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REA Holdings crop harvest increases

By BFN News | 03:21 PM | Tuesday 16 December, 2014

R.E.A. Holdings' harvest of oil palm fresh fruit bunches during the 11-month period to the end of November amounted to 578,556 tonnes, compared with 523,993 tonnes for the corresponding period in 2013. External purchases of FFB totalled 136,192 tonnes, compared with 88,796 tonnes for the corresponding period in 2013. For the same period, processing of the group's own FFB production and the externally purchased FFB, together totalling 705,613 tonnes (2013: 612,224 tonnes), produced 154,723 tonnes of crude palm oil (CPO) (2013: 133,680 tonnes), 32,437 tonnes of palm kernels (2013: 27,957 tonnes) and 11,826 tonnes of crude palm kernel oil ("CPKO") (2013: 10,249 tonnes). These production figures reflect extraction rates of 21.9 per cent for CPO (2013: 21.8 per cent), 4.6 per cent for kernels (2013: 4.6 per cent) and 38.1 per cent for CPKO (2013: 36.6 per cent). Rainfall to the end of November averaged 2,233 millimetres across the group's operations (2013: 3,030 millimetres). Although the widely predicted recurrence of an El Nino has not materialised, the level of rainfall throughout 2014 to date has been consistently below monthly averages in 2013 and below the average for the preceding six years. Production levels are comfortably ahead of 2013 levels, but after a period of steady improvement in operations, several weeks of particularly dry weather during September and October resulted in serious disruptions to transport logistics delaying sales of CPO and CPKO and temporarily setting back the recovery. The return of heavy rains in mid November brought welcome relief and the group is working to recover the backlog on CPO and CPKO deliveries by year end. As part of the programme of improvements to address engineering and operational deficiencies in the group's three oil mills, one of the two boilers in each of the two older mills have been undergoing refurbishment in recent months. As soon as both boilers are fully back in service, the two remaining boilers in the mills in question will also be refurbished. The deterioration in the condition of these two boilers has resulted in a temporary reduction in throughput, restricting the volume of fruit that the group has been able to process. Because of this, the group is to an extent delaying harvesting so as to keep the volume of fruit being delivered to the mills within manageable levels. As a result, crops reported to end November were lower than they would otherwise have been. The group estimates the carry-over of fruit that would normally have been harvested by end November at some 30,000 tonnes although continuing processing restrictions may mean that not all of this carry over will ultimately prove recoverable. An update says: "Whilst the processing inefficiencies that have resulted from the necessary refurbishment of boilers distort comparisons, it is clear that the continuing focus on the mills is starting to have a positive impact on extraction rates. Further progress should be made in 2015. In addition, the group is now proceeding with the proposed expansion in 2015 of the third, newest oil mill at Satria to double its capacity to 80 tonnes of FFB per hour. This will provide further resilience in meeting the growing processing requirement for both group and smallholder fruit. "The CPO price remained steady during the first quarter of the year, but since then has generally been on a downward trend. After a peak in March at just below $1,000 per tonne, CIF Rotterdam, it now stands close to a low for the year of $675 per tonne. Particular bearish factors have been a record soybean crop in the US and a falling petroleum oil price that has reduced the competitiveness of bio-diesel manufactured from vegetable oil. Predicting commodity prices in the current uncertain world economic context is not easy but some professional forecasters of vegetable oil prices now foresee some recovery in the first half of 2015. The directors believe that demand for CPO is price elastic and that the current lower price is likely to stimulate additional consumption in the major markets of China and India." At 3:21pm: (LON:RE.) R E A Holdings PLC share price was -34.87p at 332.38p Story provided by

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