SIPEF 
By 1.1. GROUP PRODUCTION
Group production | ||
* Beneficial Interest: share of the group |
The third quarter saw good palm oil production (+5.46%),
supported by favourable weather conditions in most locations
and in line with the general trend of increasing productions
in South East Asia. Notwithstanding the relatively lower
quantities (-1.0%) during the first half of the year, the
total production of palm oil as per end September already
exceeds by 1.2% that of the same period last year.
Especially the mature plantations in the province of North
Sumatra and the own estates in Hargy Oil Palms in Papua New
Guinea enjoyed growth boosting climatological conditions. The
oil extraction rate of the factories of the group are however
slightly inferior to those of last year. Also the young
plantings of the UMW/TUM plantations in North Sumatra
experienced an accelerated growth in quantities and the crops
of the outgrowers in Hargy Oil palms have reached cruising
speed, after a long spell of recovery following the freakish
weather conditions of the first quarter.
The total rubber production increased by 15.7% compared to
last year. Favourable weather conditions, together with an
optimisation of tapping procedures and stimulation of the
rubber trees, ensured an excellent rubber production (+25.0%)
for the SIPEF group in Sumatra during the first nine months
of the year. The daily supply of rubber for our activities in
Papua New Guinea was affected by the high average rainfall
leading to loss of tapping days. The low market prices did
nothing to stimulate the supply from third parties. The
increase in the volume of processed rubber (+14.9%) is mainly
the result of processing the stocks that, due to quality
issues, had been built up last year.
Following substantially better weather conditions during the
second quarter the quantity of tea from our Cibuni gardens in
Java improved considerably (+7.5%) compared to the
exceptionally dry year 2011. This trend continued in the
third quarter albeit somewhat mitigated.
Traditionally the banana production in the Ivory Coast is
limited during the summer period but this year volumes in the
third quarter turned out better than those during the
politically unstable year 2011.
Kasteel Calesberg - 2900 Schoten
RPR Antwerpen / BTW BE 0404 491 285 p. 1 of 3
1.2. MARKETS
Average market prices | ||
in USD/tonne* 9m/12 9m/11 12m/11 Palm oil CIF Rotterdam 1 063 1 159 1 125 Rubber RSS3 FOB Singapore 3 471 5 229 4 823 Tea FOB origin 2 850 2 960 2 920 Bananas FOT Europe 1 099 1 177 1 125 * World Commodity Price Data |
During the month of May many analysts started projecting
large soy bean and corn crops in the US and this weighed on
the oil-seed and vegetable oils markets. However the scenario
changed quite substantially when the US Midwest was hit by
drought starting around the end of June, combined with a
delay in the Indian Monsoon rains and a heat wave in the
regions around the Black Sea.
This prompted palm oil prices, which had dropped to around
USD 950 CIF Rotterdam, to edge back up to around USD 1 025 by
early September.
Then, as harvesting picked up in the US, the crop turned out
not to be as bad as feared. It also became clear that oil
palm production was turning out stronger than expected both
in Malaysia and Indonesia and so on the back of weak demand
this led to a sharp increase in stocks. At the end of
September stocks of palm oil in Malaysia reached a record
level of 2.48 million tonnes. This explains the sudden and
sharp drop in levels
from mid-September onward to just below USD 900 CIF
Rotterdam.
The rubber market was mainly influenced by political
initiatives. In July the International Tripartite Rubber
Council (Indonesia-Malaysia-Thailand) announced they had
plans to support prices but gave no details. Then in August
the Thai authorities first said they would release funds to
allow the purchase of rubber in the domestic market, only to
change their mind a few days later. This fuelled confusion
and so reports of a slowdown of the Chinese economy just
added to the woes and prices for RSS1 dropped below USD 3 per
kg by the end of August.
Tea prices again continued their steady performance during
the third quarter as supply and demand were largely unchanged
resulting from poor crops in many producing countries with
steady off take of good quality teas.
Banana prices, which as a rule suffer during the summer of
lack of demand, have moved back up to levels that marginally
exceed those of last year. Seen as the group mainly operated
with yearly contracts at fixed prices this market move had
little or no effect on our activities.
1.3. PROSPECTS
The production expectations for palm oil and rubber in
Indonesia remain good and we expect that the current
production surplus compared to last year on most of our
plantations will be maintained. Depending on the timing of
the start of the rainy season in Papua New Guinea this will
also be the case for the palm oil production at Hargy Oil
Palms. We expect the rubber production in Papua New Guinea to
be lower during the fourth quarter as a result of wintering
of the trees.
Tea production is expected to be higher than last year and in
the Ivory Coast we expect to export more bananas thanks to a
full return to normality of the growing conditions.
High palm oil stock are depressing prices on the spot market
to such an extent that the Malaysian authorities announced
early October they would reduce the export tax policy with a
view to boosting demand for crude palm oil. However by
delaying the implementation till the 1st January
2013 there will be no immediate relief and market was
disappointed.
Kasteel Calesberg - 2900 Schoten
RPR Antwerpen / BTW BE 0404 491 285 p. 2 of 3
However fundamentals have not changed and once these stocks
do get absorbed, over the next three to four months, prices
will move up to higher levels again. Let's keep in mind that
demand should be boosted by palm oil's steep discount versus
its main competitor soy oil.
The outlook for rubber has changed since early October when
the Tripartite implemented what is called the AETS (Agreed
Export Tonnage Scheme), which in effect is an export
restriciton. Indeed this gave a boost to natural rubber
prices and pushed RSS1 levels back over USD 3 per kg.
Nevertheless what is needed to maintain prices above USD 3
per kg in a sustainable way is an improvement in the overall
economic activity leading to more demand for rubber
products.
Despite better weather conditions in some tea producing
countries in Africa which may affect tea prices, the outlook
still remains better than last year as global demand for good
quality teas remains strong.
At this moment a little over 90% of the expected production
of palm oil has been sold at an average price equivalent to
USD 1 080 CIF Rotterdam. In addition to the limited
quantities that are disposed of locally practically the whole
rubber production for export has been sold at an average
price of USD 3 419 per tonne FOB. Sales of the tea produced
in 2012 have again reached a level of USD 3 per kg.
Thanks to these sales we can state that the major part of the
income has been secured and that the current lower prices for
palm oil will only have a relatively small impact on this
year's results. We expect that the export tax in Indonesia
will be reduced in line with lower market prices. In October
it still amounted to USD 125.15 per tonne.
The rise in cost of production resulting from wage increases
has been cancelled out in Indonesia thanks to a weak rupiah,
but remains substantial in Papua New Guinea, where again this
year the local currency appreciated by about 15% versus the
USD.
Taking into account a realised sales price for palm oil about
USD 70 per tonne lower than the average for
2011, and with rubber prices almost USD 1 200 per tonne
lower, and also considering rising cost of production, we
conclude that we are on the way of achieving good results
which however shall be lower than in 2011.
Both the planting in additional areas in Papua New Guinea as
well as the compensation process, following the acquisition
of two new licenses in South Sumatra, are ongoing, but latter
requires a patient approach and a meticulous administrative
follow up. It is not possible at this time to give an
indication on how many hectares SIPEF shall be in a position
to develop.
Schoten, 25 October, 2012.
For more information, please contact:
* F. Van Hoydonck, Managing Director (mobile
+32/478.92.92.82)
* J. Nelis, Chief Financial Officer
Tel.: 0032/3.641.97.00 Fax: 0032/3.646.57.05
mail to : finance@sipef.comwebsite www.sipef.com(section "investor relations")
SIPEF is a Belgian agro-industrial company listed on NYSE
Euronext Brussels.
The company mainly holds majority stakes in tropical
businesses, which it manages and operates. The group is
geographically diversified, and produces a number of
different commodities, principally palm oil. Its investments
are largely ventures in developing countries.
Kasteel Calesberg - 2900 Schoten
RPR Antwerpen / BTW BE 0404 491 285 p. 3 of 3
|
distributed by
|
