TIDMPAL
RNS Number : 1202F
Equatorial Palm Oil plc
15 May 2017
15 May 2017
EQUATORIAL PALM OIL PLC
("EPO", the "Company" or, together with its subsidiaries and
associates, the "Group")
Interim Results for the six months ended 31 March 2017
Equatorial Palm Oil plc (AIM: PAL), the AIM quoted palm oil
production company with operations in Liberia, West Africa,
announces its unaudited interim results for the six months ended 31
March 2017 (the "Period"). EPO is supported by its 63 per cent.
shareholder and venture partner Kuala Lumpur Kepong Berhad ("KLK"),
a Malaysian corporation, in developing a new sustainable palm oil
operation in Liberia through investment in its plantations,
training and infrastructure.
Highlights:
-- Amendments to the Group's Concession Agreements agreed with
the Government of Liberia providing for an additional five-year
duty and tax free period and a corresponding extension to the total
time period for the 50 year concessions
-- Construction of the new 60 metric tonne per hour ("mt/hr")
palm oil mill at Palm Bay estate commenced in April 2016
-- Sales of small quantities of fresh fruit bunches ("FFB") commenced in January 2017
-- Sustainability Report 2016 released
-- EPO adopts the High Carbon Stock Approach methodology and
carried out High Carbon Stock ("HCS") assessment in establishing
clear parameters, alongside stakeholders, for the development of
new plantations
-- Post period end: Mr Lee Guo Zhang appointed to the board of the Company.
Michael Frayne, Non-Executive Chairman of EPO, commented:
"We continue to make steady progress in Liberia and have the
full support of the Government of Liberia as was evidenced by the
recent amendments made to our Concession Agreements to allow for an
additional 5 years of tax and duty free periods.
"The commencement of construction of the new 60 mt/hr palm oil
mill at Palm Bay estate was a significant milestone for the
Company. With commissioning of the new mill likely to take place in
the second half of 2018, we will begin to start training our staff
in all the new skills required for the development and operation of
the mill on a stage by stage basis.
"The sustainable palm oil business is a long-term commitment to
the Government of Liberia and its people, and the Company maintains
its unwavering support for the agricultural industry in Liberia
through partnering with all stakeholders."
For further information, please
contact:
Equatorial Palm Oil plc
Geoffrey Brown (Executive
Director)
www.epoil.co.uk +44 (0) 20 7016 9885
Strand Hanson Limited (Nominated
Adviser)
James Harris / James Bellman +44 (0) 20 7409 3494
Mirabaud Securities LLP (Broker)
Peter Krens +44 (0) 20 7484 3510
CHAIRMAN'S STATEMENT
The Group focussed on further progressing its oil palm assets in
Liberia, West Africa, and setting the foundations for its
large-scale development. The Group's oil palm estates, are held
through Liberian Palm Developments Limited ("LPD"), an associate
company owned in equal proportion by EPO and KLK.
Liberian Palm Developments Limited
Amendment to Concession Agreements - Extension of Tax and Duty
Free Periods
On 17 March 2017, the Group announced that its tax and duty free
allowance had been extended for a further five years under the
concession agreements granted to LPD's subsidiaries for the
development of its two existing oil palm estates at Palm Bay and
Butaw (the "Concession Agreements.").
The Concession Agreements became effective on 6 August 2008 and
were granted for a term of 50 years. In accordance with the
Concession Agreements, LPD's subsidiaries were granted certain tax
and duty free status for the first seven years of operations
("Rehabilitation Term").
As a consequence of factors outside of the Group's control,
which resulted in slower than planned development of the concession
areas, the Government of Liberia approved an amendment to the
Concession Agreements for both of LPD's Liberian subsidiaries being
Libinc Oil Palm Inc. (Palm Bay estate) and Liberia Forest Products
Inc (Butaw estate).
The amendments, which were ratified by the Liberian legislature
and authorised by the President of Liberia, extend the
Rehabilitation Term for a further five years from 27 February 2017
for Libinc Oil Palm Inc and 14 March 2017 for Liberia Forest
Products Inc, which are the dates on which the amendments to the
Concession Agreements became effective. The extension of the
Rehabilitation Term by 5 years has resulted in the term of the
Concession Agreements also being extended by a similar period and
both shall now end on 6 August 2063 being the fifty-fifth
anniversary of the effective date of the Concession Agreements.
Since 2008, the Group has spent over US$100m in developing its
oil palm operations in Liberia. With crude palm oil production
scheduled to commence during the second half of 2018 ("2H2018")
from our new 60 mt/hr palm oil mill currently being built on Palm
Bay estate. This timely extension to the Rehabilitation Term
reinforces the Government of Liberia's commitment to foreign
investors.
Construction Update on new 60 mt/hr Palm Oil Mill
On 13 April 2016, the Group announced that LPD is to construct a
60 mt/hr palm oil mill ("POM") to be located at the Palm Bay
estate, and I am pleased to report that construction is now well
underway. The mill is being constructed in a modular fashion, with
the first of two lines of 30 mt/hr currently under construction,
and is anticipated to be operational in the 2H2018. The first phase
of the mill, being the first 30MT line, is fully funded from the
loan to LPD provided by KLK on 5 September 2016 and the balance of
funding required for the second 30mt/hr line is expected to be
sourced on a similar debt funded basis.
The construction of the POM is a very significant project for
the communities in which we operate and for the Liberian
Government. This is particularly true in light of the recent
downturn in the prices of many commodities, which has led the
Liberian Government to put a greater emphasis on development of the
agriculture sector in view of its long term sustainability.
Palm Bay is located 24km from the port of Buchanan, where LPD
has leased approximately 4.5 acres in close proximity to the wharf
from the National Port Authority for a tank farm and export
facility (the "Site"), from which it is intended that vessels will
load EPO's produce for onward shipment to its customers.
The Group's palm products, comprising crude palm oil, crude palm
kernel oil and palm kernel cake, will be trucked from the Palm Bay
estate to the port of Buchanan and stored at the tank farm which
LPD intends to build on the Site. Construction of the tank farm
will soon commence where LPD will build initial capacity for 2,500
MT of storage capacity for palm oil and related products and is
planned for completion in 2H 2018. In time, the tank farm is
expected to hold up to 10,000MT of palm oil.
Work has been ongoing at both Palm Bay and Butaw estates,
tending to the already 7,600 ha planted since 2011. Since January
2017, LPD has begun making small sales of fresh fruit bunches
("FFB") from its newly maturing oil palms at Palm Bay estate to a
local oil palm developer who has an existing mill and also local
farmers in the area. The sales volumes are currently relatively
small, being less than 100 mt of FFB per day, and as soon as the
POM is in operation, these sales of FFB will cease and LPD will
process all of its FFB at the new mill on Palm Bay estate.
Corporate Social Responsibility ("CSR") and Sustainability
During the Period, the Group released its Sustainability Report
2016, which is intended to provide an update on EPO's
Sustainability Report 2015. This 2016 publication is an interim
report which provides an update on the Group's community work in
Liberia, illustrating the Group's CSR activities following the
detailed report released in 2015. The 2016 report reviews projects
to date and details how the Group has resolved some of the land
rights issues experienced in Liberia. The report can be found
at:
http://www.epoil.co.uk/uploads/epo-sustainability-report-2016.pdf
The report also addresses:
-- The Group's commitment to the Roundtable on Sustainable Palm
Oil ("RSPO"), including the key principle of free, prior informed
consent ("FPIC") from communities as essential for land
development
-- The Group's plans to help make the certified sustainable palm
oil industry the basis of stable, long term economic development in
Liberia
-- EPO and the World Bank Smallerholder Tree Crop Revitialisation Project
-- Human Rights Impact Assessment being commissioned
-- The Group's tax and royalty regime, employment and training policy
-- "Concession Company of the Year 2016" awarded by The Inquirer newspaper in Liberia
-- Case study: EPO schools and clinics
-- Data outlining all EPO CSR initiatives for an illustrative time period
RSPO
EPO has been a member of the RSPO since 2007 and adheres to all
international best practice standards for plantation development,
including free, prior and informed consent of the communities in
which it operates.
The Group has consistently adopted best practices and procedures
to ensure that the CPO ("Crude Palm Oil") produced from our new
plantings will meet with international sustainability standards,
thereby enabling our CPO to be labelled "sustainable" palm oil.
We note that, from March 2017, EPOs membership of the RSPO will
be retained through KLK's membership, due to KLK's holding in EPO
following a recent change in the RSPO membership rules. KLK has
been a member of the RSPO since 2004, and EPO's status and
contribution to the RPSO will be unaffected by this change.
Appointment of Director
On 10 May 2017, the Company announced the appointed of Mr Lee
Guo Zhang as a director of the Company. Guo Zhang joined KLK in
2010 as an executive. He has experience across various departments
in KLK and was promoted to his current position as a Senior Manager
in the Plantations Division in 2015. We very much welcome Guo Zhang
onto the board and his guidance and input will be extremely
valuable for the Company and we draw nearer to completion of the
first stage of our new 60 mt per hour palm oil mill at Palm Bay
estate and production in 2018.
Financial Review
The loss of the Group for the six months ended 31 March 2017 of
US$1,115,000 (31 March 2016: US$507,000) was in line with
expectations. Cash held by the Group as at 31 March 2017 was
US$296,000 (30 September 2016: US$465,000).
Summary and Outlook
The additional five-year duty and tax free periods, and
corresponding term extensions, under our two Concession Agreements
was a significant achievement by our senior management team led by
Geoffrey Brown and Sashi Nambiar. The Government of Liberia has
demonstrated its commitment to developing the agriculture sector in
Liberia and this is an excellent outcome for not only the Group and
its stakeholders, but also for foreign investors looking to invest
in Liberia.
The commissioning of the new 60 mt/hr palm oil mill in the
second half of 2018 will be a huge step towards cementing the Group
as one of the leading sustainable palm oil producers in West
Africa. We believe the Group will be an excellent example in
demonstrating the significant social and economic benefits that
agricultural development can bring, and we are proud to play a part
in this process.
Michael Frayne
Chairman
15 May 2017
INDEPENT REVIEW REPORT TO EQUATORIAL PALM OIL PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2017 which comprises the group statement
of comprehensive income, the group statement of financial position,
the group cash flow statement, the group statement of changes in
equity and the related explanatory notes. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our report has been prepared
in accordance with the terms of our engagement to assist the
company in meeting the requirements of the rules of the London
Stock Exchange for companies trading securities on AIM and for no
other purpose. No person is entitled to rely on this report unless
such a person is a person entitled to rely upon this report by
virtue of and for the purpose of our terms of engagement or has
been expressly authorised to do so by our prior written consent.
Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly
disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2017 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
Location
United Kingdom
Date: 15 May 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
EQUATORIAL PALM OIL PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODED 31 MARCH 2017
Period Period ended Year ended
ended
31 March 31 March 30 September
2017 2016 2016
Note (unaudited) (unaudited) (audited)
$'000 $'000 $'000
Revenue 81 86 192
Administrative
expenses (328) (412) (847)
Operating loss (247) (326) (655)
-------------- -------------- ---------------
Interest income 256 248 504
Other income 22 28 66
Share of operating
loss of associate 3 (1,146) (457) (1,191)
Loss for the period
before and after
taxation attributable
to owners of the
parent (1,115) (507) (1,276)
-------------- -------------- ---------------
Other comprehensive
income
Exchange losses
arising on translation
of foreign operations (16) (46) (100)
-------------- -------------- ---------------
Total comprehensive
income for the
period attributable
to owners of the
parent (1,131) (553) (1,376)
-------------- -------------- ---------------
Loss per share
expressed in cents
per share
- Basic 2 (0.3) (0.1) cents (0.4) cents
cents
EQUATORIAL PALM OIL PLC
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2017
31 March 30 September
2017 2016
(unaudited) (audited)
Note
$'000 $'000
ASSETS
Non-current assets
Property, plant and equipment 3 3
Investment in associate 3 21,276 22,422
Receivables from associate 6,508 6,386
27,787 28,811
-------------- --------------
Current assets
Trade and other receivables 150 121
Cash & cash equivalents 296 465
-------------- --------------
446 586
LIABILITIES
Current liabilities
Trade and other payables 61 94
61 94
-------------- --------------
Net current assets 385 492
-------------- --------------
NET ASSETS 28,172 29,303
============== ==============
SHAREHOLDERS' EQUITY
Share capital 4 5,598 5,598
Share premium 46,791 46,791
Warrant and option reserve 5 - -
Foreign exchange reserve 500 516
Retained loss (24,717) (23,602)
Total equity 28,172 29,303
============== ==============
EQUATORIAL PALM OIL PLC
GROUP CASH FLOW STATEMENT
FOR THE PERIODED 31 MARCH 2017
Period Period ended Year ended
ended
31 March 31 March 30 September
2017 2016 2016
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Cash flows from operating
activities
Loss for the year
before and after taxation (1,115) (507) (1,276)
Depreciation - - 1
Increase in receivables (16) (93) (9)
Decrease in payables (23) (34) 35
Interest income (256) (248) (504)
Other income (22) (27) (62)
Share of operating
loss of associate 1,146 457 1,191
Net cash outflow from
operating activities (286) (452) (624)
-------------- -------------- ---------------
Cash flows from investing
activities
Purchase of property,
plant and equipment - (3) (3)
Funds loaned to associate (91) (38) (5)
Interest income received 216 1 172
Other income received 9 11 38
Net cash inflows/(outflow)
from investing activities 134 (29) 202
-------------- -------------- ---------------
Cash flows from financing
activities
Net cash inflow from - - -
financing activities
-------------- -------------- ---------------
Net decrease in cash
and cash equivalents (152) (481) (422)
Cash and cash equivalents
at beginning of period 465 987 987
Exchange losses on
cash and cash equivalents (17) (48) (100)
Cash and cash equivalents
at end of period 296 458 465
-------------- -------------- ---------------
EQUATORIAL PALM OIL PLC
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 31 MARCH 2017
Called Share Foreign Warrant
up share premium exchange and option Retained Total
capital reserve reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000
Unaudited
----------- ---------- ----------- -------------- ----------- ----------
As at 1 October
2015 5,598 46,791 616 108 (22,434) 30,679
----------- ---------- ----------- -------------- ----------- ----------
Loss for the
period (507) (507)
Total comprehensive
income for the
period (46) (46)
----------- ---------- ----------- -------------- ----------- ----------
As at 31 March
2016 5,598 46,791 570 108 (22,941) 30,126
----------- ---------- ----------- -------------- ----------- ----------
Audited
As at 1 October
2015 5,598 46,791 616 108 (22,434) 30,679
----------- ---------- ----------- -------------- ----------- ----------
Expiry of warrants
and options - - - (108) 108 -
Loss for the
period - - - - (1,276) (1,276)
Other comprehensive
income for the
year - - (100) - - (100)
As at 30 September
2016 5,598 46,791 516 - (23,602) 29,303
----------- ---------- ----------- -------------- ----------- ----------
Unaudited
----------- ---------- ----------- -------------- ----------- ----------
As at 1 October
2016 5,598 46,791 516 - (23,602) 29,303
----------- ---------- ----------- -------------- ----------- ----------
Loss for the
period - - - - (1,115) (1,115)
Other comprehensive
income for the
year - - (16) - - (16)
As at 31 March
2017 5,598 46,791 500 - (24,717) 28,172
----------- ---------- ----------- -------------- ----------- ----------
EQUATORIAL PALM OIL PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIODED 31 MARCH 2017
1. Basis of preparation
These consolidated financial statements have been prepared using
policies based on International Financial Reporting Standards (IFRS
and IFRIC interpretations) issued by the International Accounting
Standards Board ("IASB") as adopted for use in the EU. They do not
include all disclosures that would otherwise be required in a
complete set of financial statements but have been prepared in
accordance with policies expected to be applied in the 2017 Annual
Report and should be read in conjunction with the 2016 Annual
Report. The financial information for the half year ended 31 March
2017 does not constitute statutory accounts within the meaning of
Section 434(3) of the Companies Act 2006 and is unaudited.
The annual financial statements of Equatorial Palm Oil plc are
prepared in accordance with IFRSs as adopted by the European Union.
The comparative financial information for the year ended 30
September 2016 included within this report does not constitute the
full statutory accounts for that period. The statutory Annual
Report and Financial Statements for 2016 have been filed with the
Registrar of Companies. The Independent Auditors' Report on that
Annual Report and Financial Statement for 2016 was unqualified and
did not contain a statement under 498(2) or 498(3) of the Companies
Act 2006.
The same accounting policies, presentation and methods of
computation are followed in these condensed consolidated financial
statements as were applied in the Group's latest annual audited
financial statements. In addition, the IASB has issued a number of
IFRS and IFRIC amendments or interpretations since the last annual
report was published. It is not expected that any of these will
have a material impact on the Group.
The financial statements have been prepared on a going concern
basis. Based upon the Company's current cash balance and
expectation of cash receipts from interest income, the Directors
consider that the Company will have sufficient cash to fund the
Company's ongoing commitments for a period of at least a year after
the approval of these financial statements.
Regarding the funding of LPD, KLK previously provided a letter
of support to LPD in November 2016 which states that KLK will
provide further funding as necessary in order for LPD to continue
its normal operations, although this has not been updated, the
Board do not consider there to be any reason to believe this would
not continue.
2. Loss per share
The basic loss per share is derived by dividing the loss for the
Period attributable to ordinary shareholders by the weighted
average number of shares in issue.
As inclusion of the potential Ordinary shares would result in a
decrease in the loss per share they are considered to be
anti-dilutive, as such, a diluted earnings per share is not
included.
Period ended Period ended Year ended
31 March 2017 31 March 2016 30 September 2016
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Loss for the period (1,115) (507) (1,276)
Weighted average number of Ordinary
shares of 1p in issue 356.3 million 356.3 million 356.3 million
Loss per share - basic (0.3) cents (0.1) cents (0.4) cents
3. Investment in associate
The Company, through its investment in Equatorial Biofuels
(Guernsey) Limited, owns a 50% interest in Liberian Palm
Developments Limited ("LPD").
In 2014 a new Joint Venture Agreement ("JVA") was signed
pursuant to which cash and funding commitments of up to $35.5m were
made available to be provided to LPD. The Company and KLK each
subscribed for US$7.5m of new equity in LPD and KLK committed to
providing up to US$20.5m in further funding. Under the JVA, the
Company retained a 50% economic and voting interest in LPD. Also
under the JVA, KLK has the power to appoint the Chairman to the
Board of LPD and in the case of a tied vote the Chairman has the
casting vote. For this reason, the Company accounts for its
investment in LPD as an equity investment in which it has
significant influence.
In January 2015, LPD entered into a $20.5m loan agreement ("Loan
Agreement") with KLK Agro Plantations Pte Ltd ("KLK Agro"), a
wholly owned subsidiary of KLK, for operations and funding. The
term of the Loan Agreement is 5 years and the interest rate is
3-months USD LIBOR plus 5 per cent per annum.
In April 2016, the Group announced the commissioning of a 60
metric tonne per hour ("mt/hr") palm oil mill ("POM") of which the
stage 1 will be to install a 30mt/hr POM, anticipated to be
operational in 2018, which will cost approximately US$20m and is to
be funded by debt finance which our major shareholder and venture
partner KLK is arranging on commercial arm's length terms. The
balance of funding for the stage 2 second 30mt/hr line will be
sought closer to the time of commissioning on a similar debt funded
basis.
As at 31 March 2017 the Company had US$6,508,000 (31 March 2016:
US$6,347,000) in receivables due from the associate, on which
interest of US$256,000 accrued during the period (31 March 2016:
US$248,000).
The Company's interest in LPD is as follows:
$'000
Interest in associate at 1
October 2015 23,613
Share of losses of associate (457)
Interest in associate at 31
March 2016 23,156
Interest in associate at 1
October 2015 23,613
Share of losses of associate (1,191)
Interest in associate at 30
September 2016 22,422
Interest in associate at 1
October 2016 22,422
Share of losses of associate (1,146)
Interest in associate at 31
March 2017 21,276
The balance sheet and results of Liberian Palm Developments
Limited for the period of six months to 31 March 2017 were as
follows:
31 March 31 March 30 September
2017 2016 2016
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Non-current assets 96,744 83,339 90,143
Current assets 10,097 3,767 6,354
Non-current liabilities (62,239) (38,563) (49,939)
Current liabilities (2,051) (2,231) (1,714)
TOTAL NET ASSETS 42,551 46,312 44,844
Income 124 - -
Expenses (2,816) (913) (2,382)
Loss after tax (2,292) (913) (2,382)
4. Called up share capital
Period Period Period ended
ended ended
31 March 31 March 30 September
2016 2015 2015
(unaudited) (unaudited) (audited)
Allotted, called up and $'000 $'000 $'000
fully paid
--------------------------------- -------------- -------------- ---------------
356,277,502 (30 September
2016 - 356,277,502) Ordinary
shares of 1p each 5,598 5,598 5,598
--------------------------------- -------------- -------------- ---------------
5. Availability of financial information
Copies of this interim financial information will be available
on the Company's website.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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