RNS Number : 7572M
D1 Oils Plc
04 February 2009
4 February 2009
D1 Oils plc ('D1 Oils' or 'the Group')
Pre-close Trading Update
The Board of D1 Oils plc today issues the following update ahead of the publication of the Company's results for the year ended 31 December 2008 which are scheduled to be announced in April 2009.
Significant progress was made during 2008 in demonstrating the viability of Jatropha as an energy crop and in consolidating the Group's world leading position in its cultivation, underpinned by a plant science programme that differentiates the Group from its competitors.
Total planting of Jatropha at 31 December 2008 in which D1-BP Fuel Crops Limited ('D1-BP Fuel Crops' or the 'Joint Venture') has an interest was approximately 257,000 hectares (192,016 hectares as at 31 March 2008). The majority of the activity during the year was in North East India, where Williamson Magor made significant progress. During the year the Joint Venture successfully produced its first quantities of crude Jatropha oil.
D1 Oils Plant Science Limited (DOPSL), the Company's wholly owned subsidiary, has significantly developed the Group's global breeding programme in support of D1-BP Fuel Crops, establishing a central facility in Cape Verde and eight development centres in Africa, India and South East Asia.
DOPSL delivered 19 million seedlings of its first Jatropha selection to D1-BP Fuel Crops' farmers in 2008.
DOPSL is currently evaluating 13 new selections of Jatropha material in 29 product placement trials worldwide. In 2009 the best performers will be selected for high oil yield and good biodiesel profile and multiplied up for initial commercial release intended to take place in 2010.
DOPSL has applied for a patent for a process to turn Jatropha seedcake into a high protein animal feed, thereby substantially enhancing the value of the byproduct and improving significantly the economics of Jatropha planting worldwide. Tests have shown the improved meal contains more digestible protein than soya bean meal and has an energy and amino acid composition competitive with the best available protein sources for animal feed production.
The Group can now demonstrate Jatropha's carbon saving credentials. Based on an assessment of the carbon performance of D1-BP Fuel Crop's Jatropha planting in North East India, Ecofys, the sustainable energy consulting company, estimates that Jatropha-based biodiesel can deliver over 60% carbon savings compared to fossil fuel diesel. The assessment uses the greenhouse gas methodology of the UK Renewable Transport Fuel Obligation (RTFO) and is a significant improvement on the RTFO default values for the carbon savings of rapeseed, soya and palm.
Building on this performance, D1 Oils has been in discussion with BP International ('BP') about the most appropriate way to deliver value for shareholders. As a result the partners have agreed a new forward strategy for the business to include:
The marketing of a substantial share in D1-BP Fuel Crops to third parties to contribute to the funding of the further growth and development of the business.
Full and final settlement of the previously announced discussions regarding the planting assets transferred to D1-BP Fuel Crops at the inception of the Joint Venture. The settlement includes a payment by D1 to BP of £5 million, £3 million of which was provided for in the year ended 31 December 2007.
A new business plan for D1-BP Fuel Crops which will tighten the business' geographic focus, reduce the overhead base and contain short term cash requirements, whilst maintaining investment in the key technologies and capabilities that differentiate the business.
During 2008 the Company announced its intention to withdraw from refining and trading biodiesel in the UK. The resulting cost reduction programme has been completed in line with expectations.
As a result of the deterioration in the economic climate and consequent constraint on potential buyers' ability to raise debt finance, the disposals of our UK refining sites and equipment at Middlesbrough and Bromborough have been delayed. Discussions are continuing with a number of interested parties. In view of the difficulties in realising value from the assets at Bromborough and Middlesbrough, the Directors believe it is appropriate to reduce the holding value of these assets by approximately £3.5 million.
As a result of the above impairment charge, the additional costs associated with the planting settlement referred to above and certain impairment charges at the Joint Venture level, the loss after tax for the year ended 31 December 2008 is now likely to be greater than the Board's previous expectations.
Gross cash on hand (defined as cash held in bank accounts and on deposit) as at 31 December 2008 was £20.2 million and net cash (defined as gross cash less cash held as collateral) was £18.2 million. In addition, the gross and net cash position at 31 December 2008 of D1-BP Fuel Crops, of which the Group owns 50%, was £12.4 million.
Commenting on the announcement Brian Myerson, Chairman of D1 Oils, said:
'During 2008 D1 Oils demonstrated the viability of Jatropha as one of the most promising non-food energy crops. The Company is now established as a world leader in Jatropha curcas, with a significant planting business backed by pioneering plant science. We look forward to taking the business forward to its next stage of development and in turn to creating value for all shareholders.'
D1 Oils plc
Graham Prince, 020 7367 5600
Director, Corporate Communications
Camilla Gore 020 7404 5959
Notes to Editors:
D1 Oils plc is a biofuels technology company. Our strategy is to develop new energy crops into sustainable commercial fuels. We provide technology and services for the breeding, development, planting and harvesting of new varieties of commercial biofuel crops, focusing on alternative, sustainable feedstocks that are not subject to the same price pressures as food-grade crops. We have an established plant science and planting programme for Jatropha curcas, a robust, tropical oilseed bearing tree. Jatropha produces inedible oil feedstock for biodiesel and is able to make use of land not suitable for arable agriculture. D1 has a 50:50 joint venture with BP for the global planting of Jatropha.
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