26 August 2011

NEW BRITAIN PALM OIL LIMITED

("NBPOL", the "Group" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011 (UNAUDITED)

New Britain Palm Oil Limited (LSE: NBPO), one of the world's largest fully integrated producers of sustainable palm oil, today announces its unaudited interim results for the six months ended 30 June 2011.

Financial highlights

·      Revenue of USD 403.9 million (H1 2010: USD 205.4 million)

·      Profit before tax of USD 158.8 million (H1 2010: USD 46.2 million) excluding the effects of revaluing biological assets under IAS 41

·      Basic EPS of USD 77.8 cents per share (H1 2010: USD 20.7 cents per share) excluding the effects of revaluing biological assets under IAS 41

·      EBITDA, excluding the impact of IAS 41, of USD 187.0 million (H1 2010: USD 65.1 million)

·      Gross margin of 50% (H1 2010: 45%)

·      Subsequent to period end, the board announces resumption of dividend payments by declaring an interim dividend of USD 15 cents payable in October

·      The Group had cash holdings at period end of USD 115.9 million as compared to USD 2.7 million at the end of 2010

Operational highlights

·      During the first half of 2011, a record total of 1,295,230 tonnes of fresh fruit bunches were processed (H1 2010: 949,793 tonnes)

·      Total oil production in the period was 318,166 tonnes - with 297,813 tonnes of Crude Palm Oil (CPO) and 20,353 tonnes of Palm Kernel Oil (H1 2010: 211,627 tonnes and 17,968 tonnes respectively)

·      In the first six months the Company has achieved an average CPO selling price of USD 1,122/tonne of CPO (H1 2010: USD 792/tonne)

·      CPO prices have been robust during the first half, trading between USD 1,100 to 1,300/tonne, starting the period at around USD 1,200/tonne and ending at around USD 1,100/tonne, current prices are approximately USD 1,050/tonne

·      As at 30 June 2011, the Group had shipped 292,523 tonnes of all oils at USD 1,190/tonne and total sales not shipped ('forward sales') of 139,000 tonnes at USD 1,115/tonne giving a total committed price of USD 1,166/tonne for 431,523 tonnes as at the half year

·      The Company's crude palm oil extraction rate for the period was 23.0% (FY 2010: 22.4%)

·      The Liverpool refinery continues to meet all of our expections with continued growth in sales volumes of high grade sustainable and traceable oil in a segregated supply chain

Commenting on the results, Mr Nick Thompson, Chief Executive Officer, said:

"New Britain Palm Oil's performance was very strong in the first half of 2011 with a record profit before tax of USD 158.8 million excluding IAS 41 effects, reflecting higher palm oil prices and improved productivity. This compares favourably to the 2010 first half year profit of USD 46.2 million and full year profit of USD 131.2 million. These results include a one-off contribution of approximately USD 8.9 million net profit on disposal of the Company's 50% interest in PT Dami Mas Sejahtera, and net foreign exchange gains of USD 18 million primarily arising from a strengthening Papua New Guinea currency (PNG Kina) and the weakness in the US Dollar.

World CPO prices have been robust during the first half trading in a range of approximately USD 1,100 and USD 1,300/tonne with good demand and global stocks of oil remaining relatively low. The Group achieved an average CPO selling price of USD 1,122/tonne on the back of record production of 297,813 tonnes of crude palm oil, including some 95,024 tonnes contribution from the acquisition of Kula Palm Oil Limited (KPOL) completed in May 2010. Overall, the Group processed over 1.29 million tonnes of oil palm fruit during the first half of 2011, including 423,404 tonnes from KPOL, representing a 36% increment over the same period last year. The cropping outlook for the next quarter appears to be equally strong particularly in West New Britain and at RAIL.

Our refinery in Liverpool continues to meet our expectations and has been EBIDTA positive since March 2011, with good, consistent margins. Volumes delivered to our customers continue to increase on a monthly basis and the refinery is now running at approximately 70% of our installed capacity. Civil works are well underway for our bakery products plant adjacent to our Liverpool refinery with the majority of equipment scheduled to arrive in September with the project on track for commissioning in early 2012. We remain very well positioned to satisfy the growing market requirement for high grade fully traceable and sustainable physical oils together with speciality fats and margarines both in the UK and on the Continent with our supply partners Wilmar International in Germany

The Company continues to invest in its operations and the board remains confident of delivering further growth and progress." 

Enquiries:

Website: www.nbpol.com.pg 

Notes to editors

NBPOL is a large scale integrated industrial producer of sustainable palm oil in Australasia, headquartered in Papua New Guinea (PNG). It now has over 75,000 hectares of planted oil palm plantations, a further 5,000 hectares under preparation for oil palm, over 8,000 hectares of sugar cane and a further 9,500 hectares of grazing pasture, (some of which will be converted to oil palm); eleven oil mills; two refineries, one in PNG, and one in Liverpool, UK; and a seed production and plant breeding facility. The Company is quoted on both the Main Market of the London Stock Exchange and on the Port Moresby Stock Exchange in PNG.

NBPOL is fully vertically integrated, producing its own seed (which it also sells globally) and planting, cultivating and harvesting its own land and processing and refining palm oil (both in PNG and the UK). It also contracts directly with its end customers in the EU and arranges shipping of its products.

NBPOL has high regard for the importance of its sustainability credentials and is active in proving its performance through its certification to ISO 14001 and its close involvement and support of the Roundtable on Sustainable Palm Oil ("RSPO"). The Company is a certified supplier of sustainable palm oil from the entire production base in West New Britain Province, at RAILin PNG, and its entire Solomon Islands estates, under the RSPO guidelines.

NEW BRITAIN PALM OIL LIMITED

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011 (UNAUDITED)

NBPOL enjoyed a very solid performance in the first half of 2011 with profit before tax of USD 158.8 million (excluding IAS 41 (biological assets)) compared to USD 46.2 million in the same period last year and USD 131.2 million for the 2010 full year.  This result includes a one-off contribution of some USD 8.9 million net profit on disposal of the Company's 50% interest in PT Dami Mas Sejahtera, and net foreign exchange gains of USD 18 million primarily arising from a strengthening Papua New Guinea Kina and the weakness in the US Dollar.

CPO prices have traded between USD 1,100 and USD 1,300/tonne having started the year at USD 1,200/tonne and finished the half year at USD 1,100/tonne, which compares very favourably with the price at June 2010 of around USD 785/tonne. Demand for CPO has remained strong as palm oil remains attractively priced versus other oils and palm oil stocks are still at relatively low levels compared to usage. During the first six months, the Company has achieved an average selling price of USD 1,122/tonne of CPO compared to USD 792/tonne for the same period last year. As at 30 June 2011, the Group had made sales and forward sales of 130,000 tonnes of CPO for the remainder of 2011 at an average price of 1,082/tonne and into 2012 for 49,000 tonnes at an average price of 1,027/tonne.

Cropping levels have been in line with expectations and pleasingly crops are still high at the start of the second half of 2011. Oil production is some 38% higher than the same period in 2010 with much improved oil extraction rates at 23.0% (as compared to 22.3% in H1 2010), due largely to lower rainfall patterns than the long term average and no negative weather impacts on our operations as well as some improvement in the extraction rates at KPOL.

Results

Revenue increased by 96.6% over the comparative period to USD 403.9 million (H1 2010: USD 205.4 million) as prices have significantly increased from the same period last year and higher volumes including in particular a full six month contribution from KPOL. Total oils shipped (crude palm oil, palm kernel oil and refined oils, excluding the UK refinery) in the first six months is up 49.7% with 292,523 tonnes compared to 195,388 tonnes for the corresponding period last year.

Gross profit was USD 200.6 million, an increase of 118.5%, from USD 91.8 million for the same period last year, reflecting higher prices, increased volumes shipped and controlled operating costs. Included in other gains in the Statement of Comprehensive Income is the net gain on recognition of agricultural products as they are harvested from the oil palm and processed into oil stocks on hand at period end. Had this inventory been shipped prior to the end of June, the net gain would be reflected in revenues and gross profit equating to a gross margin of 52% as compared to 46% in H1 2010.

During the first half of 2011, a total of 1,295,230 tonnes of fresh fruit bunches were processed, up 36.4% compared to 949,793 tonnes for the same period last year. Fruit production in West New Britain is up 8% on this time last year, a reflection of the much improved weather conditions compared to the first six months of 2010. RAIL fruit production is up 16% from its young palms whilst production in the Solomon Islands is unchanged. Fruit production from the KPOL estates (six month contribution) was over 423,000 tonnes as compared to 141,800 tonnes for the same period last year (two month contribution). Harvesting rounds are generally at acceptable levels across all our estates with the exception of West New Britain where rounds are slightly extended and will result in good cropping levels in the next quarter. Rainfall in the first half of 2011 was the lowest on record and continues to be lower than the average but still ample for excellent growing conditions, with good sunshine hours and there have been no negative weather impacts on operations.

Seed revenues of USD 4.1 million for the first half of 2011 were in line with our expectations and are much improved on this time last year (USD 2.9 million) driven by increased demand from Indonesia and new customers.

The cost of fruit from smallholders has increased in line with the growth in the crude palm oil price. Smallholder fruit production has increased 34% from almost 274,000 tonnes in the first half of 2010 to over 367,000 tonnes in the first half of 2011 including 105,400 tonnes of smallholder fruit at KPOL. In the first half of 2011, the Group paid USD 66.1 million for smallholder fruit compared to USD 29.3 million for the same period last year.

Distribution costs are 62% higher than the corresponding period last year, reflecting increased tonnages shipped and a marginal increase in freight costs mainly from the higher diesel oil price. Administrative expenses rose significantly from USD 31.8 million in H1 2010 to USD 46.4 million in H1 2011 due mainly to the six month costs of KPOL and increased labour costs across the Group.

Operating profit including IAS 41 was USD 126.7 million compared to USD 82.9 million for the comparative period last year, reflecting the effect of IAS 41 losses in the year to date being USD 36.8 million compared to a gain of USD 36.1 million in H1 2010.

Net finance costs have increased to USD 4.8 million compared to USD 2.7 million in the corresponding period last year reflecting increased borrowings following the refinance in April of the loan facility taken out to fund the acquisition of KPOL and increased working capital requirements at our Liverpool refinery.

Profit before tax for the period was USD 121.9 million including IAS 41 and USD 158.8 million excluding IAS 41 compared to H1 2010 of USD 82.3 million including IAS 41 and USD 46.2 million excluding IAS 41. Profit before tax for the whole of 2010 excluding IAS 41 was USD 131.2 million.

Tax expense for the period was USD 25.4 million compared to USD 24.1 million for the same period last year, reflecting an effective tax rate of 21% (compared to 29%) due to non-assessable foreign exchange gains and a tax credit arising from the IAS 41 loss.

Earnings per share for the six months ended 30 June 2011 including the effects of IAS 41 increased from USD 37.4 cents in H1 2010 to USD 61.9 cents for H1 2011. Earnings per share excluding IAS 41 were USD 77.8 cents compared to USD 20.7 cents for the same period last year. 

Subsequent to period end, an interim dividend for 2011 of USD 15 cents per share was declared payable in October 2011.

Balance sheet

The Company's balance sheet reflects cash balances of USD 115.9 million and total borrowings of USD 301.6 million of which USD 240.0 million pertains to the five year facility taken out in April, USD 17.9 million short term working capital financing for the Liverpool refinery and USD 43.7 million to RAIL. 

The USD 240.0 million five year facility has been used to repay the USD 200 million 12-month facility taken out for the acquisition of KPOL and the balance for various capital projects and working capital. The facility comprises a USD 120.0 million Tranche A and a USD 120.0 million Tranche B. The principal amount outstanding under Tranche A shall be repaid in 18 quarterly instalments of USD 6.3 million commencing in October and a final instalment of USD 6.6 million. The principle amount outstanding under Tranche B is payable at maturity.

Trade and other receivables are higher at USD 83.1 million compared to USD 69.6 million for the first half of 2010, reflecting the higher value of sales, increased volumes and also the timing of shipments. Trading terms remain unchanged and are tied to the Federation of Oils, Seeds and Fats Associations Ltd ('FOSFA International') contracts.

Inventories increased by 69% to USD 176.8 million compared to USD 104.4 million at the end June 2010, reflecting mainly the higher oil stocks at period end and higher prices. While the Company continues to meet its production targets, inventories at period end are expected to fluctuate based on timing of shipments and movements in price.

Derivative financial instruments at 30 June 2011 are lower both in current and non current liabilities as compared to 31 December 2010 . The current liability amount of derivative financial instruments decreased from USD 48.5 million to USD 15.4 million while the non current liability decreased from USD 8.2 million to USD 0.6 million. These decreases are due to fact that there is less exposure on our hedge book. 

Cashflow and capital expenditure

Net cash inflow from operating activities was USD 115.2 million compared to USD 24.2 million for the same period last year. Investing activities decreased from USD 245.9 million for H1 2010 to USD 34.6 million this year as a result of acquisition of KPOL in the prior year. Purchases of property, plant and equipment together with expenditure on plantation development have increased from USD 42.3 million in H1 2010 to USD 48.4 million this period, slightly behind our full year planned capital programme. The net cash movement after financing activities was an increase of USD 116.8 million compared to a reduction to June 2010 of USD 40.9 million. The Company ended the period with cash holdings of USD 115.9 million (H1 2010: USD 0.1 million net overdrafts) having started the year with net cash balances of USD 2.7 million.

Outlook

NBPOL enters the second half in a strong position with sales and forward sales as at period end of 130,000 tonnes of CPO for the remainder of 2011 at an average price of 1,082/tonne and into 2012 for 49,000 tonnes at an average price of 1,027/tonne. World CPO prices have slightly retreated from the start of the year, particularly in recent weeks, as the impact of the European debt crisis and health of the global economy weighs on sentiment. While the prices of palm oil products, like all commodities, is difficult to predict, stocks held in the global supply chain remain relatively low at one and a half months usage. NBPOL remains well positioned to benefit from the continued strong demand for high grade palm oil products, and in particular the increasing requirement for them to be fully traceable and sustainable. 

NBPOL continues to trade in line with the board's expectations. The Company will resume the payment of dividends in October and remains confident of delivering further progress and growth.

 NEW BRITAIN PALM OIL LIMITED

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS TO 30 JUNE 2011

NEW BRITAIN PALM OIL LIMITED

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

NEW BRITAIN PALM OIL LIMITED

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS TO 30 JUNE 2011

NEW BRITAIN PALM OIL LIMITED

GROUP STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS TO 30 JUNE 2011

RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH

GENERATED FROM OPERATING ACTIVITIES

NEW BRITAIN PALM OIL LIMITED

NOTES TO THE INTERIM FINANCIAL INFORMATION

FOR THE SIX MONTHS TO 30 JUNE 2011

1.             STATEMENT OF ACCOUNTING POLICIES

New Britain Palm Oil Limited was incorporated on 19 May 1967, as a limited liability company in Papua New Guinea. New Britain Palm Oil Limited and its subsidiaries (the "Group") operate in the oil palm industry in Papua New Guinea, the Solomon Islands, Indonesia, Singapore, Australia and the United Kingdom.

The address of New Britain Palm Oil Limited's registered office is Bebere Plantation, Mosa, Kimbe, West New Britain Province, Papua New Guinea.

New Britain Palm Oil Limited is listed on the Port Moresby Stock Exchange and the London Stock Exchange.

This consolidated interim financial information does not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2010 were approved by the Board of Directors on 31 March 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 237 of the Companies Act 1985.

This consolidated interim financial information for the six months ended 30 June 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting, and is unaudited. The consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2010, which have been prepared in accordance with IFRS.

(a)           Accounting policies

Except as described below, the accounting policies applied in this consolidated interim financial information are consistent with those of the annual financial statements for year ended 31 December 2010, as described in those annual financial statements.

(b)           Foreign currency translation

(i) Functional and presentation currency

Items included in this consolidated interim financial information are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated interim financial information is presented in US Dollars, which is New Britain Palm Oil Limited's presentation currency and differs from its functional currency, the Papua New Guinea Kina ("PNG Kina").

The statement of financial position and the statement of changes in equity are translated from PNG Kina to US Dollars at the closing rate existing at the date of the balance sheet, which at 30 June 2011 is PGK1.00 = USD 0.4355 (31 December 2010: PGK 1.00 = USD 0.3820).

The statement of comprehensive income and the statement of cash flows are translated from PNG Kina to US Dollars at the average exchange rates prevailing during the period, which are considered to approximate the actual exchange rate at the date of each transaction. The average exchange rate at 30 June 2011 is PGK1.00 = USD 0.4050 (31 December 2010: PGK 1.00 = USD 0.3688).

2.             REVENUE AND OTHER INCOME

3.             PROPERTY, PLANT AND EQUIPMENT