M.P. EVANS GROUP PLC

 

 

M.P. Evans Group PLC ("MP Evans" or "the Group"), a producer of Indonesian palm oil and Australian beef cattle, announces its unaudited preliminary results for the year ended 31 December 2014.

 

Highlights

 

Financial

 

*   Profit for the year increased by 62% to US$ 37.1 million (2013

    US$22.9 million)

 

*   Earnings per share US cents 61.0 (2013 US cents 36.0 cents)

 

*   Total dividend per share for the year increased by 0.50 pence to

    8.75 pence (2.25 pence interim already paid)

 

 

Indonesian palm oil

 

*   Plantation profits 44% higher at US$ 35.8 million (2013 US$24.8 million)

 

*   Indonesian f.f.b. crops 12% higher than in 2013 as crops increased

    40% on Kalimantan and 24% on Bangka project and were 7% lower on

    established estates

 

*   Palm-oil price averaged US$821 per tonne (2013 US$856 per tonne);

    currently around US$650 per tonne

*   2,200 hectares compensated at year end on the new Musi Rawas project

    in South Sumatra; planting commenced in late 2014

 

*   Group's crops projected to continue rising strongly in future years

 

Australian beef cattle

 

*   NAPCo made profits after 2013 loss as cattle prices strengthened

    markedly

 

*   Woodlands made small profit as cattle price strengthened though

    weight gain fell

 

*   Good rainfall received in 2015 - cattle prices have remained firm

   

 

Malaysian property

 

*   Reduced profits by Bertam Properties as completed sales comprised lower-value properties

 

 

 

 

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans, said:

 

"It is pleasing to report that the Group's overall profit for the year, US$37.1 million, was 62% higher than 2013's US$22.9 million.  The continuing upward trend of f.f.b. crops on the new projects, excellent extraction rates and the beneficial effect on costs of the weakening of the Indonesian Rupiah resulted in a significant improvement in plantation profits. The cattle operations benefited from markedly improved prices. Cattle prices have remained firm so far in 2015 but palm-oil prices, having weakened sharply in the last quarter of 2014, have not, to date, shown any significant improvement.  Nonetheless, healthy profit margins are still achievable."

 

 

 

 

 

 

 

Enquiries:

M. P. Evans Group PLC            Telephone: 020 7796 4133 on

                                 14 April only

                                 Thereafter - 01892 516333

Peter Hadsley-Chaplin            Chairman

Philip Fletcher                  Managing director

Tristan Price                    Finance director

 

Hudson Sandler

Charlie Jack                     Telephone:  020 7796 4133

Katie Matthews

Bertie Berger

 

Peel Hunt LLP                    Telephone:  020 7418 8900

Dan Webster

Richard Brown

Matthew Armitt

 

 

An analysts' meeting will be held today at 9:30 a.m. at the offices of Hudson Sandler, 29 Cloth Fair, London EC1A 7NN.

 

 

 

OVERVIEW OF RESULTS

The board is pleased to report that the profit for the year increased by 62% to US$37.1 million, compared with US$22.9 million in 2013. Earnings per share rose accordingly by 70% to US cents 61.0 (2013 US cents 36.0 cents).

 

The markedly-improved profit was achieved largely as a result of a 12% increase in the Group's Indonesian crops of oil palm fresh fruit bunches ("f.f.b."), to 385,400 tonnes, despite a 4% decline in the average palm-oil price to US$ 821 per tonne in 2014 compared with 2013. The higher crop level was mainly attributable to a significant increase from the Group's two new projects in East Kalimantan and on Bangka Island. The profits of the Group's two associated oil-palm companies were similar to last year.

 

In Australia, a small profit was recorded at Woodlands, compared with a small loss last year, while similarly, at The North Australian Pastoral Company Pty Limited ("NAPCo"), last year's loss was turned round to a profit. This resulted from a sharp increase in cattle prices, especially for the heavier, export-orientated cattle produced by NAPCo. With regard to the Group's Malaysian property-development activities, the Group's share of the profit achieved by Bertam Properties Sdn. Berhad declined following a lower average value of completed property sales. Overall, chiefly because of the substantially-improved result at NAPCo, the Group's share of its associated companies' profits increased by 23%.

 

 

DIVIDEND

Taking account of the increased profit, the board is recommending a final dividend for the year of 6.50p per share, a 0.50p per share increase compared with the 6.00p per share in respect of 2013. Together with the interim dividend of 2.25p per share paid in November 2014 (the same as the interim dividend paid in November 2013), the total dividend for the year is therefore 8.75p per share. A scrip-dividend alternative is again being offered (provided that resolution 11 is passed at the annual general meeting).

 

 

STRATEGY

The Group's strategy is to continue to expand its oil-palm areas in Indonesia, in a sustainable and cost-effective manner, and to capitalise on the value of its Australian and Malaysian operations, using any sale proceeds to fund the continuing Indonesian development.

 

Indonesia

The total planted area of the Group's majority-held Indonesian operations extends to approximately 24,100 hectares, 910 of which were planted on its new projects during 2014. The planted smallholder areas adjoining the new projects amount to 6,300 hectares, 320 of which were planted in 2014. The estimated unplanted land bank is some 9,000 hectares, including the new Musi Rawas project, on the Group's estates and some 5,100 hectares on the adjoining smallholder areas managed by the Group. It is the board's aim for the Group's own areas to be planted at as rapid a rate as the availability of suitable land permits. In addition to the Group's existing unplanted landbank, the board seeks, in the future, to acquire further pieces of land suitable for sustainable oil-palm development located, if possible, near the Group's existing estates. The Group will also seek continually to maintain and, where possible, improve agronomic standards and productivity on its estates leading, ideally, to increased crops of f.f.b. and, where relevant, production of crude palm oil ("CPO"). Furthermore, the Group will continue to work closely with its joint-venture partner, SA SIPEF NV ("SIPEF"), with regard to the two associated estates which SIPEF manages, to ensure that the highest standards are maintained.

 

Australia

In Australia, on the Group's beef-cattle property, Woodlands, it is aimed to maximise the kilograms of beef produced. Productivity has been, and, where appropriate, will continue to be, improved through the enhancement of waters and fencing and the upgrading of paddocks.  Notwithstanding the continued improvement measures in place at Woodlands, it remains the board's intention to dispose of this property as and when suitable terms are agreed. With regard to NAPCo, the aim is to maximise productivity in breeding and fattening cattle. Productivity has in recent years been enhanced both on the principal breeding stations by the sinking of a significant number of new bore holes (thereby providing drinking water for the cattle) and in the grain-finishing feedlot by expansion of the facilities. These measures have helped to render the operations not only more productive but also more resistant to the effects of drought. The strategy is for more bore holes to be sunk in the future. In addition, over the past quarter century substantial improvements have been made to the genetic characteristics of the herd and the strategy is for this programme to continue.

 

In 2013, the majority shareholders in NAPCo undertook a strategic review. Following this, they indicated their willingness to sell part or all of their holding, and M.P.Evans also indicated its willingness to sell its holding in conjunction with them. The review, and prospective sale process, drew to a close without a sale in late 2013. The Group's board will continue to consider any opportunities that arise in relation to its holding.

 

Malaysia

In Malaysia, the aim is for Bertam Properties to continue to capitalise on the value of its land, either by the development and sale of housing, retail and other units or through the outright sale of raw land. The Group will continue to reap the benefit of this development and sale activity until eventually, in some five to ten years' time, the project is fully developed, or until an acceptable offer is received to acquire the Group's 40% share. It is also the Group's long-term intention to dispose of its adjacent estate and therefore, as a consequence, ultimately to exit from Malaysia entirely.

 

Palm-oil and beef-cattle markets

Average palm-oil prices (Rotterdam cif) were 4% lower in 2014 at US$821 per tonne, compared with US$856 in 2013.  Downward pressure on the price primarily related to the significant increase in the production of oilseeds, particularly soybeans, in the year.  Of the major oils, the price of palm oil remained the firmest with the normal discount to soybean oil narrowing to below US$100 per tonne, compared with the average in recent years of over US$150.

 

Palm-oil prices remained relatively strong in the first quarter of 2014 as dry weather in the main producing countries, Indonesia and Malaysia, and the prospect of El-Niño conditions later in the year (which did not materialise) reduced crop expectations.  The early dry period did indeed affect crops later in the year and world supply (opening stocks plus production) increased considerably more slowly than in 2013.

 

Early price firmness was also helped by the Indonesian Government's plans to boost bio-diesel admixture to 10%.  However, the dramatic fall in the mineral-oil price in the second half of the year resulted in palm oil becoming uneconomic for this purpose and so blending and exports reduced significantly.  Palm-oil prices fell accordingly.

 

Palm-oil use by the major buyers, India, China and the EU, stagnated or fell in 2014 and world consumption increased (1.5 million tonnes) less than in previous years (2013-5.2 million tonnes).  Indonesia became the world's biggest palm-oil user.

 

Palm-kernel-oil prices followed palm-oil prices and weakened in the latter part of the year, although not to the same extent.  The fall in coconut-oil production (a lauric oil like palm-kernel oil) in the Philippines following Typhoon Haiyan in 2013 was still having some effect in supporting lauric-oil prices in 2014.

 

Prices for both the lighter-weight cattle produced by Woodlands and the heavier, grain-finished cattle produced by NAPCo broadly rose during the course of 2014. The continuing decline in the value of the Australian Dollar boosted export demand, especially from Asia, which impacted positively on prices, particularly towards the year end. Higher-than-usual slaughter rates in Australia, owing to the continuing drought, led to record volumes, at record prices, of both beef and live-cattle exports from Australia during the year.

 

REVIEW OF OPERATIONS

 

Indonesia

 

Majority-owned estates

 

Crops and production

The overall Group f.f.b. crop of 385,400 tonnes was 12% higher than the 344,200 tonnes recorded for 2013.  As referred to in the 2014 interim report, the original crop estimate for the year of 425,000 tonnes had to be revised downwards mid-year to 385,000 tonnes, which was indeed achieved, as a result of an acute dry period experienced in the early part of the year.  The dry period particularly affected the estates in North Sumatra and Bangka.  However, notwithstanding this temporary setback, the Group's overall upward trend of crops continued and, in the circumstances, it is still pleasing to report a 12% increase, primarily derived from the Kalimantan project.  Oil-extraction rates continued at most satisfactory levels in 2014 with the Kalimatan mill achieving an increase to the commendable level of 25.6%.

 

Details of crops, production and extraction rates for 2014, with comparative figures for 2013, are set out below:-

 

 

Crops and production

                                                  2014  Increase     2013

                                                Tonnes         %   Tonnes

Crops

  Own crops

   - Pangkatan group                           140,400            148,800           

   - Simpang Kiri                               42,100             46,600           

                                               -------            -------

                                               182,500     (7)    195,400         

 

   - Kalimantan                                160,200      40    114,500         

   - Bangka                                     42,700      24     34,300         

                                               -------            -------

                                               385,400      12    344,200         

                                               =======    =====   =======

 

  Smallholder co-operative crops

   - Kalimantan                                 64,500      52     42,400          

   - Bangka                                     22,200      21     18,300          

                                               -------            -------

                                                86,700      43     60,700          

                                               =======    =====   =======

  Outside crop purchased

   - Kalimantan                                 15,600      55     34,400        

                                               =======    =====   =======

 

Production 

 Crude palm oil                

  - Kalimantan                                  61,500             47,400            

  - Pangkatan                                   33,500             35,500            

                                               -------            -------

                                                95,000       15    82,900           

                                               =======    =====   =======

 

  Palm kernels    

   - Kalimantan                                 10,100              7,800              

   - Pangkatan                                   8,300              8,600             

                                               -------            -------

                                                18,400       12    16,400           

                                               =======    =====   =======

 

 

                                                     %                  %

Extraction rate

  Crude palm oil

   - Kalimantan                                   25.6               24.8              

   - Pangkatan                                    23.9               23.9              

                                               =======            =======

  Palm kernels                                          

   - Kalimantan                                    4.2                4.1               

   - Pangkatan                                     5.9                5.8               

                                               =======            =======

 

 

Sumatra - established estates

The four established estates in Sumatra continue to operate well.  As anticipated in the 2014 interim report, the unusually dry months in the early part of 2014 impacted negatively on the f.f.b. crop in the second half of the year.  The crop for the second half was similar to that in the first, whereas in more normal years it would be markedly higher than in the first half.

 

As has been referred to in previous annual reports, two of the estates, Bilah and Simpang Kiri, were established as new projects in the early 1980's.  The programme for replanting their earlier plantings, in which the yields are falling, is under way.  This programme will continue for the next seven or eight years and the yields are expected to remain, in total, at around current levels until the new replantings mature and yields start to accelerate.  During 2014, 136 hectares were replanted on Bilah Estate, 60 hectares on Sennah Estate and 109 hectares on Simpang Kiri Estate, totalling 305 hectares.  Over the next few years, the programme is to replant between 350 and 600 hectares each year.

 

The oil-extraction rate achieved by Pangkatan Mill (which processes the f.f.b. from Pangkatan, Bilah and Sennah Estates) continued during 2014 at the very acceptable average rate of 23.9%.  The essential close coordination between mill and field management ensured that fruit of the optimum quality and ripeness is delivered to the mill for processing.  High engineering standards required in the mill were sustained, achieving good extraction rates and oil quality and minimum oil losses.  

 

Consideration is still being given by management to capturing methane from Pangkatan Mill's effluent pond, "scrubbing" it, burning it in a gas engine and selling the resultant electricity to the government electricity board ("PLN").  This project will only progress if acceptable terms can be negotiated with PLN.

 

During 2014, Pangkatan Mill received International Sustainability and Carbon Certification ("ISCC").  The mill is already accredited by the international Round Table on Sustainable Palm Oil ("RSPO") and as Indonesian Sustainable Palm Oil ("ISPO").  The annual RSPO "surveillance" audit was successfully completed in 2014. During the year, credits for both CPO and palm kernels were sold through a marketing platform with those for palm-kernel oil (and therefore palm kernels) being particularly robust following the devastating effects on Philippine coconut plantations (like palm-kernel oil, coconut oil is a lauric oil) of Typhoon Haiyan.  Premia were also received from buyers for accredited CPO and also for good-quality CPO with low percentages of free fatty acid ("f.f.a.")

 

Sumatra - Musi Rawas project

Modest progress was made during 2014 on the Musi Rawas project in South Sumatra. Local elections were held in the area of the project and it was felt prudent to suspend land-compensation negotiations until the elections were over. Towards the end of 2014, these negotiations re-started and, as at the end of the year, some 2,200 hectares had been compensated.  Planting commenced at the end of the year with just under 100 hectares in the ground at the year end. An experienced management team is in place and the nursery is now well established, ready for the planting programme which is under way.

 

The board currently estimates that some 10,000 hectares might ultimately be plantable although it is very difficult at this early stage to be certain what will transpire.  As has been said before, much will depend upon the Group's ability to agree acceptable terms with the users of the land.  The Group has undertaken to develop 30% of the planted land for the smallholders' co-operatives.  The members of the co-operatives will be those who have agreed to sell their rights to the land to the Group.

 

Kalimantan

The 40% increase in the f.f.b. crop to 160,200 tonnes in 2014, compared with the 114,500 tonnes recorded in 2013, continues the expected upward trend from this young project.  The f.f.b. purchased from the associated co-operative schemes increased similarly.

 

Planting progressed at modest levels during 2014 as the project nears completion.  At the end of 2014, some 13,940 hectares had been planted of which 9,780 hectares relate to the Group and 4,160 hectares to the smallholders' co-operatives.  The board's estimation remains that, ultimately, some 15,000 hectares will be planted of which 10,600 hectares will relate to the Group.  The unplanted balance is largely low-lying, flood-prone land which, it is intended, will be protected from flooding by the construction of bunds and the installation of powerful pumps.  Preliminary work has already commenced and official clearances and permissions are currently being sought from the authorities for the project.  It is hoped that, once these have been received, work proper will commence during 2015 and is expected to extend into 2016.  It is anticipated that approximately 950 hectares will be able to be flood-protected and yields from these areas are expected to be high.  In addition, there are 900 hectares that have already been planted but which are susceptible to regular flooding.  These areas will be protected by the new bunds and yields are expected to improve markedly as a result.

 

The CPO mill continued to improve its oil-extraction rate and it is pleasing to report that an outstanding average rate of 25.6% was achieved in 2014.  Close coordination between mill and field management was maintained during the year and high engineering standards were achieved.

 

During 2014, the Kalimantan mill was accredited by RSPO.  The ISPO and ISCC audit process got under way in 2014 and accreditation is expected to be completed in 2015.

 

Bangka

The 24% increase in the f.f.b. crop to 42,700 tonnes in 2014, compared with the 34,300 tonnes recorded in 2013, continues the upward trend from this young project after the setback experienced in 2013.  The unexpected downturn in that year was caused by adverse weather but a further two dry spells in 2014 also negatively impacted on the 2014 crop in the latter part of the year, although not to the extent experienced in 2013.  Bangka Island normally has a dry period in the middle of the year but a virtual absence of rainfall in February and March 2014 resulted in the crop in the last quarter falling off markedly. Rat damage to the fruit on the palms, which occurs in dry periods as the rats seek moisture, also negatively impacted the f.f.b. crop.

 

The planted area at the end of 2014 amounted to 6,880 hectares in total of which 4,730 related to the Group and 2,150 to the smallholders' co-operatives.  Planting progress was relatively modest during the year, amounting to 820 hectares in total, of which 640 related to the Group and 180 to the co-operatives.  Dealings with competing tin-mining interests continued to be very time consuming but it is encouraging that progress, albeit slow, continues to be made and it remains the board's view that ultimately 10,000 hectares will be planted, of which 6,000 will relate to the Group and 4,000 to the co-operatives.

 

Good progress has been made with the mill.  A tender process has been completed and contracts awarded.  Work on the ground will start shortly and commissioning of the mill is expected to take place in mid-2016 at an estimated cost of approximately US$13 million.  The mill will initially be rated at 45-tonne per hour expandable by another 15 tonnes at a later date. Methane will be captured from the liquid effluent, "scrubbed" and then burnt in a gas engine, producing power for the project. Surplus electricity will be generated and it is hoped that acceptable terms can be agreed with the government electricity board, PLN, to sell it into the grid.

 

The f.f.b. harvested on the Bangka project is currently sold under contract to nearby mills.  When the Group's own mill is in operation the sale of CPO and palm kernels, less the manufacturing costs, will be more profitable than selling f.f.b. to third-party mills.

 

 

 

Operating costs

Increased throughput at the Group's Kalimantan mill has, as expected, reduced the unit costs of producing palm products (CPO and palm kernels). This benign volume effect was strengthened by the weakness of the Indonesian Rupiah against the US Dollar which had the effect of reducing, in US Dollar terms, operating costs incurred in local currency. The Group's two mills and supplying estates now have a combined operating cost of US$ 370 per tonne of palm products ("CPO and palm kernels").

 

Environmental and social factors

The Group is committed to producing environmentally-sustainable palm oil.  The Kalimantan and Pangkatan Mills are already RSPO-accredited.  Pangkatan Mill is also ISPO and ISCC accredited whilst the Kalimantan mill is in the process of applying for accreditation.  The Bangka project, although not yet in a position to become RSPO accredited until its mill is in operation and it is selling CPO, already adheres to the RSPO "Principles and Criteria". 

 

Australia

 

Woodlands

As referred to in the interim report, negotiations are still in progress regarding the sale of Woodlands but the property continues to be operated on a 'business-as-usual' basis until a sale is concluded. Income from cattle trading, at US$2.1 million, was markedly higher than the US$1.4 million reported for 2013, though income from fattening third parties' cattle for a fee per kilogram of weight gained (agistment) fell slightly from US$0.5 million to US$0.3 million. Given the improving prospects for the beef market, the board took the view that it should stock Woodlands with its own herd, and so cattle on agistment were replaced with cattle purchased on Woodlands' own account. By the end of the year, the 5,600 cattle on the property at the beginning of the year had either been sold or returned to their third-party owners. In their place, 5,500 young cattle were purchased and grazed on Woodlands' pastures.

 

At the year end, the value of the herd reflected the significant increase in the price for beef cattle reported above, contributing to the much-improved cattle-trading result. Good rains were received early in the year but were not followed up by meaningful volumes of moisture, leading to another difficult season after the drought experienced in 2013. In addition, for much of the year, Woodlands' own herd was comprised of older animals that gain weight more slowly than young animals. As a result, it was not possible to sustain the only modestly-reduced pace of weight gain achieved in the early months of the year and, overall, weight gain for the year fell to the low level of 0.22 kg per cattle day (2013 - 0.55 kg per cattle day). Hence, poor weight gain went some way to erasing the benefit of higher beef-cattle prices so, in total, Woodlands made a profit in the year under review of US$ 0.2 million (2013 loss of US$0.1 million).

 

As a result of the above, the Group's gross profit amounted to US$ 35.9 million (2013 US$ 24.7 million).

 

Bearer-biological-asset adjustment

Whilst, as widely documented in this report, the price of CPO fell during 2014, the 20-year average price of CPO used to value the Group's biological assets nevertheless rose to US$ 641 (2013 US$ 626). This was the principal factor leading to a biological gain of US$ 15.1 million (2013 US$ 9.1 million), supported by a reduction in unit costs partly arising from a weaker Indonesian Rupiah. The value of new plantings contributed US$ 2.9 million towards the reported biological gain (2013 US$ 2.9 million). Overall, the net effect on profit of all the components of the bearer-biological-asset adjustment amounted to US$ 8.4 million (2013 US$ 6.0 million).

 

Following an amendment to International Accounting Standard 41: Biological Assets issued by the International Accounting Standards Board in June 2014, the Group intends to account for its plantings under International Accounting Standard 16: Property, Plant and Equipment. Hence, as from 1 January 2015 the Group will measure its planting at depreciated cost rather than as a 'biological asset' determined using a valuation model based on discounted cash flow. This future measure is shown in the column of the income statement and balance sheet in this annual report described as '(Result) before bearer-biological-asset adjustment'.

 

 

Associated companies

The Group's share of its associated companies' profits, including the share of the Indonesian companies' biological-bearer-asset adjustments, compared with last year, was as follows:-

 

                                  Post-tax                    Post-tax

                              Profit/(loss)               profit/(loss)

                                     before                       after

                                 biological    Biological    biological

2014                           bearer-asset  bearer-asset  bearer-asset

                                 adjustment    adjustment    adjustment

                                    US$'000       US$'000       US$'000

 

PT Agro Muko (36.84%)                 9,856        (1,013)        8,843

PT Kerasaan Indonesia (38.00%)        1,093           (39)        1,054

                                     ------        ------        ------

Total Indonesia                      10,949        (1,052)        9,897

 

NAPCo (34.37%)                        1,454             -         1,454

Bertam Properties (40.00%)            2,905             -         2,905

                                     ------        ------        ------

Total                                15,308        (1,052)       14,256

                                     ======        ======        ======

 

 

 

                                   Post-tax                    Post-tax

                              Profit/(loss)               profit/(loss)

                                     before                       after

                                 biological    Biological    biological

2013                           bearer-asset  bearer-asset  bearer-asset

                                 adjustment    adjustment    adjustment

                                    US$'000       US$'000       US$'000

 

PT Agro Muko (36.84%)                 6,949         1,661         8,610

PT Kerasaan Indonesia (38.00%)          955            62         1,017

                                     ------        ------        ------

Total Indonesia                       7,904         1,723         9,627

 

NAPCo (34.37%)                       (2,429)            -        (2,429)

Bertam Properties (40.00%)            4,396             -         4,396

                                     ------        ------        ------

Total                                 9,871         1,723        11,594

                                     ======        ======        ======

 

 

Indonesia

As foreshadowed in the 2013 annual report, PT Agro Muko ("Agro Muko") has entered a period of replanting during which it is projected that its crop will fall slightly, though there was only a marginal drop in 2014's crop compared with 2013 as the average yield rose slightly across a smaller mature hectarage. The modest oil-extraction rate of 22.5% seen in 2013 was repeated in 2014 and so production of CPO in 2014 was only fractionally below that in 2013. Against this background, Agro Muko was able to achieve significantly higher prices in 2014 than in 2013, partly as a result of achieving a good premium for its RSPO-certified oil and partly from its export sales which are sold for physical delivery up to three months forward. This, together with stronger prices for palm kernels, produced a 17% increase in revenue. By contrast, rubber production increased as the areas that have been replanted over recent years mature, though a 26% fall in prices led to a fall in rubber profits. The Group's share of results before the biological-bearer-asset adjustment amounted to US$ 9.9 million (2013 US$ 6.9 million). The crop, and results, of PT Kerasaan Indonesia ("Kerasaan") were very similar to those in 2013. As a result of the above, the Group's combined share of the post-tax, pre-biological-bearer-asset adjustment profit of these two associated companies in 2014 was US$ 10.9 million, an improvement of US$ 3.0 million (39%) on the US$ 7.9 million recorded in 2013.

 

The Group's share of the post-biological-bearer-asset-adjustment, post-tax profit of the Indonesian associates amounted to US$ 9.9 million (2013 US$ 9.6 million). The Group received gross dividends of US$ 9.2 million from Agro Muko in 2014 (2013 US$ 5.2 million, gross). Gross dividends from Kerasaan were US$ 0.9 million (2013 US$ 0.6 million, gross).

 

Details of crops, production and extraction rates for 2014, with comparative figures for 2013, are set out below:-

 

 

 

Crops and production

 

                                                   Increase/

                                          2014    (decrease)       2013

                                        Tonnes             %     Tonnes

 

F.f.b. crops

 PT Agro Muko

  - own                                344,900            -     345,800

  - outgrowers                           8,500           (1)      8,600

                                       -------                  -------

                                       353,400            -     354,400

 

  - PT Kerasaan Indonesia               42,000            2      41,200

                                       -------                  -------

                                       395,400            -     395,600

                                       =======          ====    =======

 

Production (PT Agro Muko)

  - crude palm oil                      79,400            -      79,700

  - palm kernels                        18,500            1      18,400

                                       =======          ====    =======

 

                                             %                        %

 

Extraction rates

  - crude palm oil                        22.5                     22.5

  - palm kernels                           5.2                      5.2

                                       =======                  =======

 

                                        Tonnes                   Tonnes

 

Rubber crops

 PT Agro Muko - own                      1,520            6       1,440

                                       =======          ====    =======

 

 

Australia

Following a severe drought in 2013, difficult conditions persisted across much of eastern Australia during 2014 despite which NAPCo was able to report sales revenue slightly higher than for 2013. Prices for all NAPCo's cattle increased steadily throughout the year and NAPCo worked hard to maintain its herd though, at the year end, numbers had nonetheless fallen by 5%, or 10,000 head (2013 - 9,500 head). This was largely due to lower brandings resulting from the poor seasonal conditions. Adverse conditions also affected revenue since cattle were slower to achieve required sales weights. Slower weight gain led to a 9% fall in the number of animals sold, offsetting to some degree the general rise in cattle prices that produced a significant increase in the year-end valuation of the herd, itself central to the much-improved result reported by NAPCo. NAPCo's expanded feedlot at Wainui was beneficially put to full use in mitigating the effects of the indifferent conditions though leading to higher costs as feedlot rations were increased at a time of high grain prices. As a result of all these factors, the Group's share of NAPCo's profit amounted to US$1.5 million (2013 loss of US$2.4 million). The Group's share of NAPCo's gross dividends was US$0.4 million (2013 US$0.6 million, gross).

 

Malaysia

Property-development revenue fell during 2014 to US$36.5 million compared with the US$46.0 million reported in 2013, generating a profit after tax of US$7.7 million (2013 US$11.2 million).  Bertam Properties increased its completed sales of developed properties to over 1,000 units during the year compared with some 500 in 2013. The sales in the current year were, however, mostly at the lower end of the market on which the profit margin is smaller.  As noted in previous annual reports, property-development revenue is brought to book under the international accounting standard IFRIC 15 only when a sale is fully completed. Exceptional income of US$1.5 million in 2013, relating mainly to forfeiture fees paid by purchasers defaulting on contracts to buy land and contractor penalties, was not repeated in 2014. There were no sales of land during 2014 and the golf operation continued to make a small loss. Overall, the Group's share of Bertam Properties' profit for the year amounted to US$ 2.9 million, gross (2013 US$ 4.4 million, gross). The Group's share of Bertam Properties' gross dividends amounted to US$ 1.2 million (2013 US$ 3.5 million, gross).

 

 

Profit for the year

As a result of all the above, the Group profit for the year amounted to US$ 37.1 million, an increase of US$ 14.2 million (62%) compared with the US$ 22.9 million reported for 2013. This rise in reported profit led to an increase of 71% in basic earnings per share to US cents 61.0 (2013 US cents 36.0).

 

CURRENT TRADING AND PROSPECTS

 

Indonesia

The Group's f.f.b. crops are expected to continue to rise substantially both in 2015 and in subsequent years. Notwithstanding the decline in the palm-oil price in the last two years, healthy profit margins are still achievable and the board believes growth in Indonesian domestic and global demand makes the long-term outlook for palm oil positive.

 

 

The unusually dry period at the beginning of 2014 had a negative impact on f.f.b. crops in the latter part of that year and this impact has continued to be felt into the first quarter of 2015. The crops from the majority-owned estates for the three months ended 31 March 2015, with comparative figures for the same period in 2014, were as follows:-

 

                                    3 months       Increase/       3 months

                                    ended 31      (decrease)       ended 31

                                  March 2015                     March 2014

                                      Tonnes              %          Tonnes

 

Sumatra                               36,200            (16)         43,000

Kalimantan                            35,100              8          32,600

Bangka                                13,500              5          12,800

                                      ------                         ------

                                      84,800             (4)         88,400

                                      ======            ===          ======

 

The established Sumatran estates and the Bangka project were particularly affected in 2015 by the dry weather in 2014 and the Kalimantan project has also recorded crops sharply below expectations (although 8% higher than for the same period last year) related to flooding in February 2015. Crops have recently started to pick up. The associated companies' f.f.b. crops have, as on the Group's majority-owned estates, been lower so far in 2015 than expectations and lower than for the first quarter of 2014.

 

Palm-oil prices have hovered between US$650 and US$700 per tonne (Rotterdam c.i.f.) so far in 2015 reflecting, on the upside, a slowdown in palm-oil production (relating to last year's dry weather) and, on the downside, continuing weakness in mineral-oil prices. As reported by Oil World, the weakness of mineral-oil prices has made palm oil less competitive in the energy sector despite increased subsidies being made available by the Indonesian Government in respect of bio-diesel. Moreover, the Indonesian Government has introduced a US$50 levy per tonne of CPO when the existing export tax falls to zero.

 

The Indonesian Rupiah has weakened in the first part of 2015 to the current level of around US$1 = Rp 13,000 compared with Rp 12,500 at the end of 2014. This has a beneficial effect on the Group's Rupiah-based costs (both revenue and capital) when translated into the functional currency, US Dollars.

 

Indonesian investment climate

The 2014 interim report referred to the fact that a draft plantation law had been tabled, although not at that time enacted, in the Indonesian House of Representatives. This draft law included provisions which, if passed, would have restricted foreign ownership of plantations in Indonesia to 30%. A modified version of the draft law was subsequently passed on 29 September 2014 that did not include the 30% cap on foreign investment. The law mandates the Government to prioritise domestic investment, protect local customary rights, empower local farmers and to set a cap on foreign investment at some point in the future. The current cap is 95%.

 

Australia

Welcome rainfall both on Woodlands and across most of the NAPCo properties was received in early 2015, and substantial further rainfall has recently been received on Woodlands. Cattle prices moved sharply higher, to record levels, in response both to the rainfall and to the weakening Australian Dollar and consequent increase in export demand. Prices have eased a little but are still above where they were at the end of 2014. The longer-term outlook for the Australian cattle industry appears favourable, as demand for high-quality red meat, especially in Asia, continues to rise and as herd numbers both in Australia and in the US continue to fall.

 

 

 

Peter Hadsley-Chaplin

Chairman

 

 

 

 

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2014

 

                              Result before                        Year

                                 biological    Biological         ended

                               bearer-asset  bearer-asset   31 December

                                 adjustment    adjustment          2014

                                    US$'000       US$'000       US$'000

 

Revenue                              90,922             -        90,922

Cost of sales                       (58,987)        3,959       (55,028)

                                     ------        ------        ------

Gross profit                         31,935         3,959        35,894

 

Gain on biological

 assets (note 4)                          -        15,144        15,144

Planting expenditure                      -        (6,314)       (6,314)

Foreign-exchange losses              (2,379)            -        (2,379)

Other administrative expenses        (5,870)            -        (5,870)

Other income                            448             -           448

                                     ------        ------        ------

Operating profit                     24,134        12,789        36,923

 

Finance income                        1,650             -         1,650

Finance costs                        (3,310)         (403)       (3,713)

                                     ------        ------        ------

Group-controlled profit             

 before tax                          22,474        12,386        34,860

 

Tax on profit on ordinary

 activities (note 2)                 (9,095)       (2,923)      (12,018)

                                     ------        ------        ------

Group-controlled profit

 after tax                           13,379         9,463        22,842

 

Share of associated companies'

 profit/(loss) after tax             15,308        (1,052)       14,256

                                     ------        ------        ------

Profit for the year                  28,687         8,411        37,098

                                     ======        ======        ======

 

Attributable to:

Owners of M.P. Evans Group PLC       25,395         8,281        33,676

Non-controlling interests             3,292           130         3,422

                                     ------        ------        ------

                                     28,687         8,411        37,098

                                     ======        ======        ======

 

                                  (US cents)                  (US cents)

Basic earnings per 10p share          46.04                       61.05

                                      =====                      ======

 

                                  (US cents)                  (US cents)

Diluted earnings per 10p share        45.98                       60.97

                                      =====                      ======

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2013

 

                              Result before                        Year

                                 biological    Biological         ended

                               bearer-asset  bearer-asset   31 December

                                 adjustment    adjustment          2013

                                    US$'000       US$'000       US$'000

 

Revenue                              82,186             -        82,186

Cost of sales                       (60,749)        3,298       (57,451)

                                     ------        ------        ------

Gross profit                         21,437         3,298        24,735

 

Gain on biological

 assets (note 4)                          -         9,059         9,059

Planting expenditure                      -        (6,265)       (6,265)

Foreign-exchange (losses)/gains      (8,322)            -        (8,322)

Other administrative expenses        (4,444)            -        (4,444)

Other income                              8             -             8

                                     ------        ------        ------

Operating profit                      8,679         6,092        14,771

 

Finance income                          972             -           972

Finance costs                        (3,121)         (399)       (3,520)

                                     ------        ------        ------

Group-controlled profit

 before tax                           6,530         5,693        12,223

 

Tax on profit on ordinary

 activities (note 2)                    435        (1,381)         (946)

                                     ------        ------        ------

Group-controlled profit

 after tax                            6,965         4,312        11,277

 

Share of associated companies'

 profit after tax                     9,871         1,723        11,594

                                     ------        ------        ------

Profit for the year                  16,836         6,035        22,871

                                     ======        ======        ======

 

Attributable to:

Owners of M.P. Evans Group PLC       14,438         5,315        19,753

Non-controlling interests             2,398           720         3,118

                                     ------        ------        ------

                                     16,836         6,035        22,871

                                     ======        ======        ======

 

                                  (US cents)                  (US cents)

Basic earnings per 10p share          26.28                       35.96

                                      =====                      ======

 

                                  (US cents)                  (US cents)

Diluted earnings per 10p share        26.24                       35.90

                                      =====                      ======

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2014

                                                     2014          2013

                                                  US$'000       US$'000

Other comprehensive (expense)/income

Exchange loss on translation of

 foreign operations                                (4,060)      (11,785)      

Previously unrealised profit on sale of land

 to associated undertaking released to the      

 consolidated income statement on sale of

 that land by the associate                          (458)        (323)      

Release of deferred tax                             2,460            -

Other comprehensive (expense)/income                 (633)         806       

                                                   ------       ------

Other comprehensive expense(net of

 tax) for the year                                 (2,691)     (11,302)     

 

Profit for the year                                37,098       22,871       

                                                   ------       ------

Total comprehensive income                         34,407       11,569      

                                                   ======       ======

 

 

Attributable to:

Owners of M.P. Evans Group PLC                     30,095        8,327       

Non-controlling interests                           4,312        3,242      

                                                   ------       ------

                                                   34,407       11,569      

                                                   ======       ======

 

 

 

CONSOLIDATED BALANCE SHEET

at 31 December 2014            

                                               Before

                                 biological    Biological

                               bearer-asset  bearer-asset   31 December

                                 adjustment    adjustment          2014

                                    US$'000       US$'000       US$'000

Non-current assets

Goodwill                              1,157             -         1,157

Biological assets                         -       163,538       163,538

Property, plant and equipment       191,584       (79,601)      111,983

Investments in associates            94,333        26,284       120,617

Investments                              96             -            96

Deferred-tax asset                   14,137             -        14,137

                                    -------       -------       -------

                                    301,307       110,221       411,528

                                    -------       -------       -------

Current assets

Biological assets                     4,440             -         4,440

Inventories                           6,879           415         7,294

Trade and other receivables          13,220             -        13,220

Current-tax asset                     2,029             -         2,029

Cash and cash equivalents            48,042             -        48,042

                                    -------       -------       -------

                                     74,610           415        75,025

                                    -------       -------       -------

 

Total assets                        375,917       110,636       486,553

                                    =======       =======       =======

Current liabilities

Borrowings                           32,424             -        32,424

Trade and other payables             12,555             -        12,555

Current-tax liability                 2,202             -         2,202

                                    -------       -------       -------

                                     47,181             -        47,181

                                    -------       -------       -------

 

Net current assets                   27,429           415        27,844

                                    -------       -------       -------

Non-current liabilities

Borrowings                           14,103             -        14,103

Deferred-tax liability                  199        20,984        21,183

Retirement-benefit obligations        3,765             -         3,765

                                    -------       -------       -------

                                     18,067        20,984        39,051

                                    -------       -------       -------

 

Total liabilities                    65,248        20,984        86,232

                                    =======       =======       =======

 

Net assets                          310,669        89,652       400,321

                                    =======       =======       =======

Equity

Share capital                         9,302             -         9,302

Other reserves                       69,258        26,284        95,542

Retained earnings                   211,966        55,098       267,064

                                    -------       -------       -------

Equity attributable to the owners

 of M.P. Evans Group PLC            290,526        81,382       371,908

 

Non-controlling interests            20,143         8,270        28,413

                                    -------       -------       -------

Total equity                        310,669        89,652       400,321

                                    =======       =======       =======

 

 

CONSOLIDATED BALANCE SHEET

at 31 December 2013            

                                     Before

                                 biological    Biological

                               bearer-asset  bearer-asset   31 December

                                 adjustment    adjustment          2013

                                    US$'000       US$'000       US$'000

Non-current assets

Goodwill                              1,157             -         1,157

Biological assets                         -       148,394       148,394

Property, plant and equipment       185,471       (76,152)      109,319

Investments in associates            95,521        27,335       122,856

Investments                             102             -           102

Deferred-tax asset                   14,996             -        14,996

                                    -------       -------       -------

                                    297,247        99,577       396,824

                                    -------       -------       -------

Current assets

Biological assets                       594             -           594

Inventories                           8,267          (277)        7,990

Trade and other receivables          12,345             -        12,345

Current-tax asset                     2,201             -         2,201

Cash and cash equivalents            56,348             -        56,348

                                    -------       -------       -------

                                     79,755          (277)       79,478

                                    -------       -------       -------

 

Total assets                        377,002        99,300       476,302

                                    =======       =======       =======

Current liabilities

Borrowings                           31,710             -        31,710

Trade and other payables             10,311             -        10,311

Current-tax liability                 4,313             -         4,313

                                    -------       -------       -------

                                     46,334             -        46,334

                                    -------       -------       -------

 

Net current assets                   33,421          (277)       33,144

                                    -------       -------       -------

Non-current liabilities

Borrowings                           34,780             -        34,780

Deferred-tax liability                2,903        18,060        20,963

Retirement-benefit obligations        2,933             -         2,933

                                    -------       -------       -------

                                     40,616        18,060        58,676

                                    -------       -------       -------

 

Total liabilities                    86,950        18,060       105,010

                                    =======       =======       =======

 

Net assets                          290,052        81,240       371,292

                                    =======       =======       =======

Equity

Share capital                         9,253             -         9,253

Other reserves                       75,212        27,336       102,548

Retained earnings                   189,626        45,764       235,390

                                    -------       -------       -------

Equity attributable to the owners

 of M.P. Evans Group PLC            274,091        73,100       347,191

 

Minority interests                   15,961         8,140        24,101

                                    -------       -------       -------

Total equity                        290,052        81,240       371,292

                                    =======       =======       =======

 

 

CONSOLIDATED CASH-FLOW STATEMENT

for the year ended 31 December 2014

                                               Year ended    Year ended

                                              31 December   31 December

                                                     2014          2013

                                                  US$'000       US$'000

 

Net cash generated by operating activities         28,351        19,494       

                                                   ------        ------

Investing activities

Interest received                                   1,650           972      

Sale of shares to non-controlling interest            926           498      

Proceeds on disposal of assets                        415           358      

Purchase of property, plant and equipment         (11,917)      (12,261)     

Purchase of shares from non-controlling interest        -        (7,100)     

Planting expenditure                               (6,314)       (6,265)      

                                                   ------        ------

Net cash used by investing activities             (15,240)      (23,798)      

                                                   ------        ------

Financing activities

Loan drawdown                                           -         6,800      

Proceeds on issue of shares                             -           131      

Dividends paid to Company shareholders             (5,462)       (5,964)      

Repayment of borrowings                           (17,262)       (2,318)     

Dividend paid to non-controlling interest               -          (896)      

                                                   ------        ------

Net cash used by financing activities             (22,724)       (2,247)       

                                                   ------        ------

 

 

Net decrease and cash and                   

 cash equivalents                                  (9,613)       (6,551)     

Net cash and cash equivalents 1 January            24,638        29,299      

Effect of foreign-exchange rates on

 cash and cash equivalents                            593         1,890       

                                                   ------        ------

Net cash and cash equivalents at 31 December       15,618        24,638        

                                                   ======        ======

 

 

 

NOTES

 

1.  Dividends paid and proposed

                                                     2014          2013

                                                  US$'000       US$'000

2014 interim dividend - 2.25p per 10p share

 (2013 interim dividend - 2.25p)                    1,994         1,991         

2013 final dividend - 6.00p per 10p share

 (2012 final dividend - 5.75p)                      5,647         4,796     

                                                   ------        ------

                                                    7,641         6,787     

                                                   ======        ======

 

Following the year end the board has proposed a final dividend for 2014 of 6.00p per 10p share amounting to US$4.89 million. Shareholders will again have the option to elect to receive the dividend in shares rather than in cash (provided that resolution 11 is passed at the annual general meeting). The calculation period will be 23 April to 29 April 2015. The dividend will be paid on or after 18 June 2015 to those shareholders on the register at the close of business on 24 April 2015, as follows:

 

                                                 2014             2013

 

Ex-dividend date                           23 April 2015   23 April 2014   

Record date                                24 April 2015   25 April 2014    

Final date for receipt of election

 instruction                                 28 May 2015     29 May 2014    

Definitive share certificates posted        17 June 2015    18 June 2014    

First day of dealing in the new shares      18 June 2015    19 June 2014    

Dividend payable on or after                18 June 2015    19 June 2014    

 

 

 

2.  Tax on profit on ordinary activities

                                                     2014          2013

                                                  US$'000       US$'000

 

United Kingdom corporation-tax charge

 for the year                                         413           384         

Relief for overseas taxation                         (413)         (384)        

                                                   ------        ------

                                                        -             -        

 

Overseas taxation                                   8,152        10,881        

Adjustments in respect of prior years                   -            18        

                                                   ------        ------

Total current tax                                   8,152        10,899        

 

Deferred taxation - origination and reversal

 Of temporary differences                           3,866        (9,953)       

                                                   ------        ------

                                                   12,018           946         

                                                   ------        ------

 

 

3.  Basic and diluted earnings per share

The calculation of earnings per 10p share is based on:-

 

                               2014        2014        2013        2013

                            US$'000   Number of     US$'000   Number of

                                         shares                  shares

Profit for the year

 attributable to the owners

 of M.P. Evans Group PLC     33,676                  19,753

                             ======                  ======

 

Average number of shares

 in issue                            55,163,657              54,936,947             

Diluted average number of

 shares in issue*                    55,235,438              55,025,655              

                                     ==========              ==========

 

*    The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

 

4.  Biological assets

Non-current biological assets comprise plantation bearer assets. The Group values these plantation assets using a discounted cash flow over the expected 25-year economic life of the asset. The discount rate used in this valuation is 14%.  The price of the crop (oil-palm fresh fruit bunches) is taken to be the 20-year average based on historical selling prices or, where the plantation has its own mill, an inference based on the widely-quoted commodity price for crude palm oil delivered c.i.f. Rotterdam.  The directors have concluded that using a 20-year average provides the best estimate of the prices to be achieved over the valuation period.

 

In the balance sheet, the adjustment column shows that the recognition of the biological-asset valuation replaces depreciated-historical-planting costs of US$ 79.60 million (2013 US$76.15 million) which, prior to the adoption of IFRS, were included in the carrying value of property, plant and equipment.  These costs are now replaced by the biological bearer-asset adjustment which, including the Group's share of the asset recognised by associates, together with the related deferred tax, amounts to US$ 169.25 million (2013 US$157.39 million).

 

5.  Financial information

The information in this preliminary results announcement has been prepared on the basis of the accounting policies which have been set out in the Group accounts for the year ended 31 December 2013 and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. No standards or amendments to existing standards adopted with effect from 1 January 2014 have had a material impact on the Group. Full accounts of M.P. Evans Group PLC for the year ended 31 December 2013, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, have been reported on by the Company's auditors and delivered to the Registrar of Companies.  The report of the auditors was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 December 2014 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement. The auditors anticipate issuing an unmodified opinion.

6.  International Financial Reporting Standards

This announcement is based on the Group's financial statements which are being prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted for use in the EU.

 

Whilst the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Group expects to publish full financial statements that comply with IFRS on or after 24 April 2015.

 

7.  Timetable

The report and financial statements will be available on the Group's website on or after 24 April 2015 and despatched to shareholders shortly thereafter. The annual general meeting will be held on 5 June 2015.

 

8.  Distribution

Copies of the full report and financial statements for the year ended 31 December 2014 will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ.

 

 

 

By order of the board

Mrs Claire Hayes

Secretary

 

14 April 2015