Interim Results

RNS Number : 1517P

Equatorial Palm Oil plc

28 September 2011

 



29 September 2011

EQUATORIAL PALM OIL PLC

("EPO" or the "Company")

Interim Results for 6 months ended 30 June 2011

Equatorial Palm Oil plc, (AIM: PAL) the AIM listed palm oil production company with operations in Liberia, West Africa announces its unaudited interim results for the six months ended 30 June 2011.

Financial and corporate highlights:

·     Joint venture agreement with BioPalm Energy Limited ("BioPalm Energy")(the "JV Agreement") fully implemented

·     A new palm oil mill (the "Mill") inaugurated by the President of Liberia in May

Operational Highlights:

·     First sales of crude palm oil ("CPO")

·     On track to plant 1,200 hectares of oil palms by the end of 2011

·     Commencement of nursery at Butaw Estate and enlargement of existing Palm Bay Estate nursery

·     Completed rehabilitation of 3,500 hectares of existing palms

·     Mill in final stages of commissioning with full ramp up of production expected Q4 2011

Michael Frayne, Executive Chairman of Equatorial Palm Oil commented:

"The first half of 2011 has been another transformational period for the Company following the full implementation of the JV Agreement and we are delighted to have secured BioPalm Energy as a long term partner to the Company. In addition we have seen the inauguration of the Mill, and our first sales of CPO. We remain on track to plant over 1,200 hectares of palms by the end of 2011." 

"EPO is well funded to progress its development goals through the establishment of nurseries and planting of palms for sustainable palm oil production. The remainder of 2011 and 2012 will be an exciting time for the Company and I look forward to updating shareholders as we continue to work towards our long term strategic goals."

Equatorial Palm Oil plc Michael Frayne (Executive Chairman) www.epoil.co.uk	[phone]
Strand Hanson Limited (Nominated Adviser) James Harris / Paul Cocker	[phone]
Mirabaud Securities LLP (Broker) Peter Krens	[phone]
Pelham Bell Pottinger (Financial / Corporate PR) Archie Berens / Philippe Polman	[phone]

Chairman's statement

The first half of 2011 was another transformational period for Equatorial Palm Oil. Via the joint venture ("the JV") entered into with BioPalm Energy (part of the Siva Group), the Company has a 50% interest in three significant defined areas, referred to as Palm Bay, River Cess and Butaw, with a total land area of 169,000 hectares suitable for the cultivation of oil palms. This provides the Company with the potential to become an internationally competitive palm oil production company.

Joint Venture

On 3 February 2011, the Company announced that discussions with BioPalm Energy had been successfully concluded and that the JV Agreement had been fully implemented which represented a significant milestone for the Company. The JV Agreement provided for equity investment in the joint venture company ("Palm Developments") of US$30.0 million, the cash balance as at 30 June 2011 was $25.8m.

Furthermore, BioPalm Energy will arrange and guarantee an additional US$30.0 million loan facility (the "Loan Facility") to Palm Developments and work is progressing in respect of this. As the operator of Palm Developments, EPO will use the proceeds from the Loan Facility, together with existing cash resources, to accelerate its strategic development plan in respect of the 169,000 hectare land bank at Palm Bay, River Cess and Butaw.

Mill Inaugurated; First Sales of Crude Palm Oil

During the period, the Company celebrated the success of inaugurating Liberia's only commercial palm oil mill at a total cost of US$ 3 million.  The Mill was inaugurated following eight months of construction and testing, including the processing of oil palm bunches. We were delighted and honoured to have the President of Liberia, Ellen Johnson Sirleaf, attend the inauguration of the Mill, reflecting the importance of EPO's investment both in the Mill and the oil palm sector generally, with respect to the economic and social goals of Liberia.

The plant is currently processing 30 tonnes of fresh oil palm bunches ("FFB") daily, which is sourced from the surrounding 3,500 hectares of existing oil palms rehabilitated by the Company and the JV over the past 12 months. Daily production is averaging 5 tonnes of CPO at an average extraction rate of 17 per cent.

Final commissioning work is now being undertaken at the Mill and this is expected to be completed during the fourth quarter of this year. A small number of minor modifications have been made to the original design specifications. The identified modifications are being processed by Modipalm Sdn. Bhd. , the designers and fabricators of the Mill, which will then enable the Mill to run at its full capacity of 5 tonnes per hour. As at the date of this announcement the JV has more than 600MT of CPO stored and a tender process is underway for the sale of this CPO.

Corporate Social Responsibility

In addition to the production of palm oil, EPO recognises the need to be socially engaged and community oriented. The JV employs over 1,000 people across its operations.  Over the period, the JV has upgraded many of the older buildings on Palm Bay Estate and these will be used as accommodation for its employees. In addition a new polyclinic has been built to cope with the increased medical demands of the employees and local villagers.  Furthermore, the JV donated US$25,000 for a new women's market in Buchanan, which is the port town close to the Palm Bay Estate.

At the Butaw Estate the JV has spent significant time and resources on improving roads and building bridges, which has brought great benefits to the local villagers that live on or close to the project. The nursery at Butaw has commenced with the preparation of 20 hectares sufficient to propagate enough seedlings to plant up to 2,000 hectares during 2012.

The Company has been a member of the Roundtable on Sustainable Palm Oil ("RSPO") since 2006 and is working towards the development of sustainable oil palm plantations. As the Company expands it will implement its policies and procedures in line with RSPO approved principles and criteria, which are recognised as being industry best practises.

Conclusion

This half year has been marked with significant progress.  For the remainder of 2011, we will complete the planting of 1,200 hectares of new oil palms; in 2012, we will plant over 4,000 hectares of new oil palms and in 2013 we expect 6,000-8,000 hectares of new oil palms to be completed.  The Company will begin discussions with local communities who have small holdings of oil palms for the sale of FFB that can be utilised by the Company at its Mill in order to produce CPO.

Although much has been achieved so far, in particular the implementation of the JV Agreement, the Company is continuously striving to accelerate this momentum. With market prices for CPO expected to remain strong, we continue to believe that the commercial prospects for this unique opportunity are exciting.

Michael Frayne

Executive Chairman

29 September 2011

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2011

	Note	Period ended 30 June 2011 (unaudited)	Period ended 30 June 2010 (unaudited)	Year ended 31 December 2010 (audited)
		$'000	$'000	$'000
Revenue		175	-	-
Administrative expenses		(1,306)	(1,577)	(3,538)
Share options expensed	6	(125)	(472)	(694)
Operating loss		(1,256)	(2,049)	(4,232)
Interest payable		-	(166)	(169)
Share of operating loss of joint venture	3	(189)	-	-
Profit on disposal of assets to joint venture	3	752	-	-
Loss before taxation		(693)	(2,215)	(4,401)
Taxation		-	-	-
Loss for the period after taxation		(693)	(2,215)	(4,401)
Other comprehensive income
Currency translation differences		194	251	(295)
Total comprehensive income for the period		(499)	(1,964)	(4,696)
Loss per share expressed in cents per share
- Basic & diluted	2	(0.6) cents	(3.1) cents	(4.7) cents

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

	Note	30 June 2011 (unaudited)	30 June 2010 (unaudited)	31 December 2010 (audited)
		$'000	$'000	$'000
ASSETS
Non-current assets
Investment in joint venture	3	21,803	-	-
Property, plant and equipment		-	12,005	15,554
		21,803	12,005	15,554
Current assets
Inventories		-	-	508
Receivables	4	2,170	1,025	490
Cash & cash equivalents		575	11,463	6,760
		2,745	12,488	7,758
LIABILITIES
Current liabilities
Trade and other payables		92	642	545
		92	642	545
Net current assets/(liabilities)		2,653	11,846	7,213
NET ASSETS		24,456	23,851	22,767
SHAREHOLDERS' EQUITY
Share capital	5	1,914	1,752	1,796
Share premium		29,619	26,163	27,544
Warrant and option reserve	6	2,202	2,015	2,237
Foreign exchange reserve		108	459	(86)
Retained loss		(9,387)	(6,538)	(8,724)
Total equity		24,456	23,851	22,767

EQUATORIAL PALM OIL PLC

GROUP CASH FLOW STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2011

	Period ended 30 June 2011 (unaudited)	Period ended 30 June 2010 (unaudited)	Year ended 31 December 2010 (audited)
	$'000	$'000	$'000
Cash flows from operating activities
Operating loss (Increase)/decrease in receivables (Decrease)/increase in payables Increase in inventories Depreciation Share options expensed Share of operating loss of joint venture Profit on disposal of assets to joint venture	(1,256) (1,875) (57) - 2 125 189 (752)	(2,048) (508) (2,416) - 52 472 - -	(4,232) 63 (2,654) (508) 494 694 - -
Net cash outflow from operating activities	(3,624)	(4,448)	(6,143)
Cash flows from investing activities
Investment in joint venture	(4,658)	-	-
Payments to acquire property, plant & equipment	-	(971)	(5,001)
Net cash outflow from investing activities	(4,658)	(971)	(5,001)
Cash flows from financing activities
Repayment of short term borrowings	-	(3,055)	(1,040)
Issue of ordinary share capital	2,063	20,683	19,960
Share issue costs	-	(655)	(655)
Interest paid	-	(166)	(169)
Net cash inflow from financing activities	2,063	16,807	18,096
Net increase in cash and cash equivalents	(6,219)	11,388	6,952
Cash and cash equivalents at beginning of period	6,760	100	100
Exchange (losses)/gains on cash and cash equivalents	34	(25)	(292)
Cash and cash equivalents at end of period	575	11,463	6,760

EQUATORIAL PALM OIL PLC

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2011

	Called up share capital	Share premium reserve	Foreign exchange reserve	Warrant and option reserve	Retained earnings	Total equity
	$ 000's	$ 000's	$ 000's	$ 000's	$ 000's	$ 000's
As at 1 January 2010	463	8,937	208	30	(4,323)	5,315
Share capital issued	1,289	17,881	-	1,513	-	20,683
Cost of share issue	-	(655)	-	-	-	(655)
Issue of share options	-	-	-	472	-	472
Total comprehensive income for the period	-	-	251	-	(2,215)	(1,964)
As at 30 June 2010	1,752	26,163	459	2,015	(6,538)	23,851
As at 1 January 2010	463	8,937	208	30	(4,323)	5,315
Share capital issued	1,333	19,262	-	1,513	-	22,108
Cost of share issue	-	(655)	-	-	-	(655)
Issue of share options	-	-	-	694	-	694
Total comprehensive income for the period	-	-	(294)	-	(4,401)	(4,695)
As at 31 December 2010	1,796	27,544	(86)	2,237	(8,724)	22,767
Share capital issued	118	1,945	-	-	-	2,063
Exercise of warrants and options	-	130	-	(160)	30	-
Share based payments	-	-	-	125	-	125
Total comprehensive income for the period	-	-	194	-	(693)	(499)
As at 30 June 2011	1,914	29,619	108	2,202	(9,387)	24,456

EQUATORIAL PALM OIL PLC

NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2011

1.   Basis of preparation

These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2010 Annual Report. The financial information for the half years ended 30 June 2011 and 30 June 2010 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Equatorial Palm Oil Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2010 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2010 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2010 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated financial statements.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.

In the current financial period, the Group has adopted an accounting policy for its joint venture interest in Palm Developments Limited, as disclosed in note 3. This jointly controlled entity is included in the financial statements as an equity investment. The Group accounts for its share of the net assets of the joint venture company as an investment within the statement of financial position. The Group's share of the gains or losses of the joint venture company are included within the income statement.

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

2.   Loss per share

The basic loss per share is derived by dividing the loss for the period attributable to ordinary shareholders by the weighted average number of shares in issue.

As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included.

	Period ended 30 June 2011 (unaudited)	Period ended 30 June 2010 (unaudited)	Year ended 31 December 2010 (audited)
	$'000	$'000	$'000
Loss for the period	(693)	(2,215)	(4,401)
Weighted average number of Ordinary shares of 1p in issue	123.3 million	70.8 million	93.5 million
Loss per share - basic	(0.6) cents	(3.1) cents	(4.7) cents

3.   Investment in joint venture

On 3 February 2011 the Company completed a joint venture agreement with BioPalm Energy Limited. The joint venture agreement provides for equity investment in the Joint Venture Company ("Liberian Palm Developments Limited") of US$30.0 million (US$7.5 million from Equatorial Biofuels (Guernsey) Limited, a subsidiary of EPO, on behalf of the Company and US$22.5 million from BioPalm Energy).  Furthermore, BioPalm Energy will arrange and guarantee an additional US$30.0 million loan facility to the Joint Venture Company.

Upon acquiring a 50% interest in Liberian Palm Developments Limited in exchange for the transfer of assets, the following gain arose:

	30 June 2011
	$'000
50% share of the net assets of Liberian Palm Developments Limited	21,992
Less net assets transferred to Liberian Palm Developments Limited	21,240
Profit on disposal of assets to JV	752

The Group's interest in the joint venture can be accounted for either under the equity accounting or the proportionate consolidation method. However the latter may cease to be an option from 2013 due to IFRS 11 becoming effective. Due to these changes the Directors have decided to equity account for the Group's interest in Liberian Palm Developments Limited. The results of the joint venture for the period of six months to 30 June 2011 were as follows:

	30 June 2011
	$'000
Non-current assets	18,680
Current assets	27,420
Non-current liabilities	-
Current liabilities	(2,494)
TOTAL NET ASSETS	43,606
Income	10
Cost of sales	(10)
Expenses	(378)
Loss after tax	(378)

The Company, through its investment in Equatorial Biofuels (Guernsey) Limited, owns a 50% interest in Liberian Palm Developments Limited. The Company's interest in Liberian Palm Developments Limited is as follows:

	30 June 2011
	$'000
Interest in joint venture at 1 January 2011	-
Additions	21,992
Share of profits/(losses) of joint venture	(189)
Dividend received from Liberian Palm Developments Limited	-
Interest in joint venture at 30 June 2011	21,803

4.   Receivables

				Period ended 30 June 2011 $'000	Period ended 30 June 2010 $'000	Period ended 31 December 2010 $'000
Receivable due from the Joint Venture*				2,105	-	-
Other receivables				65	209	425
Prepayments				-	816	65
				2,170	1,025	490

*  $1,817,715 was received by the Company from the Joint Venture on 6 July 2011.

5.   Called up share capital

Allotted, called up and fully paid	Period ended 30 June 2011 $'000	Period ended 30 June 2010 $'000	Period ended 31 December 2010 $'000
124,808,188 Ordinary shares of 1p each (2010: 114,751,670)	1,914	1,752	1,796

During the period the Group issued 7,273,089 shares at an average price of 17.5 pence per share ($0.28 cents).

6.   Share based payments

Warrants

Details of the warrants outstanding during the period are as follows:

	Outstanding at 1 January 2011	Expired during the period	Exercised during the period	Outstanding at 30 June 2011	Exercisable at 30 June 2011	Exercise price	Expiry date
5yr Warrants	2,198,757	-	(203,500)	1,995,257	1,995,257	17.5p	26 Feb 2015
3yr Warrants	5,817,742	-	-	5,817,742	5,817,742	17.5p	26 Feb 2013
2yr Warrants	25,651,957	-	(2,787,446)	22,864,511	22,864,511	17.5p	26 Feb 2012
1yr Warrants	300,000	(300,000)	-	-	-	30.0p	14 Feb 2011
	33,968,456	(300,000)	(2,990,946)	30,677,510	30,677,510

Share options

Details of the options outstanding during the period are as follows:

	Outstanding at 1 January 2011	Exercised during the period	Outstanding at 30 June 2011	Exercisable at 30 June 2011
Options exercisable at 17.5p	8,050,000	-	8,050,000	2,087,500
Options exercisable at 30.0p	25,000	(25,000)	-	-
	8,075,000	(25,000)	8,050,000	2,087,500

7.   Events after the reporting period

On 6 July 2011, $1,817,715 was received by the Company from the Joint Venture as partial repayment of an intercompany loan. As at 30 June 2011, the Joint Venture owed the Company $2,104,582.

INDEPENDENT REVIEW REPORT TO EQUATORIAL PALM OIL PLC

Introduction

We have been engaged by the company to review the set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the group statement of comprehensive income, the group statement of financial position, the group cash flow statement, the group statement of changes in equity and the related explanatory notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

London

United Kingdom

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

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