There were a few major movements in the net current assets, excluding liquidities:
- Rise due to the compulsory advance payment of tax (KUSD 5 098);
• | Rise due to additional advances to smallholders in Musi Rawas region of around |
USD 3.5 million; |
- Fall in the receipt of the short-term part of the receivables from the sale of the Galley Reach Holding and SIPEF-CI (KUSD -5 313);
- Fall due to the general recovery of working capital (KUSD -1 647).
From 2019 the net cash position also includes the leasing debt recognised in accordance with IFRS 16 (KUSD 3 037 as of 31 December 2019).
1.6. Dividends
In line with the 30% pay-out ratio of previous years, the board of directors proposes not paying out a dividend for the financial year 2019 in order to keep the Group's debt position under control and ensure the growth potential is not threatened.
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1.7. Prospects
1.7.1. Productions
No improvement in the volumes has been noted at the Indonesian plantations in the first month of the new production year. For the time being, these remain below the tonnages for January 2019 at the plantations in North Sumatra. This is especially the case for the UMW/TUM plantations, where the weight of the fruit bunches continues to fall short. That said, the outlook is more favourable for the rest of the first year-half and slightly positive production figures are again expected for the Group in Indonesia over the rest of the year.
The production outlook in Papua New Guinea has been adjusted downward. This is because more than 3 000 hectares were covered in ash and stones and production is now gradually getting started. However, the leaf coverage of up to 3 000 hectares of this will gradually be reestablished over a period of at least two years without fruit formation of any importance. The annual production of own plantations is expected to be 10% higher than the previous year, although this is still 20% lower than what it was in 2018. The harvests of smallholders recover more rapidly and will once more approximate those of 2018. The rainy season has now begun, but it did start a month later than a year ago. Until now, this has not caused any great disruption to the harvest.
Therefore there is no reason to adjust the outlook for the whole production year of 2020. This means that, in spite of the short-term losses of production areas in Papua New Guinea, a rise in production of more than 10% is expected compared with the disastrous year 2019 and the Group could again approximate the palm oil production volume of 2018, which exceeded 350 000 tonnes.
1.7.2. Markets
In 2020, there will be no growth in production of palm oil around the globe; Malaysia is expected to see a reduction of 0.5 to 1 million tonnes, and Indonesia limited growth at best. Other regions such as Africa, Middle America as well as Papua New Guinea are also not growing for various reasons. The main reason in Southeast Asia is the adverse weather and the reduction of fertiliser application. This situation could even spill over into 2021.
In 2019, the market has also consumed another three to four million tonnes of stocks, and it closed the year in a very low stock situation in Malaysia and Indonesia, hence the inverted price action. Normal global food growth is about three million tonnes a year and 2020 will be a year of strong domestic biodiesel consumption in many producing countries. Obviously, Indonesia is leading this charge; B30 seems to be a done deal, and there are already discussions ongoing regarding B40 for 2021 and even B100 in the upcoming years.
By adding all these inputs to the models, a very compelling friendly story was predicted for palm oil in 2020. Palm oil demand needed to be rationed, but it was unlikely to happen in biodiesel, so it had to come from food export demand. Price levels needed to increase to cut demand, and probably needed to rise considerably above the recent highs.
But then came the coronavirus outbreak, which took the market down strongly by the end of January. On paper there is little reason to believe it will impact the demand, albeit that temporarily there are some logistic hiccups, but uncertainty has taken its toll. The market has experienced a strong sell off. Provided that the coronavirus is controlled soon, it is expected that the market will rebound strongly. Once palm oil market fundamentals are back in control, SIPEF still foresees a very positive price environment for 2020.
The coronavirus outbreak is also impacting the rubber industry and has set the market back to its low price environment. Rubber production reports that suggest an early wintering in rubber producing areas, as well as the impact of the leaf disease, are limiting supply. Though the demand side continues to be subdued, it remains to be seen for how long. However, if the automobile industry improves, particularly in the Asian region, SIPEF could see a more positive price environment.
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Tea production in Kenya is in its peak period and, along with the sluggish demand experienced, SIPEF expects prices to continue to move in their current price bands which are at multiyear lows.
1.7.3. Results
SIPEF has now sold 36% of the expected palm oil production for 2020 on a market that has risen sharply over the past four months. This was achieved at an average price of USD 727 per tonne CIF Rotterdam equivalent, premiums for sustainability and origin included, compared with 23% of the volumes at USD 584 per tonne at the same time the previous year. So sales are already USD 143 per tonne higher (+24.5%) than in the previous year. However, in the present financial year due consideration will again have to be given to an export levy of USD 50 per tonne and a possible export tax in February of USD 18 per tonne. In spite of the current unexpected uncertainty in the market due to the coronavirus, the Group wishes to take further advantage of the underlying positive market trends. The volumes will gradually be placed on the market, taking account of the applicable sales policy of selling under forward contracts three to six months in advance.
Furthermore, given the uninspiring outlook on the rubber markets, only 13% of the expected rubber volumes were sold at an average price of USD 1 579 per tonne at the beginning of 2020. However, this is 14.1% higher than the average price of USD 1 384 per tonne in the same period in 2019. Around 19% of the tea volumes were also sold at considerably lower market prices. The marketing strategy for the sale of bananas was continued, with primarily fixed prices for the whole year, in 2020 through deliveries mainly to France and the UK for the best qualities and to West Africa for the other volumes.
Having entered in a more comforting price environment for palm oil since the end of 2019, with prices touching the USD 750 to USD 800 per tonne levels, there is a prospect for improving results in 2020.
To a great degree the ultimate recurring result will be determined by the achievement of the forecast of the production growth, the level of the market prices for the rest of the year, the retention of the existing export levies on palm oil in Indonesia and the trend in cost prices. A slight upswing is expected in the latter case, due to the increase in worker wages, combined with the strong performance of the local currency in Indonesia against the reporting currency, USD.
1.7.4. Cash flow and expansion
Pursuant to the generally low palm oil prices in 2019, resulting in negative free cash flow, the decision was made to limit the usual replacement investments in the new financial year 2020 where possible. In response to the volcanic eruptions in Papua New Guinea, the decision was also made not to set up any nurseries and to postpone the replanting for a year. The replanting was also postponed in Indonesia where possible.
The Group will therefore continue to focus on the investment programmes in South Sumatra in 2020, with the further expansion of the Musi Rawas activities and the replanting and improvement of the recently acquired Dendymarker palm plantations and mill. The expansion of this mill's processing capacity from 20 tonnes per hour to 60 tonnes per hour is a priority to process the rocketing number of palm fruits at its own installations.
Over the past two years 2 824 hectares have already been rejuvenated with young palms at Dendymarker, including 1 868 hectares in 2019. In 2020, SIPEF will continue to plant more areas, including in the 'plasma' zone (neighbouring smallholders) adjacent to the own planted hectares.
In the past year, an additional 1 532 hectares were compensated and an additional 1 550 hectares prepared for planting or planted in Musi Rawas, bringing the total to 12 203 cultivated hectares. That is 71.5% of the total of 17 074 compensated hectares, of which 2 363 hectares acquired for planting for plasma and 14 711 for own development. There are now more than 4 400 hectares in production. As well as the enlargement of the planted areas, the investment focus is primarily oriented to the development of the internal road network and the residential centres for the workers and local management.
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Due to these recent achievements, the SIPEF group had planted a total of 82 967 hectares at the end of 2019, with the supply base in excess of 100 000 hectares, supplying nine palm oil mills in Indonesia and Papua New Guinea.
2. Agenda 2020
23 April 2020 | Interim report Q1 | |
30 April 2020 | Annual report online available (at the latest) on | |
www.sipef.com | ||
10 June 2020 | Ordinary general meeting | |
13 August 2020 | Announcement on the half year results | |
22 October 2020 | Interim report Q3 | |
3. Condensed financial statements
3.1. Condensed financial statements of the SIPEF group
- Consolidated balance sheet (see annex 1)
- Consolidated income statement and statement of comprehensive income (see annex 2)
- Consolidated cash flow statement (see annex 3)
- Statement of changes in consolidated equity (see annex 4)
- Segment information (see annex 5)
- IFRS 16 - leasing (see annex 6)
4. Report of the statutory auditor
The statutory auditor has confirmed that his audit procedures, which have been substantially completed, have revealed no material adjustments that would have to be made to the accounting information in this press release.
Deloitte Bedrijfsrevisoren - represented by Kathleen De Brabander.
Translation: this press release is available in Dutch and English. The Dutch version is the original; the other language version is a free translation. We have made every reasonable effort to avoid any discrepancies between the different language versions. However, should such discrepancies exist, the Dutch version will take precedence.
Schoten, 13 February 2020
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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For more information, please contact:
- F. Van Hoydonck, managing director (GSM +32 478 92 92 82)
- J. Nelis, chief financial officer
Tel.: +32 3 641 97 00
Fax : +32 3 646 57 05
investors@sipef.com
www.sipef.com(section "investors")
SIPEF is a Belgian agro-industry group listed on Euronext Brussels and specialised in the - as sustainable certified - production of tropical agricultural commodities, primarily crude palm oil and palm products. These labour-intensive activities are consolidated in Indonesia, Papua New Guinea and Ivory Coast and are characterised by broad stakeholder involvement, which sustainably supports the long-term investments.
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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Consolidated balance sheet
ANNEX 1
In KUSD (condensed) | 31/12/2019 |
Non-current assets | 805 114 |
Intangible assets | 517 |
Goodwill | 104 782 |
Biological assets - bearer plants | 306 342 |
Other property, plant & equipment | 359 071 |
Investment property | 0 |
Investments in associated companies and joint ventures | 5 751 |
Financial assets | 73 |
Other financial assets | 73 |
Receivables > 1 year | 13 442 |
Other receivables | 13 442 |
Deferred tax assets | 15 135 |
Current assets | 138 011 |
Inventories | 26 251 |
Biological assets | 6 030 |
Trade and other receivables | 75 938 |
Trade receivables | 33 284 |
Other receivables | 45 367 |
Current tax receivables | 14 787 |
Investments | 0 |
Other investments and deposits | 0 |
Derivatives | 0 |
Cash and cash equivalents | 10 653 |
Other current assets | 1 639 |
Assets held for sale | 0 |
Total assets | 943 125 |
Total equity | 663 010 |
Shareholders' equity | 628 686 |
Issued capital | 44 734 |
Share premium | 107 970 |
Treasury shares (-) | -10 277 |
Reserves | 498 052 |
Translation differences | -11 793 |
Non-controlling interests | 34 325 |
Non-current liabilities | 137 008 |
Provisions > 1 year | 1 548 |
Provisions | 1 548 |
Deferred tax liabilities | 46 850 |
Trade and other liabilities > 1 year | 1 |
Financial liabilities > 1 year | 63 000 |
Leasing liabilities > 1 year | 2 513 |
Pension liabilities | 23 096 |
Current liabilities | 143 107 |
Trade and other liabilities < 1 year | 28 896 |
Trade payables | 17 292 |
Advances received | 2 377 |
Other payables | 8 747 |
Income taxes | 480 |
Financial liabilities < 1 year | 109 763 |
Current portion of amounts payable > 1 year | 18 000 |
Financial liabilities | 91 239 |
Leasing liabilities < 1 year | 524 |
Derivatives | 42 |
Other current liabilities | 4 406 |
Liabilities associated with assets held for sale | 0 |
Total equity and liabilities | 943 125 |
31/12/2018
780 310
441
- 782
- 712
-
723
0
7 239
77
77
- 112
- 112
- 224
- 058
-
274
4 870
- 025
- 001
-
024
9 280
0
0
0
- 595
2 014
0
- 368
- 759
- 509
- 734
107 970 -9 423
- 914 -11 686
- 250
-
041
1 550
1 550
- 936
0
- 000
0
- 555
- 568
- 623
-
647
450
9 455
71
- 038
- 000
-
038
0
771
6 136
0
- 368
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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Consolidated income statement
ANNEX 2
In KUSD (condensed) | 31/12/2019 | |
Revenue | 248 311 | |
Cost of sales | -212 038 | |
Changes in the fair value of the biological assets | 889 | |
Gross profit | 37 162 | |
General and administrative expenses | -31 481 | |
Other operating income/(charges) | - 741 | |
Operating result | 4 940 | |
Financial income | 2 161 | |
Financial charges | -5 473 | |
Exchange differences | - 775 | |
Financial result | -4 088 | |
Result before tax | 852 | |
Tax expense | -6 772 | |
Result after tax | -5 920 | |
Share of results of associated companies and joint ventures | -1 485 | |
Result from continuing operations | -7 404 | |
Result from discontinued operations | 0 | |
Result for the period | -7 404 | |
Attributable to: | ||
- Non-controlling interests | 600 | |
- Equity holders of the parent | -8 004 | |
Earnings per share (in USD) | ||
From continuing and discontinued operations | ||
Basic earnings per share | -0.77 | |
Diluted earnings per share | -0.77 | |
From continuing operations | ||
Basic/diluted earnings per share | -0.77 | |
Diluted earnings per share | -0.77 | |
Basic earnings per share before sale BDM-ASCO | -0.77 |
31/12/2018
- 270 -201 040 -2 134
- 096 -31759 9 728
- 065
2 308
-3 733
-1 666
-3 091
46 974
-14 155
32 819
- 854
31 965
0
31 965
1 876
30 089
2.88
2.88
2.88
2.88
2.17
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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Statement of consolidated comprehensive income
In KUSD (condensed) | 31/12/2019 |
Result for the period | -7 404 |
Other comprehensive income: | |
Items that may be reclassified to profit and loss | |
in subsequent periods | |
- Exchange differences on translating foreign operations | - 107 |
- Cash flow hedges - fair value result for the period | - 392 |
- Income tax effect (cash flow hedges) | 114 |
Items that will not be reclassified to profit and loss | |
in subsequent periods | |
- Defined Benefit Plans - IAS 19R | - 289 |
- Income tax effect | 72 |
Total other comprehensive income: | - 602 |
Other comprehensive income for the year attributable to: | |
- Non-controlling interests | - 10 |
- Equity holders of the parent | - 592 |
Total comprehensive income for the year | -8 006 |
Total comprehensive income attributable to: | |
- Non-controlling interests | 590 |
- Equity holders of the parent | -8 596 |
31/12/2018
31 965
805
503
122
-1 073
122
357
- 67
423
32 322
1 810
30 512
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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Consolidated cash flow statement
ANNEX 3
In KUSD (condensed) | 31/12/2019 | 31/12/2018 |
Operating activities | ||
Result before tax | 852 | 46 974 |
Adjusted for: | ||
Depreciation | 42 285 | 38 745 |
Movement in provisions | 3 267 | -1 967 |
Stock options | 126 | 157 |
Exchange results not yet realised | 65 | 113 |
Changes in fair value of biological assets | - 889 | 2 134 |
Other non-cash results | -1 634 | -1 693 |
Hedge reserves and financial derivatives | -1 120 | 1 707 |
Financial income and charges | 4 705 | 3 391 |
Capital loss on receivables | 0 | 80 |
Capital gain on sale of investments | 0 | -7 376 |
(Gain)/loss on disposal of property, plant and equipment | 570 | - 366 |
(Gain)/loss on disposal of financial assets | 0 | 0 |
Cash flow from operating activities before change in net working capital | 48 227 | 81 899 |
Change in net working capital | 1 883 | -13 680 |
Variation in long term receivables | -3 530 | 0 |
Cash flow from operating activities after change in net working capital | 46 580 | 68 219 |
Income taxes paid | -14 693 | -34 537 |
Cash flow from operating activities | 31 887 | 33 682 |
Investing activities | ||
Acquisition intangible assets | - 160 | - 261 |
Acquisition biological assets | -33 305 | -27 496 |
Acquisition property, plant & equipment | -33 081 | -41 671 |
Acquisition investment property | 0 | 0 |
Acquisition financial assets | - 200 | - 300 |
Dividends received from associated companies and joint ventures | 0 | 0 |
Proceeds from sale of property, plant & equipment | 1 795 | 1 171 |
Proceeds from sale of financial assets | 5 313 | 21 963 |
Cash flow from investing activities | -59 638 | -46 594 |
Free cash flow | -27 751 | -12 912 |
Financing activities | ||
Capital increase | 0 | 0 |
Equity transactions with non-controlling parties (investment MP Evans) | 0 | 0 |
Decrease/(increase) of treasury shares | - 854 | -1 115 |
Decrease long-term financial borrowings | -9 500 | -10 000 |
Increase long-term financial borrowings | 50 500 | 0 |
Decrease short-term financial borrowings | -19 799 | 0 |
Increase short-term financial borrowings | 0 | 41 161 |
Last year's dividend paid during this bookyear | -6 495 | -19 682 |
Dividends paid by subsidiaries to minorities | 0 | - 607 |
Interest received - paid | -5 043 | -3 430 |
Cash flow from financing activities | 8 809 | 6 327 |
Net increase in investments, cash and cash equivalents | -18 942 | -6 585 |
Investments and cash and cash equivalents (opening balance) | 29 595 | 36 180 |
Effect of exchange rate fluctuations on cash and cash equivalents | 0 | 0 |
Investments and cash and cash equivalents (closing balance) | 10 653 | 29 595 |
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Statement of changes in consolidated equity
ANNEX 4
Share | Treasury | Defined benefit | Translation | Shareholders' | Non- | ||||||||||||||||||
In KUSD (condensed) | Issued capital | Reserves | controlling | Total equity | |||||||||||||||||||
premium | shares | plans - IAS 19R | differences | equity | |||||||||||||||||||
interests | |||||||||||||||||||||||
January 1, 2019 | 44 734 | 107 970 | -9 423 | -3 391 | 516 305 | -11 686 | 644 509 | 34 250 | 678 759 | ||||||||||||||
Result for the period | -8 004 | -8 004 | 600 | -7 404 | |||||||||||||||||||
Other comprehensive income | - 207 | - 278 | - 107 | - 592 | - 10 | - 602 | |||||||||||||||||
Total comprehensive income | 0 | 0 | 0 | - 207 | -8 282 | - 107 | -8 596 | 590 | -8 006 | ||||||||||||||
Last year's dividend paid | -6 495 | -6 495 | - 516 | -7 011 | |||||||||||||||||||
Equity transactions with non-controlling parties | 0 | 0 | |||||||||||||||||||||
Other | - 855 | 122 | - 733 | - 733 | |||||||||||||||||||
December 31, 2019 | 44 734 | 107 970 | -10 277 | -3 598 | 501 650 | -11 793 | 628 686 | 34 325 | 663 010 | ||||||||||||||
January 1, 2018 | 44 734 | 107 970 | -8 308 | -2 652 | 505 384 | -12 491 | 634 636 | 33 140 | 667 776 | ||||||||||||||
Result for the period | 0 | 30 089 | 0 | 30 089 | 1 876 | 31 965 | |||||||||||||||||
Other comprehensive income | - 739 | 357 | 805 | 423 | - 67 | 357 | |||||||||||||||||
Total comprehensive income | 0 | 0 | 0 | - 739 | 30 446 | 805 | 30 512 | 1 809 | 32 322 | ||||||||||||||
Last year's dividend paid | -19 682 | -19 682 | - 606 | -20 288 | |||||||||||||||||||
Equity transactions with non- | |||||||||||||||||||||||
controlling parties | 0 | 0 | |||||||||||||||||||||
Other | -1 116 | 157 | - 959 | - 93 | -1 052 | ||||||||||||||||||
December 31, 2018 | 44 734 | 107 970 | -9 423 | -3 391 | 516 305 | -11 686 | 644 509 | 34 250 | 678 759 |
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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Segment information
ANNEX 5
SIPEF's activities can be classified into segments based on the type of product. SIPEF has the following segments:
- Palm: Includes all palm products, including palm kernels and palm kernel oil, both in Indonesia and Papua New Guinea
-
Rubber: Includes all different types of rubber produced and sold by the SIPEF group, both in Indonesia and Papua New Guinea
O Ribbed Smoked Sheets (RSS)
O Standard Indonesia Rubber (SIR) O Scraps and Lumps - Tea: Includes both types of tea produced by Sipef in Indonesia, i.e.:
- Orthodox tea
- "Cut, tear, curl" (CTC) tea
- Bananas and flowers: Includes all sales of bananas and flowers originating from Ivory Coast.
- Corporate: Mainly includes management fees received from non-group companies, commissions charged on sea freight and other commissions which are not covered by the sales contract.
The overview of segments below is based on the SIPEF group's internal management reporting. The most important differences with IFRS consolidation are:
- Instead of revenue the gross margin per segment is used as the starting point.
In KUSD (condensed) | 31/12/2019 |
Gross margin per product | |
Palm | 34 445 |
Rubber | -2 244 |
Tea | - 370 |
Bananas and flowers | 4 697 |
Corporate | 634 |
Total gross margin per product | 37 162 |
General and administrative expenses | -31 481 |
Other operating income/(charges) | - 741 |
Financial income/(charges) | -5 002 |
Discounting Sipef-CI | 1 689 |
Exchange differences | - 775 |
Result before tax | 852 |
Tax expense | -6 772 |
Effective tax rate | -794.8% |
Result after tax | -5 920 |
Share of results of associated companies | -1 485 |
Gain on sale BDM-ASCO | 0 |
Result for the period | -7 404 |
31/12/2018
68 800
-1 065
627
2 794
941
72 096
-31 759
2 352
-3 457
2 031
-1 666
39 597
-14 155
-35.7%
25 442
- 854
7 376
31 964
Below we present the segment information per product and per geographical region in accordance with the IFRS profit and loss accounts.
The segment result is revenue minus expense that is directly attributable to the segment and the relevant portion of income and expense that can be allocated on a reasonable basis to the segment.
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Gross profit by product
Revenue | Cost of sales | Changes in | Gross profit | % of total | |||||||
fair value | |||||||||||
2019 - KUSD | |||||||||||
Palm | 210 251 | -176 683 | 877 | 34 445 | 92.7 | ||||||
Rubber | 10 330 | -12 574 | 0 | -2 244 | -6.0 | ||||||
Tea | 5 072 | -5 454 | 12 | - 370 | -1.0 | ||||||
Bananas and plants | 22 024 | -17 327 | 0 | 4 697 | 12.6 | ||||||
Corporate | 634 | 0 | 0 | 634 | 1.7 | ||||||
Others | 0 | 0 | 0 | 0 | 0.0 | ||||||
Total | 248 311 | -212 038 | 889 | 37 162 | 100.0 | ||||||
2018 - KUSD | |||||||||||
Palm | 240 057 | -169 088 | -2 169 | 68 800 | 95.4 | ||||||
Rubber | 11 699 | -12 764 | 0 | -1 065 | -1.5 | ||||||
Tea | 5 454 | -4 862 | 35 | 627 | 0.9 | ||||||
Bananas and plants | 17 119 | -14 326 | 0 | 2 793 | 3.9 | ||||||
Corporate | 941 | 0 | 0 | 941 | 1.3 | ||||||
Others | 0 | 0 | 0 | 0 | 0.0 | ||||||
Total | 275 270 | -201 040 | -2 134 | 72 096 | 100.0 |
The segment "corporate" comprises the management fees received from non group entities, additional commissions on sea freights and any other commissions that are not included in the sales contracts.
Gross profit by geographical segment
Revenue | Cost of | Other | Changes in fair | Gross profit | % of total | ||||||||
sales | Income | value | |||||||||||
2019 - KUSD | |||||||||||||
Indonesia | 149 050 | -121 260 | 143 | 911 | 28 844 | 77.6 | |||||||
Papua New Guinea | 72 643 | -69 610 | 0 | - 22 | 3 011 | 8.1 | |||||||
Ivory Coast | 25 840 | -21 167 | 0 | 0 | 4 673 | 12.6 | |||||||
Europe | 634 | 0 | 0 | 0 | 634 | 1.7 | |||||||
Others | 0 | 0 | 0 | 0 | 0 | 0.0 | |||||||
Total | 248 167 | -212 037 | 143 | 889 | 37 162 | 100.0 | |||||||
2018 - KUSD | |||||||||||||
Indonesia | 163 653 | -118 738 | 381 | -1 477 | 43 819 | 60.8 | |||||||
Papua New Guinea | 93 232 | -67 976 | 0 | - 657 | 24 599 | 34.1 | |||||||
Ivory Coast | 17 120 | -14 326 | 0 | 0 | 2 794 | 3.9 | |||||||
Europe | 884 | 0 | 0 | 0 | 884 | 1.2 | |||||||
Others | 0 | 0 | 0 | 0 | 0 | 0.0 | |||||||
Total | 274 889 | -201 040 | 381 | -2 134 | 72 096 | 100.0 |
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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IFRS 16 - leasing
ANNEX 6
The Group has adopted IFRS 16 from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on 1 January 2019.
On adoption of IFRS 16, the group recognized lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019.
The lease payments are discounted using the weighted average cost of capital (WACC) implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
The Group leases office space, land rights and vehicles under a number of operating lease agreements with a lease term of one year or more. The rent of the office buildings concerns the monthly rental payments for the offices in Indonesia. For the land rights the subject of the lease concerns the usufruct of certain land wherefore a fixed annual rental amount is paid. The remaining land rights in PNG have a duration of 99 years for which no rental amount is paid. These assets will be depreciated over a period of 25 years in line with the lifespan of an oil palm. The vehicles concern the limited number of car leases within the group.
The future operating lease commitments under these non-cancellable operating leases are due as follows:
in KUSD | |
Operating lease commitments disclosed as at 31 December 2018 | 5 220 |
(-) Discounted using the lessee's incremental borrowing rate of at the date of initial application | -2 200 |
Lease liability recognised as at 1 January 2019 | 3 020 |
Of which are: | |
Current lease liabilities | 496 |
Non-current lease liabilities | 2 524 |
Total lease liability as at 1 January 2019 | 3 020 |
The movement during the year of the lease liability can be summarised as follows: | |
In KUSD | |
Operating lease commitments disclosed as at 1 January 2019 | 3 020 |
Acquisitions | 233 |
Financial costs (unwinding discount rate) | 251 |
Lease repayments | - 524 |
Exchange result | 57 |
Lease liability recognised as at 31 December 2019 | 3 037 |
Of which are: | |
Current lease liabilities | 524 |
Non-current lease liabilities | 2 513 |
Total lease liability as at 31 December 2019 | 3 037 |
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As the Group has opted to apply option 2B: Cumulative catch-up, the right-of-use asset equals the lease liability as at 1 January 2019. The movement of the year is presented here below:
Movement | Opening balance | |||
Total right-of-use assets as at 1 January 2019 | 3 020 | |||
Acquisition | 233 | |||
Depreciation | - 358 | |||
Total | 2 895 | |||
Land rights* | Office rent | Car rent | Total | |
Total right-of-use assets as at 1 January 2019 | 818 | 1 778 | 424 | 3 020 |
Total right-of-use assets as at 31 December 2019 | 1 003 | 1 580 | 312 | 2 895 |
* increase in land rights subject to lease in PNG in 2019 |
The total depreciation for the right-of-use assets until 31 December 2019 amounts to 358 KUSD and the financial charges to 251 KUSD. Of the depreciation, 47 KUSD was recorded in the Cost of sales of the palm segment of Papua New Guinea and 310 KUSD in the "General and administrative expenses".
SIPEF - Kasteel Calesberg - 2900 Schoten | |
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Sipef NV published this content on 13 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 February 2020 10:10:07 UTC