Feronia Inc. ("Feronia" or the "Company") (TSX VENTURE:FRN) today released its
unaudited financial results for the three months ended March 31, 2012. All
amounts in this release are expressed in US dollars unless otherwise indicated.
Q1 2012 Highlights
-- Produced 2,009 tonnes of Crude Palm Oil ("CPO")
-- Replanted 264 hectares of oil palm (1,370 ha year-to-date as of May 27,
2012)
-- Achieved a fresh fruit bunch ("FFB") yield of 1.74 tonnes per ha for the
quarter (not annualized or seasonally adjusted) compared to 0.94 tonnes
per ha in Q1 2011
-- Completed first stage of civil work for Yaligimba plantation palm oil
mill
-- Commenced sales of Palm Kernel Oil
-- Planted 305 ha of rice and 60 ha of edible beans (a total of 200 ha of
edible beans were planted by the end of April 2012)
-- Revenue up 31% to $1,934,000 from $1,478,000 in Q1 2011
-- Achieved gross margin of 40% at the Company's palm oil operations
compared to 35% in Q1 2011
-- Net Income (loss) attributable to Feronia was ($2,403,000) or $(0.02)
per share, compared to ($7,158,000) or ($0.07) per share in Q1 2011
-- Cash balance at March 31, 2012 of $9,310,000
Bill Dry, CEO stated "In the first quarter of 2012 Feronia continued to invest
in creating long-term value at its oil palm plantations while focusing on
maximizing yields and cash flow from existing plantings. We resumed our
re-planting initiative on schedule in March and have planted 1,370 ha of oil
palms year-to-date as of May 27, 2012. We have also commenced a programme of
fertilising palms aged 4 to 16 years. Most of these palms have never had the
benefit of fertiliser application. We expect that over time, the investment in
fertiliser use will have a significant positive effect on yields and provide a
high return on our investment. We have completed preliminary civil works for our
new palm oil mill at Yaligimba and technicians from Malaysia are due on site in
June 2012 to assist in the construction and commissioning phase."
"The focus at our arable farming operations continues to be on proving
compelling commercial yields for rice and edible beans. During the first
quarter, we planted 305 ha of rice and 60 ha of edible beans with an additional
140 ha of edible beans planted in April. We expect to harvest both of these
crops in June of this year" added Dry.
Operational Summary and Key Metrics by Division
Palm Oil Operations
Key Metrics:
First quarter ended March 31, 2012
Lokutu Yaligimba Boteka
------------------------------------
Immature Hectares 1,679 1,415 1,020
Producing Hectares 4,809 3,903(1) 1,501
Fruit Production (tonnes) 9,223 - 1,752
Oil Produced (tonnes) 1,688 - 321
Oil Extraction Rate 18.30% - 18.32%
PKO Produced (tonnes) 143 - -
FFB Yield/ha(3) 1.92 - 1.17
Operational Summary and Key Metrics by Division
Palm Oil Operations
Key Metrics:
First quarter ended March 31, 2012
Total Total Total
(as at (as at (as at
March 31, March 31, March 31,
2012) 2011) 2010)
------------------------------------
Immature Hectares 4,114 3,233 2,156
Producing Hectares 10,213(2) 12,753 13,338
Fruit Production (tonnes) 10,975 11,952 6,795
Oil Produced (tonnes) 2,009 2,064 1,113
Oil Extraction Rate 18.31% 17.27% 16.38%
PKO Produced (tonnes) 143 - -
FFB Yield/ha(3) 1.74(4) 0.94 0.51
Notes:
--------
1. The producing hectares at the Yaligimba plantation are not
currently being harvested and as a result are not contributing
to FFB or CPO production.
2. During the years ended December 31, 2010 and 2011, the Company
classified palms aged 4 to 30 years as mature and producing.
Management has elected to now classify only palms aged 4 to 25
years as mature and producing which resulted in a reduction of
the total number of producing hectares.
3. FFB yield/ha is for current quarter only and is not annualized
or seasonally adjusted. Annual FFB yield/ha will reflect
seasonal factors, with the highest production typically around
May and the lowest production around October.
4. Represents a weighted average of FFB yield/ha for the Lokutu and
Boteka plantations.
The Company previously transported fruit by barge from the Yaligimba plantation
to the palm oil mill at the Lokutu mill for processing into CPO. Due to
escalating costs associated with such transport and the deterioration in palm
oil quality resulting from such transportation, it became uneconomical to
continue and the operation was suspended in the first quarter of 2012. Once the
new palm oil mill at the Yaligimba plantation is operational (currently
scheduled for the fourth quarter of 2012), the Company will have access to an
additional 3,903 ha of producing palms, which will be an increase of 62.1% over
the area currently being harvested. It is expected that the Yaligimba plantation
will achieve operating results similar to the Lokutu plantation on a per hectare
basis. See "Cautionary Notes" below. With the suspension of barging operations
at the Yaligimba plantation, the total number of contributing producing hectares
decreased by 38.2% to 6,310 ha and the total tonnage of fruit production
decreased by 8% on a year-over-year basis.
Recent developments with respect to the oil palm operations include the following:
1. first application of fertiliser to palms aged between 4 and 16 years,
with 508 ha covered as at the end of the first quarter of 2012;
2. 264 ha of oil palms replanted in the quarter ended March 31, 2012 and
1,370 ha of oil palms replanted year-to-date as of May 27, 2012; and
3. first stage of civil work for the new palm oil mill at the Yaligimba
plantation completed. Technicians from Malaysia are scheduled to arrive
on site in June 2012 for preparation of the mill building and associated
equipment. Supplies of cement and steel reinforcement materials have
been delivered to site to proceed with the second stage of civil work.
Arable Farm Operations
Key Metrics:
First quarter ended First quarter ended
Arable March 31, 2012 March 31, 2011
----------------------------------------------------------------------------
Land Available (ha) 10,000 10,000
Land Cleared (ha) 2,000 -
Land Prepared (ha) 1,700 200
Land Planted (ha) 365(1) -
Note:
-------
1. A total of 305 ha of rice was planted in the first quarter
of 2012 and 60 ha of beans were planted in the first quarter
of 2012 as part of a 200 ha planting of beans that was
completed in April 2012.
Recent Developments:
-- 305 ha of rice planted in February 2012
-- 200 ha of edible beans planted by April 2012
-- Second stage drying and storage equipment arrived in March 2012
-- Technicians for the installation and commissioning of the second stage
drying and storage facility arrived on site in the last week of May 2012
with commissioning scheduled to commence in July 2012
In February 2012, 305 ha of rice were planted. The Company expects to harvest
this crop in early June 2012.
In March 2012, 60 ha of edible beans were sown and in April 2012, a further 140
ha of edible beans were sown for a total of 200 ha as part of the Company's
strategy of smaller scale, proof-of-yield plantings. These will build on the
Company's knowledge of local conditions in preparation for future large-scale
planting.
Work on the arable storage, drying and processing facilities is well advanced
with the first stage of storage and drying commissioned in January 2012 and the
processing facility anticipated to be completed in the third quarter of 2012.
Imports of fertiliser and equipment were in place on the farm before the current
planting season commenced. Technicians for the installation and commissioning of
the second phase drying facility arrived on site in the last week of May 2012
with commissioning scheduled to commence in July 2012.
Outlook
The Company's strategy for its oil palm plantations business continues to be to
maximize returns from existing plantings while investing in new plantings and
the required processing capacity. In the first quarter of 2012, the Company
applied fertiliser to 508 ha of palms aged between 4 and 16 years, re-planted
264 ha of oil palms (1,370 ha year-to-date as of May 27, 2012), and made further
progress towards the completion of the new palm oil mill at Yaligimba. In the
coming quarters, the Company will remain focused on increasing yields through
improved harvesting and collection practices and the application of fertiliser,
replanting oil palms, and completing the Yaligimba mill. Commissioning of the
new palm oil mill at Yaligimba is expected to provide the Company with immediate
access to an additional 3,903 ha of mature oil palms for the production of CPO,
an increase of 62.1% from the area currently accessible. Once the Yaligimba palm
oil mill is completed, there are no major capital expenditures currently
anticipated in the Company's oil palm plantations business for the next several
years, excluding fertiliser costs associated with immature palms.
The Company's primary objective with respect to its arable farming business for
the remainder of 2012 is to prove commercial yields for rice and beans at its
operation in Bas Congo, DRC. To this end the Company planted 305 ha of rice in
the first quarter of 2012 and completed the planting of 200 ha of beans in the
second quarter of 2012. The rice and bean crops are scheduled to be harvested
and yields calculated during the second quarter of 2012. In the fourth quarter
of 2012, the Company intends to plant a further crop of rice for harvest in the
first quarter of 2013.
The Company has the infrastructure in place for drying, storing, and processing
crops produced on 4,000 to 6,000 hectares, depending on yields achieved. The
Company does not intend to expand the arable farming operation until
commercially compelling yields have been achieved on a scale of up to 2,000
hectares. Once such yields have been achieved, the Company will consider
expanding the scale of the planting programme. With excess processing capacity
in place, such an expansion can occur relatively quickly and with minimal
capital expenditure outside of costs associated to land clearing and
preparation.
In summary, the key objectives of the Company in 2012 remain as follows:
i. commissioning the palm oil mill at the Yaligimba plantation, thereby
enabling the Company to harvest and process fruit grown at that
location;
ii. completing up to 5,000 ha of re-planting across its oil palm
plantations; and
iii. proving commercial yields of rice and beans at its arable farming
division.
"In the coming quarters Feronia expects to complete several key investments. In
the second quarter the Company expects to complete the construction and
commissioning of the processing facilities for its arable farming operation. In
the fourth quarter, the Company expects to complete the construction and
commissioning of the new palm oil mill at the Yaligimba plantation. Completion
of each of these facilities will constitute a major milestone for the Company.
It is well positioned to leverage this significant capital investment to grow
for the next many years." stated Ravi Sood, Executive Chairman.
Financial Discussion - Quarter Ended March 31, 2012
Revenue and Gross Margin
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in thousands of US
dollars) First quarter ended March 31,
----------------------------------------------------------------------------
$ %
2012 2011(1) Change Change
----------------------------------------------------------------------------
Palm Oil $ 1,807 $ 1,355 $ 452 33%
Other 127 123 4 3%
----------------------------------------------------------------------------
Revenues 1,934 1,478 456 31%
Cost of Sales 1,155 968 187 19%
----------------------------------------------------------------------------
Gross Margin(2)PHC $ 779 $ 510 269 53%
Gross Margin(2) PHC % 40% 35%
----------------------------------------------------------------------------
Arable operating expense 813(3) 171(3) 642 375%
----------------------------------------------------------------------------
Note:
-------
1. Certain figures for the first quarter ended March 31, 2011 have
been restated and reflect adjustments as discussed in note 2 of
the condensed consolidated interim financial statements.
2. See section below entitled "Non-GAAP Financial Measures".
3. No revenue was generated by the Company's arable farming
operation during these periods.
The following table provides a summary of palm fruit production and CPO:
First quarter ended Mar 31
---------------------------------
$ %
2012 2011 Change Change
Palm Fruit Production
Total Tonnes 10,975 11,952 (977) (8)%
Crude Palm Oil (CPO)
Total Tonnes 2,009 2,064 (55) (3)%
Oil Extraction rate 18.3% 17.3% N/A 6%
Cash used in operating activities
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in thousands of US
dollars) First quarter ended March 31,
----------------------------------------------------------------------------
$ %
2012 2011(1) Change Change
----------------------------------------------------------------------------
Cash used in operating activities $ (1,414) $ (1,676) $ 262 16%
----------------------------------------------------------------------------
Note:
-------
1. Certain figures for the first quarter ended March 31, 2011
have been restated and reflect adjustments as discussed in
note 2 of the condensed consolidated interim financial
statements.
Operating Costs
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Expressed in thousands of US
dollars) First quarter ended March 31,
----------------------------------------------------------------------------
$ %
2012 2011(1) Change Change
----------------------------------------------------------------------------
Selling, general and
administrative $ 3,029 $ 2,878 151 5%
Other gains and losses (16) 3 (19) (619)%
----------------------------------------------------------------------------
Operating costs $ 3,013 $ 2,881 $ 132 5%
----------------------------------------------------------------------------
Note:
-------
1. Certain figures for the first quarter ended March 31, 2011
have been restated and reflect adjustments as discussed in
note 2 of the condensed consolidated interim financial
statements.
Operating costs for the first quarter of 2012 were $3,013,000, an increase of
$132,000, or 5%, compared to the first quarter of 2011. The increase was a
result of an increase in selling, general and administrative expenses of
$151,000 due to the following:
-- Increase in amortization of $225,000 due to increased investment in
plant and equipment during 2011 and in the first quarter of 2012 with
amortization charged in the year of acquisition.
-- Reduction in recruitment costs with $103,000 incurred in the first
quarter of 2011 compared to a minimal amount in first quarter of 2012.
Cash Flows and Liquidity
The cash balance was $9,310,000 as at March 31, 2012, compared to $13,521,000 as
at December 31, 2011. The decrease in cash balance of $4,211,000 was a result of
net loss (excluding non-cash items) of $2,582,000, increase in working capital
of $1,167,000 and capital expenditure of $2,796,000.
For the first quarter of 2012, working capital requirements resulted in cash
inflows of $1,167,000 compared to cash inflows of $542,000 for the first quarter
of 2011. First quarter 2012 net cash inflows of $1,167,000 were driven by
increases in payables of $906,000 and decreases in inventory of $37,000 and
receivables of $531,000 offset by an increase in prepaid expenses of $307,000.
Working capital inflows of $542,000 for the first quarter of 2011 were driven by
lower prepaid expenses of $473,000 and increases in payables of $681,00 offset
by an increase in inventory of $541,000 and receivables of $71,000.
Investing activities resulted in cash outflows of $2,797,000 for the first
quarter of 2012, compared to cash outflows of $1,655,000 in the first quarter of
2011, due to capital spending for manufacturing equipment in order to build
production capacity.
Major outstanding anticipated cash requirements are related to:
i. the completion and construction of the new oil palm mill at Yaligimba
(approximately $6,500,000; expected completion in the fourth quarter of
2012);
ii. the completion of the rice mill to service Feronia Arable
(approximately $300,000; expected completion in the third quarter of
2012); and
iii. the completion of the storage and drying facilities to service the
arable operations (approximately $800,000; expected completion in the
third quarter of 2012).
Adjustments to 2011 Quarterly Information
(i)Notice to Readers: As a result of the audit of the financial statements for
the year ended December 31, 2011, the Company has determined that certain
IFRS-determined information in its interim filings for each of the first three
quarters of 2011 will require adjustments to correct for IFRS-related changes in
the valuation model for the biological assets of the Company and the
reclassification of the warrants as financial liabilities. Further, any
adjustments made to such quarterly information may affect the figures presented
for the three month period ended December 31, 2011. The condensed consolidated
interim financial statements for the period ended March 31, 2012 include
adjusted comparative figures for the period ended March 31, 2011 (see note 2 of
the financial statements). The Company is currently in the process of
determining the required adjustments for the remaining interim periods of 2011
and will update its interim filings for 2011 as soon as practicable. Readers are
cautioned not to rely on the unaudited figures presented in the Company's
interim filings for 2011.
Non-GAAP Financial Measures
Throughout this press release, references are made to "gross margin". A
description of this non-GAAP financial measure and its limitations are discussed
in the Company's management's discussion and analysis for the period ended March
31, 2012 under "Non-GAAP Financial Measures".
About Feronia Inc.
Feronia is a large-scale commercial farmland and plantation operator in the DRC.
The Company uses modern agricultural practices to operate and develop its oil
palm plantations and arable farming business division. Feronia believes in the
immense agricultural potential of the DRC for high-quality foodstuffs and edible
oils given its ideal climate, excellent soil and highly skilled and experienced
workforce. Feronia's management team is comprised of senior agriculturalists
with extensive experience in managing both plantations and large-scale
mechanized farming operations in emerging markets. Feronia is committed to
sustainable agriculture, environmental protection and providing support for
local communities. For more information please see www.feronia.com.
Cautionary Notes
Except for statements of historical fact contained herein, the information in
this press release constitutes "forward-looking information" within the meaning
of Canadian securities law. Such forward-looking information may be identified
by words such as "anticipates", "plans", "proposes", "estimates", "intends",
"expects", "believes", "may", "will" and include without limitation, statements
regarding proposed capital expenditure; the Company's plan of operations and
comparative advantages; plans regarding sowing rice and replanting oil palms;
improvements in harvesting and collection; and positive trends regarding OERs.
There can be no assurance that such statements will prove to be accurate; actual
results and future events could differ materially from such statements. Factors
that could cause actual results to differ materially include, among others:
risks related to foreign operations (including various political, economic and
other risks and uncertainties), the interpretation and implementation of the
"Loi Portant Principes Fondamentaux Relatifs A L'Agriculture" (the DRC's
agriculture law, as discussed in the Company's management's discussion and
analysis for the period ended March 31, 2012), termination or non-renewal of
concession rights or expropriation of property rights, political instability and
bureaucracy, limited operating history, lack of profitability, lack of
infrastructure in the DRC, high inflation rates, limited availability of debt
financing in the DRC, fluctuations in currency exchange rates, competition from
other businesses, reliance on various factors (including local labour,
importation of machinery and other key items and business relationships), the
Company's reliance on two refining factories and one major customer, lower
productivity at the Company's plantations and arable farming operations, risks
related to the agricultural industry (including adverse weather conditions,
shifting weather patterns, and crop failure due to infestations), a shift in
commodity trends and demands, vulnerability to fluctuations in the world market,
the lack of availability of qualified management personnel and stock market
volatility. Most of these factors are outside the control of the Company.
Investors are cautioned not to put undue reliance on forward-looking
information. Except as otherwise required by applicable securities statutes or
regulation, the Company expressly disclaims any intent or obligation to update
publicly forward-looking information, whether as a result of new information,
future events or otherwise.
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