MARKET DEVELOPMENT
REA Harvests, Processes More, But Lower Palm Oil Prices Hit Profit
REA Harvests, Processes More, But Lower Palm Oil Prices Hit Profit
17/12/2014 (Alliance News) - Crude palm oil producer REA Holdings PLC Tuesday said it harvested, processed and sold more fresh fruit bunches in the first 11 months of 2014, although it said lower crude palm oil and crude palm kernel oil prices have hit profits in the second half.
The company said the crop of oil palm fresh fruit bunches harvested during the 11 months was 578,556 tonnes, up from 523,993 tonnes in the same period last year. External purchases of fresh fruit bunches totalled 136,192 tonnes, up from 88,796 tonnes a year earlier.
It said that the processing of the group's own fresh fruit bunches and the externally purchased fresh fruit bunches together totalled 705,613 tonnes, up from 612,224 tonnes last year. It said that crude palm oil and tonnes of palm kernels produced during the period increased, reflecting slightly higher extraction rates.
REA said it experienced much lower rainfall during the period, with the level of rainfall throughout 2014 consistently below monthly averages in 2013, and below the average for the preceding six years.
"Production levels are comfortably ahead of 2013 levels, but after a period of steady improvement in operations, several weeks of particularly dry weather during September and October resulted in serious disruptions to transport logistics delaying sales of crude palm oil and crude palm kernel oil and temporarily setting back the recovery," the company said.
"The return of heavy rains in mid November brought welcome relief and the group is working to recover the backlog on crude palm oil and crude palm kernel oil deliveries by year end," it added.
The company said that both crude palm oil and crude palm kernel oil prices have fallen from the higher prices seen earlier in the year, which has hit profits for the second half.
"The lower crude palm oil and crude palm kernel oil prices, coupled with the effect of holding larger than normal stocks in a falling market because of the transport problems caused by the period of exceptional dry weather, is negatively affecting the group's profitability in the second half of 2014," it said.
It said that after a peak in March at just below USD1,000 per tonne, crude palm oil prices now stands close to a low for the year of USD675 per tonne.
REA said that progress is also being made with a number of ancillary projects, including the sale of electricity generated by the group's methane capture plants to the Indonesian state electricity company.
"The group has now obtained the operating licence required to establish a quarry on the group's stone concession with a view to producing stone for the group's agricultural operations and for sale to third parties," it said.
It said that contractual arrangements for the provision of quarry services are being put in place and upgrading of the access road to the quarry is expected to start in 2015. However, it said that coal mining projects and cooperation arrangements with third party contractors remain suspended pending an improvement in international coal prices.
"The recent fall in petroleum oil prices is likely to be beneficial to coal extraction costs and resumption of mining is therefore now likely to require a lesser improvement in coal prices than was previously the case," it said.
REA is looking to spin-off its operating subsidiary PT REA Kaltim Plantations in an initial public offering on the Indonesian Stock Exchange in Jakarta. Is said it has started discussions with advisers on the structure of the offering, with plans for an IPO during 2015.
REA shares were down 6.7% Tuesday afternoon at 342.75 pence.
The company said the crop of oil palm fresh fruit bunches harvested during the 11 months was 578,556 tonnes, up from 523,993 tonnes in the same period last year. External purchases of fresh fruit bunches totalled 136,192 tonnes, up from 88,796 tonnes a year earlier.
It said that the processing of the group's own fresh fruit bunches and the externally purchased fresh fruit bunches together totalled 705,613 tonnes, up from 612,224 tonnes last year. It said that crude palm oil and tonnes of palm kernels produced during the period increased, reflecting slightly higher extraction rates.
REA said it experienced much lower rainfall during the period, with the level of rainfall throughout 2014 consistently below monthly averages in 2013, and below the average for the preceding six years.
"Production levels are comfortably ahead of 2013 levels, but after a period of steady improvement in operations, several weeks of particularly dry weather during September and October resulted in serious disruptions to transport logistics delaying sales of crude palm oil and crude palm kernel oil and temporarily setting back the recovery," the company said.
"The return of heavy rains in mid November brought welcome relief and the group is working to recover the backlog on crude palm oil and crude palm kernel oil deliveries by year end," it added.
The company said that both crude palm oil and crude palm kernel oil prices have fallen from the higher prices seen earlier in the year, which has hit profits for the second half.
"The lower crude palm oil and crude palm kernel oil prices, coupled with the effect of holding larger than normal stocks in a falling market because of the transport problems caused by the period of exceptional dry weather, is negatively affecting the group's profitability in the second half of 2014," it said.
It said that after a peak in March at just below USD1,000 per tonne, crude palm oil prices now stands close to a low for the year of USD675 per tonne.
REA said that progress is also being made with a number of ancillary projects, including the sale of electricity generated by the group's methane capture plants to the Indonesian state electricity company.
"The group has now obtained the operating licence required to establish a quarry on the group's stone concession with a view to producing stone for the group's agricultural operations and for sale to third parties," it said.
It said that contractual arrangements for the provision of quarry services are being put in place and upgrading of the access road to the quarry is expected to start in 2015. However, it said that coal mining projects and cooperation arrangements with third party contractors remain suspended pending an improvement in international coal prices.
"The recent fall in petroleum oil prices is likely to be beneficial to coal extraction costs and resumption of mining is therefore now likely to require a lesser improvement in coal prices than was previously the case," it said.
REA is looking to spin-off its operating subsidiary PT REA Kaltim Plantations in an initial public offering on the Indonesian Stock Exchange in Jakarta. Is said it has started discussions with advisers on the structure of the offering, with plans for an IPO during 2015.
REA shares were down 6.7% Tuesday afternoon at 342.75 pence.