TIDMAEP
RNS Number : 7557L
Anglo-Eastern Plantations PLC
30 April 2015
Anglo-Eastern Plantations Plc
("AEP", "Group" or "Company")
Preliminary announcement of results for year ended 31 December
2014
Anglo-Eastern Plantations Plc, and its subsidiaries are a major
producer of palm oil and rubber with plantations across Indonesia
and Malaysia amounting to some 127,800 hectares, has today released
its results for the year ended 31 December 2014.
Financial Highlights
2014 2013
$m $m
Revenue 251.3 201.9
Profit before tax
- before biological asset
("BA") adjustment 85.0 59.7
- after biological asset
adjustment 51.2 153.4
EPS before BA adjustment 132.26cts 90.70cts
EPS after BA adjustment 77.61cts 235.95cts
Dividend (pence) 3.0p 3.0p
Dividend (cents) 4.5*cts 5.0cts
Note: * Based on exchange rate at 24 April 2015 of
$1.5165/GBP
Enquiries:
Anglo-Eastern Plantations
Plc
Dato' John Lim Ewe Chuan 020 7216 4621
Charles Stanley Securities
Russell Cook / Karri
Vuori 020 7149 6000
Chairman's Statement
The Group is pleased to report an improved performance in 2014
on the back of higher production of Fresh Fruit Bunch ("FFB"),
increased purchase of external crops by the mills and better
operating margins. The performance was exceptional considering the
Indonesian Rupiah depreciated by 2% against the US Dollar during
the year, on top of 26% depreciation in 2013.
Despite the encouraging performance, challenging times are ahead
for the Group and the palm oil industry. While India's imports of
edible oil rose for the third year in a row, the import of palm oil
fell for the first time in four years as Indian refiners bought
more soy and sunflowers oil. Increased planting acreage
complemented by good weather led to a bumper harvest of soybean and
record supply of cooking oil globally. Even with weaker currencies,
exports of Crude Palm Oil ("CPO") from Indonesia and Malaysia to
India and China, the two largest consumers, were lower as the CPO
discount to soya oil narrowed to around $100/mt compared to a
10-year average discount of $160/mt. Consumers tend to switch their
imports to soya and other soft oils when the CPO discount to soya
oil is lower. China also cut back on shipment of CPO amidst a
slower economy and tightening of lending for commodity
financing.
In 2014 CPO price declined to a 5-year low, the lowest since
2009.The price weakened as experts downgraded the probability of El
Nino weather phenomenon which would have reduced the FFB production
and palm oil inventories. The recent sharp decline in crude oil
prices is also expected to reduce the CPO's competitiveness as a
source of energy.
The Group's revenue was $251.3 million, compared to $201.9
million achieved in 2013, an increase of 24% which was due largely
to the increase in FFB production and purchase of third party crops
for the mills. The average CPO price in 2014 was $815/mt, 5% lower
than the figure of $857/mt in 2013, but ended the year even lower
at $700/mt.
FFB production for 2014 was 857,400mt, 9% higher than the
previous year (2013: 787,500mt) in line with 11% increase in
matured trees. Yields remained below expectation due primarily to
the lagged effect from dry weather in first three months of the
year, followed by wide spread flooding in North Sumatera towards
the end of the year and higher proportion of young palms. FFB
bought-in from surrounding smallholders in 2014 was 626,200mt
(2013: 496,600mt), 26% higher, as the Group offered competitive
prices for the external crops. The Group's mills processed 12% more
FFB, and increased CPO production to 294,200mt (2013: 262,600mt).
The oil extraction rate reduced slightly due to the slightly
inferior external crop.
The Group operating profit for 2014, before the biological asset
("BA") adjustment was $78.8 million, 32% higher on $59.6 million
achieved in 2013. Earnings per share, before BA adjustment
increased to 132.26cts, compared to 90.70cts in 2013. The Group
operating profit for 2014 after a downward BA adjustment of $33.7
million was $45.1 million as compared to 2013 of $153.3 million
after an upward BA adjustment of $93.7 million. The post BA
adjusted earnings per share were 77.61cts compared to 235.95cts for
the previous year. The lower biological value was due to the
weakening of Rupiah against US Dollar and also was due to a higher
discount rate applied in the determination of biological assets
from 15.8% to 16.4%.
As at 31 December 2014, the Group had cash and cash equivalents
of $125.9 million and borrowings of $34.9 million, resulting in a
net cash position of $91.0 million, compared to $63.7 million at 31
December 2013.
In spite of the challenging market conditions the Board has
continued to invest in the development of new assets. The Group
planted 3,403ha of oil palms in 2014 of which 1,019ha comprised of
replanting. This was less than planned, due primarily to delays in
finalising agreement with villagers for land compensation payments
in Bengkulu, Bangka and Kalimantan.
The mill construction in Central Kalimantan is progressing well.
The mill, ancillary buildings, roads and locally fabricated
mechanical works are about 80% completed while the imported
processing equipment for the mill is being delivered in stages for
installation in first quarter of 2015. This mill, with an initial
capacity of 45mt/hr, is expected to be operational in second
quarter of 2015. As previously reported the construction of another
mill in North Sumatera is deferred while the Board considers
further the relative cost advantages of two selected possible
sites.
AEP embraces the Group's responsibility for the impact of its
activities on the environment, consumers, employees, communities,
stakeholders and all other members of wider society. In meeting the
Group's Corporate Social Responsibility ("CSR") obligations it is
cognisant of the contribution and welfare of its employees while
continuing to contribute to improve the well-being of the
community.
The construction of the $5 million biogas and biomass plant for
one of the mills in North Sumatera has been completed and is in
operation. The plant besides producing dried long fibres from empty
fruit bunches for export, is also producing biogas which reduces
the mill dependence on electricity produced from fossil fuels.
There is a significant reduction in the emission of greenhouse gas
which was discharged from effluent treatment in the anaerobic
lagoons. We anticipate that the biogas plant with a one megawatt
generator will generate excess electricity power of about 3.6
million kw per annum of which the plant plans to sell to the
Indonesian National Electricity Company. The successful
implementation and running of this project will pave the way for
further similar undertaking in the Group's other palm oil mills.
Although the biogas and biomass project is not a requirement of
Indonesian Sustainable Palm Oil ("ISPO"), it is nevertheless
environmentally friendly and is expected to provide a return on
investment of about 6 years.
The Group has registered all its Indonesian operating
subsidiaries for the ISPO certification. In January 2014, three
subsidiaries were ISPO certified while another is awaiting
certification approval after completion of all requirement. Seven
subsidiaries are at various stages of certification audit. It was
reported in October 2014 that of the 880 companies applying for
ISPO certification, only 63 companies have so far been certified
due mainly to a shortage of certification auditors. The Chairman of
ISPO announced in December 2014 that the deadline for registration
of all palm oil companies for ISPO certification has been extended
by another 18 months. The ISPO certification of the Group estates
and mills will continue in 2015.
The majority of our employees working at the Group's plantations
and mills, together with their families and dependents, are housed
in self-contained communities constructed by the Group. Employees
and their dependents are provided with free housing, clean water
and electricity. Within these communities we also build and
maintain places of worship, schools and sports facilities. In 2014,
the Group spent $234,475 to build additional facilities and
maintain these amenities and will continue to incur community
development expenditure in 2015.
The Group also recognises its obligations to the wider farming
communities in which it operates. The Indonesian authorities have
established that not less than 20% of the new planted areas
acquired from 2007 onwards are to be reserved for the benefit of
smallholder cooperatives, known as Plasma scheme, and the Group is
integrating such smallholder developments alongside its estates.
The Group has to-date planted 734ha for Plasma and this number is
expected to increase in the coming years. This will help maintain
and improve the Group's relationship with the local communities. In
order to aid the development of Plasma scheme, a subsidiary
provided a corporate guarantee to a local bank in excess of $18
million to cover loans raised by the cooperative.
The Board supported Kebun Kas Desa (village's scheme)
development programme to supplement the livelihood of the villages.
The Group provides technical and management expertise to villagers
and has to-date financed, developed and managed 22 smallholder
village schemes across four companies.
The Board is mindful that given the anticipated further capital
commitments the level of dividend needs to be balanced against the
planned expenditure. The Board is also mindful of shareholders'
sentiment and therefore declared a final dividend of 3.0p per share
in respect of the year to 31 December 2014 (2013: 3.0p). Subject to
approval by shareholders at the Annual General Meeting, the final
dividend will be paid on 10 July 2015 to those shareholders on the
register on 12 June 2015.
The Board views the prospects for 2015 with cautious optimism.
It was reported that the import for oils and fats has been growing
at an average of 2.2 million mt per annum over the last 3 years.
The continuing rise in income levels and population growth in
China, India and Indonesia would be expected to drive the
consumption of CPO and likely lead to a gradual recovery in CPO
prices. The possibility of price recovery over the next few months
is limited due to an ample supply of vegetable oils coming onto the
market. Weaker currencies in Malaysia and Indonesia which makes CPO
cheaper may perhaps stimulate the purchase by foreign refiners.
The Group expects to face tougher challenges with steeper rise
in operating costs in 2015 due to rising fertiliser prices, higher
wage inflation and removal of government fuel subsidies in
Indonesia.
I wish to highlight the introduction of the new law on
Plantation by the Indonesian Government in October 2014 as detailed
under Principal risks and uncertainties - Country of the Strategic
Report. The new law inter alia mandated the Government to
prioritize domestic investments in the plantation business
development and restricts foreign investments in the same sector
based on types of plantation crops, business scale and conditions
of a particular region; and possibly in the future, may set a cap
on foreign investments.
On behalf of the Board of Directors, I would like to convey our
sincere thanks to our management and all employees of the Group for
their dedication, loyalty, resourcefulness, commitment and
contribution to the success of the Group.
I would also like to take this opportunity to thank
shareholders, business associates, government authorities and all
other stakeholders for their continued confidence, understanding
and support for the Group.
Madam Lim Siew Kim
Chairman
29 April 2015
Strategic Report
Business Model
The Group will continue to focus on its strength and expertise
which are planting more oil palms which includes replanting old
palms with low yield, replace old rubber trees with palm trees and
building more mills to process the FFB. The Group has over the
years created value to shareholders through expansion in a
responsible way. We have in the last few years bought and invested
in new tracts of land and portions remain to be planted. Good land
at reasonable price has become more scarce. The Indonesian
government has in 2014 moved to introduce a law to cap the size of
new plantations owned by foreign companies. The Group remains
committed to use its available resources to develop the land bank
in Indonesia as regulatory constraints permit.
The Group's objectives are to provide appropriate returns to
investors in the long term from operation as well as expansion of
the Group's business, to foster economic progress in the localities
of the Group's activities and to develop the Group's operations in
accordance with the best corporate social responsibility and
sustainability standards.
We believe that sustainable success for the Group is best
achieved by acting in the long-term interests of our shareholders,
our partners and society.
Our Strategy
The Group's objectives are to provide an appropriate level of
returns to the investors and to enhance shareholders' value.
Profitability however is very much dependent on the CPO price which
is volatile and determined by supply and demand. In the short term,
CPO price remains under pressure due to the abundance of vegetable
oil and the falling crude oil prices which undermine the potential
of CPO as a source for biodiesel. However the Group believes in the
long-term viability of palm oil which remains a cheap and the most
productive source of vegetable oil in a growing population.
The Group's strategies therefore focus on maximising yield per
hectare above 22mt/ha, mill production efficiency of 110%,
minimising production costs below $300/mt and streamlining estate
management. For the year under review, the Group achieved a yield
of 19.1mt/ha, 115% mill efficiency and production cost of $247/mt.
This compared to 2013 yield of 19.5mt/ha, 102% mill efficiency and
production cost of $276/mt. Despite stiff competition for external
crops from surrounding millers, the Group is committed to purchase
more external crops from third parties at competitive, yet fair
prices, to maximise the efficiency of the mills. With higher
throughput, the mills achieved economy of scales in production. A
mill achieves 100% mill efficiency when it operates 16 hours a day
for 300 days per annum.
In line with the commitment to reduce its carbon foot prints,
the Group plans to construct in stages biogas plants at all its
mills to tap the methane gas to generate electrical power and at
the same time reduces the consumption of fossil fuel. It plans to
reduce greenhouse gas emissions per metric ton of CPO produced in
the next two to three years.
The Group will continue to follow-up and offer competitive and
fair compensation to villagers so that land can be cleared and
planted.
Financial Review
The financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB") as adopted by the European
Union ("EU") and with those parts of the Companies Act 2006
applicable to companies preparing their accounts under IFRS.
For the year ended 31 December 2014, revenue for the Group was
$251.3 million, 24% higher than $201.9 million reported in 2013 due
primarily to the increase in FFB production and higher purchase of
third party crops for the mills.
Group operating profit for 2014 before biological asset
adjustment was $78.8 million, 32% more than $59.6 million in
2013.
FFB production for 2014 was 857,400mt, 9% higher than the
787,500mt produced in 2013. The yield remains below expectation due
primarily to the lagged effect from dry weather in first three
months of the year in North Sumatera and parts of Peninsular
Malaysia, followed by wide spread flooding in North Sumatera at the
end of the year and a higher proportion of young palms. FFB
bought-in from local smallholders for 2014 was 626,200mt (2013:
496,600mt), 26% higher compared to 2013. The supply of third party
crops was visibly lower in the third quarter of 2014 due to a low
crop cycle and impact of dry weather. The drought induced tree
stress resulted in late ripening of the fruits. During the year,
FFB processed by the Group's mills was 1.38 million mt, 12% higher
than last year of 1.23 million mt and CPO production was 12% higher
at 294,200mt, compared to 262,600mt in 2013.
Profit before tax and after BA adjustment for the Group was
$51.2 million, 67% lower compared to $153.4 million in 2013. The BA
adjustment was a debit of $33.7 million, compared to a credit of
$93.7 million in 2013. The CPO price for 2014 was very volatile. It
ended the year at $700/mt lower than the 10-year average CPO price
at $750/mt for the first time. As a result the directors have
benchmarked the 10-year average CPO price assumptions against
market expectations and have adopted the CPO price of $700/mt used
in last year's computation of biological assets to represent a more
sustainable CPO price over the long term and have maintained the
price for the current year. This is supported by the World Bank
Commodities Price Forecast for palm oil for 2015 at $700/mt. The
lower biological value was due to the weakening of Rupiah against
US Dollar and also was due to a higher discount rate applied in the
determination of biological assets from 15.8% to 16.4%. The higher
discount rate is a reflection of the increased sovereign risks in
Indonesia.
The average CPO price for 2014 was $815/mt, 5% lower than 2013
of $857/mt.
Earnings per share before BA adjustment increased by 46% to
132.26cts compared to 90.70cts in 2013. Earnings per share after BA
adjustment fell from 235.95cts to 77.61cts.
The Group's balance sheet remains strong notwithstanding an
unrealised exchange loss on translation of foreign subsidiaries of
$12.0 million compensated by a land revaluation gain of $0.3
million net of deferred tax. As at 31 December 2014, the Group had
cash and cash equivalents of $125.9 million and borrowings of $34.9
million, giving it a net cash position of $91.0 million, compared
to $63.7 million in 2013. Net Group's borrowings in the year
reduced to $34.9 million (2013: $35.0 million). For these reasons,
the Group adopts a going concern basis of accounting and believe
the Group will continue operation and meet its liabilities for the
foreseeable future.
Business Review
Indonesia
FFB production in North Sumatera, which aggregates the estates
of Tasik, Anak Tasik, Labuhan Bilik, Blankahan, Rambung, Sg Musam
and Cahaya Pelita ("CPA"), produced 342,900mt in 2014 (2013:
339,100mt), 1% higher than 2013. In November and December 2014, CPA
experienced heavy rainfall that inundated over 2,000ha of the
plantation. About 1,400mm of rain fell over 22 days resulting in a
flash flood that reached up to 1.5 metre high. The evacuation of
FFB was not possible until the flood receded. A larger budget will
be allocated to build canals and water gates as part of its flood
mitigation program at CPA.
Ganoderma fungus which attacks the root system of palm oil was
discovered in 8.7% of Anak Tasik plantation covering 766ha. Since
it was first detected in 2007, it has caused the removal of 7,500
palms. Good sanitation and high standards of agronomic practices
remain the main priority to avoid spreading of the infection. We
are currently conducting trials using probiotic microorganism to
improve the soil condition. Insect damage by Oryctes beetle and
termites resulting in significant loss of newly planted palm
continued to affect trees in Labuhan Bilik and to a smaller extent
in Blankahan. A combination of treatment with pheromone-trap and
insecticide were used to control the insect population. 270ha of
rubber trees in Rambung were also infected by White root disease
which were treated with Anvil fungicide and the situation has since
improved. A replanting programme covering over 1,019ha in Tasik was
completed in November 2014. Replanting was necessary due to
declining yield as workers find it difficult to harvest the palm
trees which were about 30 years old as they have reached an average
height of 16 to 18 metres tall.
FFB production in Bengkulu and South Sumatera, which aggregates
the estates of Puding Mas, Alno, KKST, ELAP and RAA produced
304,200mt (2013: 277,800mt), 9% higher than 2013. With fair weather
in Bengkulu, about 40km of roads were resurfaced with tar while
another 680km of roads were graded and compacted with either gravel
or laterite soil to improve transport of FFB. As most of the
estates are situated close to forest reserves, wild boars and herds
of elephants continued to damage palm trees. Deep trenches and
fencing provide temporary relief. The protracted negotiation with
the villagers over land compensation will have an effect on the
future planting in Bengkulu and South Sumatera.
FFB production in the Riau region, comprising Bina Pitri
estates, produced 116,700mt in 2014 (2013: 116,200mt), marginally
higher than 2013. On the other hand, CPO production improved by 13%
due to the higher purchase of FFB from smallholders despite the
competitiveness for external crops from millers. Our mill offered
higher prices for external crops raising the mill utilization rate
at the expense of a lower operating margin.
FFB production in Kalimantan which comprises of the Sawit Graha
Manunggal estates produced 65,700mt in 2014 (2013: 25,400mt) mainly
from newly matured oil palm area of 4,651ha. FFB yield has
surpassed expectation despite the sandy soil condition. FFB yield
from trees planted in 2010 averaged 8 to 11mt/ha. The low rainfall
over a four month period in the third and beginning of fourth
quarter of 2014 is likely to affect the FFB production in 2015.
Overall bought-in crops for Indonesian operations were 26%
higher at 626,200mt for the year 2014 (2013: 496,600mt). The
average oil extraction rate from our mills was 21.3% in 2014 (2013:
21.4%). The extraction rate was lower due to the lower quality of
external crops.
Malaysia
FFB production in 2014 was 3% lower at 28,000mt, compared to
29,000mt in 2013. The Malaysian operations faced difficulty in
recruiting foreign workers hampering harvesting and estate work. In
December 2014, the harvest was interrupted for two weeks as the
estates were inaccessible due to flooding and landslide brought
about by the incessant year end monsoon rain and seasonal high
tide. The Malaysian plantations had $0.9 million pre-tax loss in
2014 while it broke even in 2013.
Commodity Prices
The CPO CIF Rotterdam price started the year at $890/mt (2013:
$835/mt) and reached a peak of $993/mt in March 2014 before
retreating to lower levels for the rest of the year. It ended the
year at $700/mt (2013: $905/mt), averaging $815/mt for the year
(2013: $857/mt).
The soft demand for palm oil due to the abundance of soya and
sunflower oil is likely to curb a quick recovery of the CPO price.
The sudden drop in crude oil prices in the last quarter of 2014 did
not help to boost the competitiveness of CPO as a source of
biodiesel. Perhaps the continuing rise in income levels and
population growth in China, India and Indonesia may drive the
consumption of CPO and would likely lead to a gradual recovery in
CPO prices. The price differential between CPO and soya oil which
has narrowed would remain a concern as a smaller spread could
prompt CPO buyers to switch to rival soya oil. The successful
efforts of Indonesia and Malaysia to introduce mandatory blending
of biodiesel for industrial and commercial purposes likewise could
provide some price support.
Rubber prices averaged $1,605/mt for 2014 (2013: $2,361/mt). Our
small area of 668ha of mature rubber contributed a revenue of $1.8
million in 2014 (2013: $2.5 million).
Corporate Development
In 2014, the Group opened up new land and planted 2,384ha of oil
palm mainly in Kalimantan, boosting planted area including Plasma
by 4% to 63,500ha (2013: 61,100ha). In the same period, 13ha of
matured planting was cleared to make way for effluent treatment
plant and nurseries. This excludes the replanting of 1,019ha of oil
palm in North Sumatera. New plantings remain behind schedule due to
delays in finalising settlement of land compensation with villagers
in Bengkulu, Bangka and Kalimantan. The villagers seek compensation
beyond what the Group considered fair and reasonable resulting in
protracted negotiations.
The mill construction in Central Kalimantan is progressing on
schedule. This mill with an initial capacity of 45mt/hr is expected
to be operational in the second quarter of 2015.
The biogas and biomass plant completed at a cost of $5 million
is in operation. The power produced from the biogas plant is
utilized in the biomass plant to produce dried long fibres for
export. There are plans to sell the surplus power amounting to 3.6
million kw per year to the Indonesian National Electricity
Company.
The successful implementation and running of this project will
pave the way for further similar undertakings for the rest of the
Group's mills.
Corporate Social Responsibility
Corporate Social Responsibility ("CSR") is an integral part of
corporate self-regulation incorporated into our business model. Our
Group embraces responsibility for the impact of its activities on
the environment, consumers, employees, communities, stakeholders
and all other members of the public sphere. In engaging the social
dimension of CSR, the Group's business has taken cognizance of the
contribution and further enrichment of its employees while
continuing to make contributions to improve the well-being of the
surrounding community.
The majority of employees and their dependents in the
plantations and mills are housed in self-contained communities
built by the Group. The employees and theirdependents are provided
with free housing, clean water and electricity. The Group also
builds, provides and repairs places of worship for workers of
different religious faiths as well as schools and sports facilities
in these communities.In 2014, the Group spent $234,475 to build
additional facilities and to maintain these amenities. This
includes construction of a new school and kindergarten, renovation
of 13 existing schools and procurement of four new school buses. It
will continue to incur community development expenditure in
2015.
Staff and selected employees are given the opportunity to be
trained and to attend seminars to enhance their working skills and
capacity. The Group provides free education for allemployees'
childrenin the local plantations and communities where they work.
In 2014, scholarships amounting to $27,316 were provided to
children in surrounding villages and selected employees' children
to further their tertiary education in collabration with a
university in Bengkulu. In addition the Group provides funding to
construct educational facilities such as laboratories, libraries,
and computers. The salaries of teachers in the estates and the cost
ofschool buses to transport employees' children to the schools are
provided by the Group. Over the years atotal of 33 schools have
been built with 116 teachers currently employed within our Group
estates. In 2014, the Groupspentsome $778,053 on running the
schools.
The Group continues to provide free comprehensive health care
for all its workers as we believe that every employee and their
dependents should have easy access to health services. We have
established 21clinicsoperated by qualified doctors, nurses and
hospital assistants in the estates.Related healthcare expenses for
2014 were $694,771.
A strong commitment to CSR has a positive impact on employees'
attitudes and boosts employee recruitment. The Group realizes that
employees are valuable assets in order to run an efficient,
effective, profitable and sustainable business and operations.
The Group also recognises its obligations to the wider farming
communities in which it operates. The Indonesian authorities have
established that not less than 20% of the new planted areas
acquired from 2007 onwards are to be reserved for the benefit of
smallholder scheme cooperatives, known as Plasma scheme, and the
Group is integrating such smallholder developments alongside its
estates. In order to aid the development of Plasma scheme, a
subsidiary provided a corporate guarantee to a local bank in excess
of $18 million to cover loans raised by the cooperatives.
The Board supported Kas Desa smallholder village development
programme to supplement the livelihood of the villages. The Group
has to-date financed, developed and managed 22 smallholder village
schemes across four companies.
In addition to education and healthcare which includes the
construction of schools, provision of scholarships, books, the
Group also develops infrastructure such as construction and repair
of 18 bridges and 170km of roads. The Group also provides aid to
villagers such as fruit seedlings, fish fries, cattle and ducks to
start community sustaining programs.
Indonesian Sustainable Palm Oil
The ISPO certification is legally mandatory for all plantations
in Indonesia. In March 2012, ISPO, which is fundamentally aligned
to RSPO (Roundtable on Sustainable Palm Oil) principles, has become
the mandatory standard for Indonesian planters.
A Steering Committee was established to work out a roadmap to
support the ISPO implementation at mills and estates. Workshops and
training sessions on occupational safety and healthcare were
carried out to inculcate a safety culture in workplaces at the
estates and mills in North Sumatera, Riau and Bengkulu. During the
year the Group continued to upgrade its agricultural chemical
stores and diesel fuel storage tanks in various plantations and
mills to meet safety and environmental standards. Standard
operating procedures were refined and documented based on
sustainable oil palm best practices. The Group also conducts
internal audits using an audit checklist adopted from the above
practices to determine the level of compliance. The Group worked
closely with appointed certification consultants in the
implementation of ISPO standard. In January 2014, three
subsidiaries were ISPO certified while another is awaiting
certification approval after completion of all requirement. Another
seven subsidiaries are at various stages of certification
audit.
Care For The Environment and Sustainable Practices
As a Group, we highlight the importance of creating awareness
and implementation of good environmental management practices
throughout the organisation. The Group has been consistently
practising good agricultural practices such as zero burning,
integrated pest management, land terracing and recycling of
biomass. Where the land is undulating, we build terraces for
planting which helps to prevent landslides and provide better
accessibility for employees.
Effluent discharged from some mills is initially treated in
lagoons before being applied to trenches located between rows of
palm trees. Once the effluent dries up, it becomes organic
fertilizer for the oil palm and reduces the application and buying
of inorganic fertilizers. In some estates, empty bunches are
applied to land where it biodegrades to fertilizers.
The Group's first biogas and biomass project in North Sumatera
which was completed in the year will enhance the waste management
treatment in the mill and at the same time mitigate greenhouse
biogas emissions. Under this project, the methane gas will be
trapped and will be used to generate and supply power to its
biomass plant without dependency on fossil fuel. Further similar
undertakings for the Group's mills are planned and shall be
implemented in stages.
The Group is committed to implementing good agricultural
practices as spelled out in its standard operating procedures for
the planting of oil palm. Integrated Pest Management has been
adopted to control pests and to improve biological balance.
Barn Owls were introduced to control rats. Beneficial plants of
Turnera sp, Cassia cobannesisand Antigonon leptosus were planted to
attract predator insects of caterpillar pests. Weeds are controlled
selectively by using more environmental friendly herbicide such as
Glyphosate.
The usage of Paraquat herbicide and chemicals has been reduced
and minimized to control weeds and vermins.The sprayers are also
trained insafety and spraying techniques. The chemicals are kept in
designated storage and examined at regular intervals. Employees who
handled the use of chemicals undergo medical examination. Natural
vegetation on uncultivable land such as deep peat, very steep areas
and riparian zones along watercourses are maintained to preserve
biodiversity and wildlife corridors.
Two mills in the Bengkulu region have beeninstalled with
Extended Aeration to enhance treatment of the mill effleunts by
mechanical aeration at a cost of about $500,000.
All our mills utilize the waste mesocarp fibre from the oil palm
fruits as fuel to generate steam from boilers to eventually produce
power from steam turbines. The power generated drives all of the
processing equipment in mills and estate housing. This helps to
reduce reliance on fossil fuel such as diesel in our milling
operations.
The Group continues to comply and preserve the High Conservative
Value ("HCV") areas recognised by the Department of Forestry.
Principal risks and uncertainties
The Group's business involves risks and uncertainties of which
the Directors currently consider the following to be material.
There are or may be other risks and uncertainties faced by the
Group that the Directors currently deem immaterial, or of which
they are unaware, that may have a material adverse impact on the
Group. The Board carries out a robust assessment of the principal
risks facing the Group on an annual basis.
Country
The Group's operations are located substantially in Indonesia
and therefore significantly rely on economic and political
stability in Indonesia. The country has recently benefited from a
period of relative political stability, steady economic growth and
stable financial system. The election of the new President in July
2014 was relatively peaceful despite attempts by the opposition to
challenge the results. The new government has introduced highly
unpopular measures to rein in the country fiscal deficits. The
Board is not aware of any attempt by the new government to impose
exchange controls that would restrict the transfer of profits from
Indonesia to the UK. The Board perceives that the Group will be
able to continue to extract profits from its subsidiaries in
Indonesia for the foreseeable future.
The Group acquires the land exploitation rights ("HGU") after
paying land acquisition and HGU processing costs. These costs are
capitalized as land asset costs since the asset characteristics
fulfill the recognition criteria. The Group holds its land under 25
or 35 year renewable leases which the Directors believe will be
renewed when due by complying with existing law and regulations.
Any changes in law and regulations relating to land tenure could
have negative impact on the Group's activities.
The Indonesian Government passed a Law No. 39 on Plantation, in
October 2014 which specifies that plantation business development
shall be prioritized to domestic investments and the amount of
foreign direct investments shall be limited with regard to national
interest and it also provides that restrictions on foreign
investment shall be based on types of plantation crops, business
scale and conditions of a particular region and these shall be
regulated by Government regulations. Since the introduction of the
new law, there is no indication so far by the Indonesian Government
as to how the new law maybe applied to oil palm plantations and the
criteria for which the factors stated above will be applied in
regard to any restriction of foreign investment. Until the said
Government regulations are introduced, the impact of this new law
cannot be assessed fully at this juncture.
Exchange Rates
CPO is a US Dollar denominated commodity and a significant
proportion of revenue costs in Indonesia (such as fertiliser and
fuel) and development costs (such as heavy machinery and mills
equipment) are imported and are US Dollar related. Adverse
movements of Rupiah against US Dollar can have a negative effect on
the operating costs. The Rupiah has depreciated by 2% against US
Dollar in 2014, on top of 26% depreciation in 2013. The Board has
taken the view that these risks are inherent in the business and
feels that adopting hedging mechanisms to counter the negative
effects of foreign exchange volatility are both difficult to
achieve and would not be cost effective.
Weather and natural disasters
Oil palms rely on regular sunshine and rainfall but these
weather patterns can vary and extremes such as unusual dry periods
or, conversely, heavy rainfall leading to flooding in some
locations do occur. Dry periods, in particular, will affect yields
in the short and medium terms but any deficits caused tend to be
made up at a later date. North Sumatera experience low rainfall for
the first three months of 2014 while Central Kalimantan had 4
months of low rainfall in the third and fourth quarter of 2014
which will have impact on the FFB production in 2015. High levels
of rainfall can disrupt estate operations and result in harvesting
delays with loss of oil palm fruits or deterioration in fruit
quality. Any delay in collection of harvested FFB during the rainy
season could also raise the level of free fatty acid ("FFA") in the
CPO. CPO with higher level of FFA is normally sold at a discount to
market prices. The high rainfall of 1,400mm over 22 days
experienced by the plantations in CPA in November and further
floods in December 2014 damaged the roads resulting in difficulty
in transportation of FFB to the mills. Where appropriate, bunding
is built around flood prone areas and canals/drainage constructed
and adapted either to evacuate surplus water or to maintain water
levels in areas quick to dry out. Where practical, natural
disasters are covered by insurance policy. Low level of sunshine
could result in delay in formation of FFB resulting in potential
loss of revenue. The geographical spread of the plantations should
nevertheless mitigate the risks of weather related events.
Cultivation risks
As in any plantations business, there are risks that crops from
the Group's estate operations may be affected by pests and diseases
like ganoderma fungus and white rot. Crop damages by oryctes
beetles, nettie caterpillar, termites, vermins, elephants and wild
boars are common. Agricultural best practice and husbandry can to
some extent mitigate these risks but they cannot be entirely
eliminated.
Other operational factors
The Group's plantation productivity is dependent upon necessary
inputs, including, in particular fertiliser, spare-parts, chemicals
and fuel. Whilst the Directors have no reason to anticipate
shortages of such inputs, Group's operations could be materially
disrupted should such shortages occur over an extended period.
Increase in prices would significantly increase production costs.
With the removal of fuel subsidy by the new Indonesian government
in January 2015, diesel will be priced in accordance to global oil
prices. When global oil prices rise, it will put pressure on
production inputs which includes the transportation of FFB.
The Group has bulk storage facilities located within its mills
which are adequate to meet the Group's requirements for CPO
storage. Nevertheless, delays in collection of CPO sold could
result in CPO production exceeding the available CPO storage
capacity. This would likely force a temporary halt in FFB
processing resulting in loss of crop.
The Group maintains insurance to cover those risks against which
the Directors consider it economical to insure. Certain risks
(including the risk of crop loss through fire, earthquake, flood
and other perils potentially affecting the planted areas on the
Group's estates) if materializes could dent the potential revenues,
for which insurance cover is either not available or would in the
opinion of the Directors be disproportionately expensive, are not
insured. These risks are mitigated by the geographical spread of
the plantations and to the extent feasible by management practices
but an occurrence of an adverse uninsured event could result in the
Group sustaining material losses.
There have been substantial increases in governmental directed
minimum wage levels in Indonesia. The Group pays not less than the
minimum wage and the increase will result in a significant rise in
Group's employment costs. The regional hikes in minimum wages for
2015 ranges from 8.9% in South Sumatera to 27.4% in Bangka. Higher
wages will erode the profitability as it forms a substantial part
of the production costs.
Produce prices
The profitability and cash flow of the plantation operations
depend upon world prices of CPO and upon the Group's ability to
sell CPO at price levels comparable with world prices.
CPO is a primary commodity and is affected by the world economy,
levels of inflation, availability of alternative soft oils such as
soya and sunflower oils. CPO price also moves in tandem with crude
oil prices which determines the competitiveness of CPO as a source
of biodiesel. This may lead to significant price swings although,
the Directors believe that such swings should be moderated by
continuous demand in economies like China, India and Indonesia.
Indonesia followed Malaysia to slash the CPO export tax to 0%
from October 2014 and will result in cheaper CPO to foreign
refiners. Larger export would lead to lower inventory of CPO which
augurs well for produce price.
Expansion
The Group is planning to plant more oil palm. In areas where the
Group holds the land rights (or Izin lokasi), the settlers and land
owners are compensated before land is cleared for planting. The
Group compensates the settlers and land owners in a transparent and
fair way. The negotiation for compensation can, however, involve a
considerable number of local individuals with similar ownership
claims and this can cause difficulties in reaching agreement with
all affected parties. Such difficulties have in the past caused
delays to the planting programmes. It is rather difficult to
foresee with reliable accuracy what area will be available for
planting out of the total area covered by land rights. Much depends
upon the success of negotiations with settlers and land owners and
satisfactory resolution of land title issue. The Group has to-date
mixed success in managing such periodic delays and disruptions
especially in South Sumatera, Bengkulu, Bangka and Kalimantan.
The Directors believe that when the land becomes available for
planting, the development programmes can be funded from available
Group cash resources and future operational cash flows,
supplemented with external debt funding. Should, however, land or
cash availability fall short of expectations and the Group is
unable to secure alternative land or funding, the Group's continued
growth may be delayed or curtailed.
Environmental and governance practices
The Group's management and Directors take seriously their
environmental and social responsibilities. The ISPO which
fundamentally aligns with RSPO principles became the mandatory
standard for all Indonesian planters in March 2012.
The estates in North Sumatera are long established. Management
follows industry best-practice guidelines and abides by Indonesian
law with regard to such matters as application of fertilisers,
health and safety. The Group uses empty fruit bunches for mulching
in the estates which is a form of fertiliser and reduces the
consumption of inorganic fertilisers. The liquid effluent from the
mills after treatment is applied to trenches in the estates as a
form of fertiliser. The biogas and biomass plant in North Sumatera
will enhance the waste management treatment of that mill and at the
same time mitigate emissions of biogas. The mill is also expected
to generate economic returns by the sale of dried long fibres which
is processed from empty fruits bunches. It also plans to sell
excess electricity to the government's state electricity grid. The
successful implementation and running of this project will pave the
way for further similar undertakings for the rest of the Group's
mills.
The Group has had an environmental impact assessment undertaken
by an independent consultant for its new project in Kalimantan.
The Group recognises that its plantations hire large numbers of
people and have significant economic importance for local
communities in the areas of the Group's operations. Any major
disputes with employees could disrupt operations. This imposes
social and governance obligations which bring with them risks that
any failure by the Group to meet the standards expected of it may
result in reputational and financial damage. The Group seeks to
mitigate such risks by establishing standard procedures which is
fair to ensure that it meets its obligations, monitoring
performance against those standards and investigating thoroughly
and taking action to prevent recurrence in respect of any failures
identified. The Group undertakes periodic reviews of its management
performance in relation to various matters and this review pays
particular attention to the manner in which the Group has
discharged its corporate social responsibilities including setting
up of Plasma schemes for its new plantations.
Social, community and human rights issues
Any material breakdown in relations between the Group and the
host population in the vicinity of the operations could disrupt the
Group's operations. The Group therefore endeavours to mitigate this
risk by liaising regularly with representatives of surrounding
villages and by seeking to improve local living standards through
mutually beneficial economic and social interaction with the local
villages. In particular, the Group, when possible, gives priority
to applications for employment from members of the local population
and supports specific initiatives to encourage local farmers and
tradesmen to act as suppliers to the Group, its employees and their
dependents. The Group spends considerable sums of money
constructing new roads and bridges and maintaining existing roads
used by villagers and the Group for the transportation of FFB. The
Group also provides technical and management expertise to villagers
to develop oil palm plots or Kebun Kas Desa (village's scheme)
surrounding the operating estates. The returns from these plots are
used to improve villages' community welfare. The Group also
provides corporate guarantee to cooperatives who borrow from local
bank to finance the development of the Plasma scheme mandated by
the government. The loan is primarily secured by a charge over the
Plasma land owned by the cooperatives.
Gender diversity
The AEP Plc Board is composed of three men and one woman with
extensive knowledge in their respective fields of experience. The
Board has taken note of the recent legislative initiatives with
regard to the representation of women on the boards of Directors of
listed companies and will make every effort to conform to its
composition based on legislative requirement.
2014 average employed
during the year
Group Headcount Women Men Total
Board 2 11 13
Senior Management
(GM and Above) - 11 11
Managers & Executives 23 363 386
Full Time 168 4,944 5,112
Part-time Field Workers 3,005 6,682 9,687
Total 3,198 12,011 15,209
% 21% 79% 100%
2013 average employed
during the year
Group Headcount Women Men Total
Board 2 9 11
Senior Management
(GM and Above) 1 13 14
Managers & Executives 32 360 392
Full Time 152 4,878 5,030
Part-time Field Workers 2,968 7,854 10,822
Total 3,155 13,114 16,269
% 19% 81% 100%
Although the Group provides equal opportunities for female
workers in the plantations, the male workers make up a majority of
the field workers due to the nature of work and the remote location
of plantations from the towns and cities. Nevertheless the
percentage of women workforce within the Group increased from 19%
in 2013 to 21% in 2014.
Employees
In 2014, the number of full time workforce averaged 5,522 (2013:
5,447) while the part-time labour averaged 9,687 (2013:
10,822).
The Group has formal processes for recruitment particularly key
managerial positions, where psychometric testing is conducted to
support the selection and hiring decisions. Exit interviews are
also conducted with departing employees to ensure that management
can address any significant issues.
The Group a has a programme for recruiting graduates from
Indonesian universities to join existing employees selected on
regular basis to training programmes organised by the Group's
training centre that provides grounding and refresher courses in
technical aspects of oil palm estate and mill management. The
training centre also conducts regular programmes for all levels of
employees to raise the competency and quality of employees in
general. These programmes are often supplemented by external
management development courses including attending industry
conferences for technical updates. A wide variety of topics is
covered including work ethics, motivation, self-improvement,
company values, health and safety.
A large workforce and their families are housed in the Group's
housing across the Group's plantations. The Group further provides
at its own cost water and electricity and a host of other amenities
including places of worship, schools and clinics. On top of
competitive salaries and bonuses, extensive benefits and privileges
help the Group to retain and motivate its employees.
The Group promotes a policy for creation of equal and ethnically
diverse employment opportunities including with respect to
gender.
The Group has in place key performance linked indicators to
determine increment and bonus entitlements for its employees.
The Group promotes and encourages employee involvement in every
aspect wherever practical as it recognises employees as a valuable
asset and is one of the key contributions to the Group's success.
The employees contribute their ideas, feedback and voice out their
concerns through formal and informal meetings, discussions and
annual performance appraisal. In addition, various work related and
personal training programmes are carried out annually for employees
to promote employee engagement and interaction.
Although the Group does not have a specific policy on employment
of disabled persons, it however employs disabled persons as part of
its workforce. The Group welcomes disabled persons joining the
Group based on their suitability.
Outlook
FFB production for three months to March 2015 was 5% lower
against the same period in 2014. Although the weather has been
relatively wet so far this year, it is too early to forecast
whether the production will be better for the rest of the year.
The CIF (Cost, Insurance, Freight) Rotterdam CPO price opened
the year 2015 at $703/mt and prices are expected to be in the range
of $600/mt to $800/mt for the first half of 2015.
It was reported that the US Dollar appreciated by approximately
2% (2013: +26%) against the Indonesian Rupiah in 2014 as foreign
funds pulled out from Indonesia's equity and bonds markets and fund
managers repositioned their riskier asset classes in emerging
economies. Rupiah weakened further about 5% against US Dollar in
early 2015. The Rupiah may be subjected to some degree of
volatility until reforms undertaken by new government raise
potential growth in Indonesia. Some fund managers see a
depreciating Rupiah not an indication of crisis but should be seen
as a welcome development for improving export competitiveness. A
weaker Rupiah makes palm oil cheaper and may stimulate purchases by
foreign refiners.
The continuing rise in income levels and population growth in
China, India and Indonesia would be expected to drive the
consumption of CPO and likely lead to a gradual recovery in CPO
prices. The price differential between CPO and soya oil which has
narrowed from a 10-year discount average of $160/mt to around
$100/mt would remain a concern as a smaller spread could prompt CPO
buyers to switch to rival soya oil. However the Indonesian and
Malaysian government efforts to rein in fiscal deficits by
successfully introducing mandatory blending of biodiesel up to 10%
effective for industrial and commercial purposes could provide some
price support.
The rising material costs and wages in Indonesia are expected to
increase the overall production cost in 2015. Indonesia's minimum
wage has increased at an average rate of between 8% and 15% per
annum over the last few years. The Indonesian government recently
announced regional hikes in 2015 minimum wage ranging from 8.9% in
South Sumatera to 27.4% in Bangka. These wage hikes will raise
overall estate costs and erode profit margins. A depreciating
Rupiah would also mean that imports of fertilisers and equipment
for the mills and estates will be more costly.
Nevertheless barring any unforeseen circumstances, the Group is
confident that CPO demand will be sustainable in the long term on
the backdrop of global economic recovery and we can expect a
satisfactory profit level and cash flow for 2015.
On behalf of the Board
Dato' John Lim Ewe Chuan
Executive Director, Corporate Finance and Corporate Affairs
29 April 2015
Consolidated Income Statement
For the year ended 31 December 2014
2014 2013
Result BA adjustment Result BA adjustment
before Total before Total
Continuing BA adjustment BA adjustment
operations Note
$000 $000 $000 $000 $000 $000
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Revenue 2 251,258 - 251,258 201,917 - 201,917
Cost of sales (164,666) - (164,666) (133,400) - (133,400)
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Gross profit 86,592 - 86,592 68,517 - 68,517
Biological
asset
revaluation
movement - (33,718) (33,718) - 93,661 93,661
Administration
expenses (7,747) - (7,747) (8,898) - (8,898)
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Operating
profit 78,845 (33,718) 45,127 59,619 93,661 153,280
Exchange gains
/ (losses) 852 - 852 (2,781) - (2,781)
Finance income 3 7,276 - 7,276 4,676 - 4,676
Finance expense 3 (2,019) - (2,019) (1,774) - (1,774)
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Profit before
tax 4 84,954 (33,718) 51,236 59,740 93,661 153,401
Tax expense (20,967) 8,429 (12,538) (16,178) (23,415) (39,593)
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Profit for
the year 63,987 (25,289) 38,698 43,562 70,246 113,808
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Attributable
to:
- Owners
of the parent 52,422 (21,660) 30,762 35,950 57,571 93,521
-
Non-controlling
interests 11,565 (3,629) 7,936 7,612 12,675 20,287
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
63,987 (25,289) 38,698 43,562 70,246 113,808
------------------ ------- --------------- -------------- ----------- --------------- -------------- ----------
Earnings per
share for
profit
attributable
to the owners
of the parent
during the
year
7 77.61cts 235.95cts
* basic
7 77.53cts 235.67cts
* diluted
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
2014 2013
$000 $000
------------------------------------- ------------ --- -------------
Profit for the year 38,698 113,808
------------------------------------- ------------ --- -------------
Other comprehensive income:
Items may be reclassified to
profit or loss:
Loss on exchange translation
of foreign operations (12,019) (112,824)
Net other comprehensive expense
may be reclassified to profit
or loss (12,019) (112,824)
------------------------------------- ------------ --- -------------
Items not to be reclassified
to profit or loss:
Unrealised gain on revaluation
of the estates 386 31,807
Deferred tax on revaluation
of assets (96) (7,951)
Remeasurement of retirement
benefits plan (680) 278
Deferred tax on retirement
benefits 170 (71)
Net other comprehensive (expense)
/ income not being reclassified
to profit or loss (220) 24,063
------------------------------------- ------------ --- -------------
Total other comprehensive expenses
for the year, net of tax (12,239) (88,761)
Total comprehensive income for
the year 26,459 25,047
Attributable to:
- Owners of the parent 21,188 21,508
- Non-controlling interests 5,271 3,539
------------------------------------- ------------ --- -------------
26,459 25,047
------------------------------------- ------------ --- -------------
Consolidated Statement of Financial Position
As at 31 December 2014
2014 2013
Note $000 $000
-------------------------------- ------ ----------- -----------
Non-current assets
Biological assets 9 251,374 265,835
Property, plant and equipment 9 227,380 213,342
Receivables 3,007 5,649
481,761 484,826
-------------------------------- ------ ----------- -----------
Current assets
Inventories 7,846 8,448
Tax receivables 9,231 8,464
Trade and other receivables 8,807 7,271
Cash and cash equivalents 125,937 98,738
151,821 122,921
-------------------------------- ------ ----------- -----------
Current liabilities
Loans and borrowings (313) (84)
Trade and other payables (21,010) (15,331)
Tax liabilities (10,752) (4,988)
Dividend payables (20) -
(32,095) (20,403)
-------------------------------- ------ ----------- -----------
Net current assets 119,726 102,518
-------------------------------- ------ ----------- -----------
Non- current liabilities
Loans and borrowings (34,625) (34,937)
Deferred tax liabilities (44,368) (55,298)
Retirement benefits -
net liabilities (4,445) (3,099)
-------------------------------- ------ ----------- -----------
(83,438) (93,334)
-------------------------------- ------ ----------- -----------
Net assets 518,049 494,010
-------------------------------- ------ ----------- -----------
Issued capital and reserves
attributable to owners
of the parent
Share capital 15,504 15,504
Treasury shares (1,171) (1,171)
Share premium 23,935 23,935
Capital redemption reserve 1,087 1,087
Revaluation reserves 57,029 56,767
Exchange reserves (190,503) (181,107)
Retained earnings 521,355 493,031
-------------------------------- ------ ----------- -----------
427,236 408,046
Non-controlling interests 90,813 85,964
-------------------------------- ------ ----------- -----------
Total equity 518,049 494,010
-------------------------------- ------ ----------- -----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
Capital Foreign
Share Treasury Share redemption Revaluation exchange Retained Non-controlling Total
capital shares premium reserve reserve reserve earnings Total interests equity
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Balance at 31 December
2012 after restatement 15,504 (1,171) 23,935 1,087 36,799 (88,838) 401,006 388,322 83,043 471,365
Items of other comprehensive
income
-Unrealised gain on revaluation
of estates, net of tax - - - - 20,062 - - 20,062 3,794 23,856
-Disposal of land - - - - (94) - 94 - - -
-Remeasurement of retirement
benefit plan, net of
tax - - - - - - 194 194 13 207
-Loss on exchange translation
of foreign operations - - - - - (92,269) - (92,269) (20,555) (112,824)
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Total other comprehensive
income / (expenses) - - - - 19,968 (92,269) 288 (72,013) (16,748) (88,761)
Profit for the year - - - - - - 93,521 93,521 20,287 113,808
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Total comprehensive income
and expenses for the
year - - - - 19,968 (92,269) 93,809 21,508 3,539 25,047
Dividends paid - - - - - - (1,784) (1,784) (618) (2,402)
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Balance at 31 December
2013 15,504 (1,171) 23,935 1,087 56,767 (181,107) 493,031 408,046 85,964 494,010
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Items of other comprehensive
income
-Unrealised gain on revaluation
of estates, net of tax - - - - 262 - - 262 28 290
* Remeasurement of retirement benefit plan,
net of tax - - - - - - (440) (440) (70) (510)
-Loss on exchange translation
of foreign operations - - - - - (9,396) - (9,396) (2,623) (12,019)
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Total other comprehensive
income / (expenses) - - - - 262 (9,396) (440) (9,574) (2,665) (12,239)
Profit for the year - - - - - - 30,762 30,762 7,936 38,698
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Total comprehensive income
and expenses for the
year - - - - 262 (9,396) 30,322 21,188 5,271 26,459
Dividends paid - - - - - - (1,998) (1,998) (422) (2,420)
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Balance at 31 December
2014 15,504 (1,171) 23,935 1,087 57,029 (190,503) 521,355 427,236 90,813 518,049
------------------------------------------------- -------- --------- -------- ----------- ------------ ----------- --------- --------- ---------------- ----------
Consolidated Statement of Cash Flows
For the year ended 31 December 2014
2014 2013
$000 $000
-------------------------------------------- --------- ---------
Cash flows from operating activities
Profit before tax 51,236 153,401
Adjustments for:
BA adjustment 33,718 (93,661)
Loss / (Profit) on disposal
of tangible fixed assets 36 (319)
Depreciation 6,833 6,406
Retirement benefit provisions 951 1,325
Net finance income (5,257) (2,902)
Unrealised (gain) / loss in
foreign exchange (852) 2,781
Property, plant and equipment
written off 135 97
Operating cash flow before
changes in working capital 86,800 67,128
Decrease / (Increase) in inventories 451 (3,591)
Decrease in non-current, trade
and other receivables 664 2,456
Increase in trade and other
payables 5,929 2,400
-------------------------------------------- --------- ---------
Cash inflow from operations 93,844 68,393
Interest paid (2,019) (1,774)
Retirement benefit paid (61) (244)
Overseas tax paid (17,756) (23,981)
-------------------------------------------- --------- ---------
Net cash flow from operations 74,008 42,394
-------------------------------------------- --------- ---------
Investing activities
Property, plant and equipment
* purchase (49,754) (49,938)
* sale 156 641
Interest received 7,276 4,676
-------------------------------------------- --------- ---------
Net cash used in investing
activities (42,322) (44,621)
-------------------------------------------- --------- ---------
Financing activities
Dividends paid by Company (1,998) (1,784)
Drawdown of long term loans - 10,000
Finance lease repayment (20) (30)
Dividends paid to minority
shareholders (402) (618)
Repayment of existing long (63) -
term loans
Net cash (used in) / from financing
activities (2,483) 7,568
----------------------------------------- -------- ---------
Increase in cash and cash equivalents 29,203 5,341
Cash and cash equivalents
At beginning of year 98,738 116,250
Foreign exchange (2,004) (22,853)
----------------------------------------- -------- ---------
At end of year 125,937 98,738
----------------------------------------- -------- ---------
Comprising:
Cash at end of year 125,937 98,738
----------------------------------------- -------- ---------
Notes
1 Accounting policies
Anglo-Eastern Plantations Plc ("AEP") is a company incorporated
in the United Kingdom under the Companies Act 2006 and is listed on
the London Stock Exchange. The registered office of AEP is located
at Quadrant House, 6(th) Floor, 4 Thomas More Square, London E1W
1YW, United Kingdom. The principal activity of the Group is
plantation agriculture.
The financial information set out below does not constitute the
company's statutory accounts for 2014 or 2013. Statutory accounts
for the years ended 31 December 2014 and 31 December 2013 have been
reported on by the Independent Auditors. The Independent Auditors'
Reports on the Annual Report and Financial Statements for the years
ended 31 December 2014 and 31 December 2013 were 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.
Statutory accounts for the year ended 31 December 2013 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2014 will be delivered to the Registrar
in due course.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented,
except as detailed in the following paragraph.
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations
(IFRS and IFRIC interpretations) issued by the International
Accounting Standards Board ("IASB") as adopted by the European
Union ("EU") and with those parts of the Companies Act 2006
applicable to companies preparing their accounts under IFRS as
adopted by the EU.
Changes in accounting standards
a) The following new standards, interpretations and amendments
are effective for the first time in these financial statements but
does not have a material effect on the Group's financial
statements:
-- IFRS 10 Consolidated Financial Statements (effective for
accounting periods beginning on or after 1 January 2014)
-- IFRS 11 Joint Arrangements (effective for accounting periods
beginning on or after 1 January 2014)
-- IFRS 12 Disclosures of Interest in Other Entities (effective
for accounting periods beginning on or after 1 January 2014)
-- IAS 27 Separate Financial Statements (effective for
accounting periods beginning on or after 1 January 2014)
-- IAS 28 Investments in Associates and Joint Ventures
(effective for accounting periods beginning on or after 1 January
2014)
-- IAS 32 Amendments - Offsetting Financial Assets and Financial
Liabilities (effective for accounting periods beginning on or after
1 January 2014)
-- IAS 36 Amendments - Recoverable Amounts Disclosures for
Non-financial Assets (effective for accounting periods beginning on
or after 1 January 2014)
-- IFRIC 21 Levies (effective for accounting periods beginning on or after 1 January 2014)
b) New standards, interpretations and amendments not yet effective.
The following new standards, interpretations and amendments are
effective for periods beginning after 1 January 2015 and have not
been applied in these financial statements:
-- IFRS 9 Financial Instruments (effective for accounting
periods beginning on or after 1 January 2018)*
-- IFRS 15 Revenue from Contracts with Customers (effective for
accounting periods beginning on or after 1 January 2017)*
-- IAS 16 Amendments - Property, Plant and Equipment (effective
for accounting periods beginning on or after 1 January 2016)*
-- IAS 19 Amendments - Defined Benefit Plans: Employee
Contributions (effective for accounting periods beginning on or
after 1 July 2014)
-- IAS 41 Amendments - Agriculture (effective for accounting
periods beginning on or after 1 January 2016)*
*These standards and interpretations are not endorsed by the EU
at present.
None of the above new standards, interpretations and amendments
are expected to have a material effect on the Group's future
financial statements except for IAS 16 and IAS 41. The amendments
to IAS 16 and IAS 41 change the accounting requirements for
biological assets that meet the definition of bearer plants.
Biological assets that meet the definition of bearer plants are
required to account for as bearer plants in accordance with IAS 16
using either cost model or revaluation model. The produce growing
on bearer plants will remain within the scope of IAS 41 measured at
fair value less costs to sell.
The biological assets of the Group fall within the definition of
bearer plants. The directors are in the process of quantifying the
impact that would have on the Group net assets with the adoption of
the amended IAS 16 and IAS 41.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
Business combinations
The consolidated financial statements incorporate the results of
business combinations using the purchase method. In the
consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition date.
Acquisitions of entities that comprise principally land with no
active plantation business do not represent business combinations,
in such cases, the amount paid for each acquisition is allocated
between the identifiable assets/liabilities at the acquisition
date.
Foreign currency
The individual financial statements of each subsidiary are
presented in the currency of the country in which it operates (its
functional currency) with the exception of the Company and its UK
subsidiaries which are presented in US Dollar. The presentation
currency for the consolidated financial statements is also US
Dollar, chosen because, as internationally traded commodities, the
price of the bulk of the Group's products are ultimately link to
the US Dollar.
On consolidation, the results of overseas operations are
translated into US Dollar at average exchange rates for the year
unless exchange rates fluctuate significantly in which case the
actual rate is used. All assets and liabilities of overseas
operations are translated at the rate ruling at the balance sheet
date. Exchange differences arising on re-translating the opening
net assets at opening rate and the results of overseas operations
at actual rate are recognised directly in equity (the "foreign
exchange reserve"). Exchange differences recognised in the income
statement of Group entities' separate financial statements on the
translation of long-term monetary items forming part of the Group's
net investment in the overseas operation concerned are reclassified
to the foreign exchange reserve if the item is denominated in the
presentational currency of the Group or of the overseas operation
concerned.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to date of disposal are transferred to the income
statement as part of the profit or loss on disposal.
All other exchange profits or losses are credited or charged to
the income statement.
Revenue recognition
Revenue includes
- amounts receivable for produce provided in the normal course
of business, net of sales related taxes and levies, including
export taxes;
- amounts received for sales of palm kernel shell, rubber wood
and other income of an operating nature.
Sales of CPO, palm kernel and rubber slab are recognised when
goods are delivered or allocated to a purchaser. Delivery or
allocation does not take place until contracts are paid for. Sales
of latex are recognised on signing of sales contract, this being
the point at which the significant risks and rewards of ownership
are passed over to the buyer. Other income mainly consists of
amounts received from sales of nut shell, which is recognised when
the goods are delivered.
Share based payments
Share options are measured at fair value (excluding the effect
of non market-based vesting conditions) at the date of grant. This
fair value is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non market-based
vesting conditions.
Fair value is measured by use of a binomial model. The expected
life used in the model has been adjusted, based on management's
best estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
Provided that all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting
conditions are satisfied.
Capitalisation on development activities
Interest capitalisation
Interest on third party loans directly related to field
development is capitalised in the proportion that the opening
immature area bears to the total planted area of the relevant
estate. Interest on loans related to construction in progress (such
as an oil mill) is capitalised up to the commissioning of that
asset. These interest rates are booked at the rate prevailing at
the time.
Plantation development
Plantation development comprises cost of planting and
development on oil palm and other plantation crops. Costs of new
planting and development of plantation crops are capitalised from
the stage of land clearing up to the stage of maturity or subject
to certificate of Land Exploitation Rights (HGU) being obtained,
whichever is earlier. The costs of immature plantations consist
mainly of the accumulated cost of land clearing, planting,
fertilising and maintaining the plantation, borrowing costs and
other indirect overhead costs up to the time the trees are
harvestable and to the extent appropriate.
Tax
UK and foreign corporation tax is provided at amounts expected
to be paid or recovered using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
The directors consider that the carrying amount of tax
receivables approximates its fair value.
Dividends
Equity dividends are recognised when they become legally
payable. The Company pays only one dividend each year as a final
dividend which becomes legally payable when approved by the
shareholders at the next following annual general meeting.
Fair value measurement
A number of assets and liabilities included in the Group's
financial statements require measurement at, and/or disclosure of,
fair value. The fair value measurement of the Group's financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair
value measurements are categorised into different levels based on
how observable the inputs used in the valuation technique utilised
are (the 'fair value hierarchy'):
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly;
-- Level 3 - unobservable inputs for the asset or liability.
The classification of an item into the above levels is based on
the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item. Transfers of items
between levels are recognised in the period they occur.
The Group measures the following assets at fair value:
-- Biological assets (note 9)
-- Revalued land - Property, plant and equipment (note 9)
For more detailed information in relation to the fair value
measurement of the items above, please refer to the applicable
notes.
Property, plant and equipment
All items of property, plant and equipment are initially
measured at cost. Cost includes expenditure that is directly
attributable to the acquisition of the items. After initial
recognition, all items of property, plant and equipment except land
and construction in progress, are stated at cost less accumulated
depreciation and any accumulated impairment losses.
The Indonesian authorities have granted certain land
exploitation rights and operating permits for the estates. The land
rights are usually renewed without significant cost subject to
compliance with the laws and regulations of Indonesia. Therefore,
the Group has classified the land rights as leasehold land and
accounted for as an indefinite finance lease. Estate land is
subsequently carried at fair value, based on periodic valuations on
an open market basis by a professionally qualified valuer. These
revaluations are made with sufficient regularity to ensure that the
carrying amount does not differ materially from that which would be
determined using fair value at the end of the reporting period.
Changes in fair value are recognised in other comprehensive income
and accumulated in the revaluation reserve except to the extent
that any decrease in value in excess of the credit balance on the
revaluation reserve, or reversal of such a transaction, is
recognised in income statement. On the disposal of a revalued
estate, any related balance remaining in the revaluation reserve is
transferred to retained earnings as a movement in reserves.
Construction in progress is stated at cost. The accumulated
costs will be reclassified to the appropriate class of assets when
construction is completed and the asset is ready for its intended
use. Construction in progress is also not depreciated until such
time when the asset is available for use.
Buildings and oil mills are depreciated using the straight-line
method. All other property, plant and equipment items are
depreciated using the double-declining-balance method. The yearly
rates of depreciation are as follows:
Buildings - 5% to 10% per annum
Oil Mill - 5% per annum
Estate plant, equipment & vehicle - 12.5% to 50% per
annum
Office plant, equipment & vehicle - 25% to 50% per annum
Biological assets
Biological assets comprise oil palm trees and nurseries. The
biological process commences with the initial preparation of land
and planting of seedlings and ceases with the delivery of crop in
the form of fresh fruit bunches ("FFB") to the manufacturing
process in which crude palm oil and palm kernel are extracted from
the FFB.
Biological assets are carried at fair value less costs to sell
determined on the basis of the net present value of cash flows
arising in producing FFB. No account is taken in the valuation of
future replanting. Biological assets are valued at each accounting
date based upon a valuation of the planted areas using a discounted
cash flow method by reference to the FFB expected to be harvested
over the full remaining productive life of the trees up to 20
years. Areas are included in the valuation once they are planted.
However oil palm which are not yet mature at the accounting date,
and hence are not producing FFB, are valued on a similar basis but
with the discounted value of the estimated cost to complete
planting and to maintain the assets to maturity being deducted from
the discounted FFB value. Movement in valuation surplus of
biological assets is charged or credited to the income statement
for the relevant period (BA adjustment).
Leased assets
Assets financed by leasing agreements which give rights
approximating to ownership (finance leases) are capitalised at
amounts equal to the original cost of the asset to the lessors and
depreciation is provided on the asset over the shorter of the lease
term or its useful economic life in accordance with Group
depreciation policy for those held at cost. Land rights are held at
fair value and revalued at the balance sheet date. The capital
elements of future obligations under finance leases are included as
liabilities in the balance sheet and the current year's interest
element is charged to the income statement to produce a constant
rate of charge on the balance of capital repayments outstanding.
There are no operating leases.
Impairment
Impairment tests on tangible assets are undertaken annually on
31 December. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use or fair value,
less costs to sell), the asset is written down accordingly.
Impairment charges are included in the administrative expenses in
the income statement, except to the extent they reverse gains
previously recognised in the statement of recognised income and
expense.
Inventories
FFB harvested from the biological assets are stated at fair
value less costs to sell at the point of harvest. The fair value
gain arising on the initial recognition of harvested produce is the
result of the FFB weight produced multiplied by the FFB price
adjusted for transportation costs to sell. There is an active
market for FFB and the price is based on statistics provided by the
government for each region.
The gain/(loss) arising on the initial recognition at the point
of harvest is recognised in the income statement within the
biological asset revaluation. The FFB is transferred to the mill,
processed in to CPO and sold within 24 hours so the write off of
the FFB is netted off against the initial recognition within the
biological asset revaluation.
All other inventories are initially recognised at cost, and
subsequently at the lower of cost and net realisable value. In the
case of processed produce for sale which comprises palm oil and
kernel, cost represents the monthly weighted-average cost of
production, and appropriate production overheads. Estate and mill
consumables are valued on a weighted average cost basis.
Financial assets
All the Group's receivables and loans are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. They are recognised at fair value at
inception and subsequently at amortised cost. No impairment
provisions have been considered necessary.
Cash and cash equivalents consist of cash in hand and short term
deposits at banks with an original maturity of not exceeding three
months. Bank overdrafts are shown within loans and borrowings under
current liabilities on the balance sheet.
There are no assets in hedging relationships and no financial
assets or liabilities available for sale.
Financial liabilities
All the Group's financial liabilities are non-derivative
financial liabilities.
Bank borrowings and long term development loans are initially
recognised at fair value and subsequently at amortised cost, which
is the total of proceeds received net of issue costs. Finance
charges are accounted for on an accruals basis and charged in the
income statement, unless capitalised according to the policy as set
out under Interest capitalisation above.
Trade and other payables are shown at fair value at recognition
and subsequently at amortised cost.
Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the balance sheet
differs from its tax base except for differences in the initial
recognition of an asset or liability in a transaction which is not
a business combination and at the time of the transaction affects
neither accounting nor taxable profit.
The Group recognises deferred tax liabilities arising from
taxable temporary differences on investments in subsidiaries,
except where the Group is able to control the reversal of the
temporary differences and it is probable that the temporary
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is possible that taxable profit will be
available against which the difference can be utilised.
Deferred tax is recognised on temporary differences arising on
property revaluation surpluses.
Deferred tax is determined using the tax rates that are enacted
or substantively enacted at the balance sheet date. Deferred tax is
charged or credited in the income statement, except when it relates
to items charged or credited directly to equity, such as
revaluations, in which case the deferred tax is also dealt with in
equity; in this case assets and liabilities are offset.
Retirement benefits
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated income statement in the year to which
they relate.
Defined benefit schemes
The Group operates a number of defined benefit schemes in
respect of its Indonesian operations. These schemes' surpluses and
deficits are measured at:
-- The fair value of plan assets at the reporting date; less
-- Plan liabilities calculated using the projected unit credit
method discounted to its present value using yields available on
high quality corporate bonds that have maturity dates approximating
to the terms of the liabilities; plus
-- Unrecognised past service costs; less
-- The effect of minimum funding requirements agreed with scheme trustees.
Remeasurements of the net defined obligation are recognised
directly within equity. The remeasurements include:
-- Actuarial gains and losses;
-- Return on plan assets (interest exclusive);
-- Any asset ceiling effects (interest inclusive).
Service costs are recognised in comprehensive income, and
include current and past service costs as well as gains and losses
on curtailments.
Net interest expense / (income) is recognised in comprehensive
income, and is calculated by applying the discount rate used to
measure the defined benefit obligation / (asset) at the beginning
of the annual period to the balance of the net defined benefit
obligation / (asset), considering the effects of contributions and
benefit payments during the period.
Gains or losses arising from changes to scheme benefits or
scheme curtailment are recognised immediately in comprehensive
income.
Settlements of defined benefit schemes are recognised in the
period in which the settlement occurs.
Treasury shares
Consideration paid or received for the purchase or sale of the
Company's own shares for holding in treasury is recognised directly
in equity, where the cost is presented as the treasury share
reserve. Any excess of the consideration received on the sale of
treasury shares over the weighted average cost of shares sold, is
taken to the share premium account.
Any shares held in treasury are treated as cancelled for the
purpose of calculating earnings per share.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts and
guarantees the indebtedness of other companies within the Group,
the Company considers these to be insurance arrangements and
accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time that
it becomes probable that the Company will be required to make a
payment under the guarantee.
Critical accounting estimates and judgements
The preparation of the Group financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect
the reported assets and liabilities and reported revenue and
expenses. Actual results could differ from those estimates and
accordingly they are reviewed on an on-going basis. The main areas
in which estimates are used are: fair value of biological assets,
property, plant and equipment, deferred tax and retirement
benefits.
Revisions to accounting estimates are recognised in the period
in which the estimate is revised or the revision affects only that
period, or in the period of revision and future periods if the
revision affects both current and future periods.
Assumptions regarding the valuation of biological assets,
property, plant and equipment are set out in note 9. Assumptions
regarding the valuation of agricultural produce at the point of
harvest less costs to sell are set out in the inventories
accounting policy. The Group's policy with regard to impairment of
such assets is set out above.
2 Revenue
2014 2013
$000 $000
Sales of produce:
- CPO 247,868 198,803
- Rubber 1,836 2,497
Other income 1,554 617
--------- ---------
251,258 201,917
--------- ---------
3 Finance income and expense
2014 2013
$000 $000
Finance income
Interest receivable on:
Credit bank balances and time
deposits 7,276 4,676
Finance expense
Interest payable on:
Development loans (2,019) (1,774)
----------
Net finance income recognised
in income statement 5,257 2,902
--------- ----------
4 Profit before tax
2014 2013
$000 $000
Profit before tax is stated after
charging
Depreciation (note 9) 6,833 6,406
Exchange (gains) / losses (852) 2,781
Operating lease expense
- Property 574 521
Professional fees 441 1,015
Staff costs (note 6) 28,316 28,698
Remuneration received by the group's
auditor or associates of the group's
auditor:
Audit of parent company 6 6
Audit of consolidated financial
statement 166 155
-------- --------
Total audit services 172 161
-------- --------
Audit of overseas subsidiaries
- Malaysia 22 23
- Indonesia 75 71
-------- --------
Total audit services 97 94
-------- --------
Fees payable to the group's auditor
for other services - 170
Total auditors' remuneration 269 425
-------- --------
5 Segment information
Measurement of operating segment profit or loss, assets and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with IFRS but
excluding non-recurring losses, such as share based payments.
Inter-segment transactions are made based on terms mutually
agreed by the parties to maximise the utilisation of Group's
resources at a rate acceptable to local tax authorities. This
policy was applied consistently throughout the current and prior
period.
The Group's assets are allocated to segments based on
geographical location.
North South Total
Sumatera Bengkulu Sumatera Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2014
Total sales
revenue (all
external)
* CPO 95,299 95,886 102 44,912 - 7,416 243,615 4,253 - 247,868
* Rubber 1,836 - - - - - 1,836 - - 1,836
Other income 813 697 3 37 - 2 1,552 2 - 1,554
--------- --------- --------- -------- ------- ----------- ---------- --------- -------- ---------
Total revenue 97,948 96,583 105 44,949 - 7,418 247,003 4,255 - 251,258
--------- --------- --------- -------- ------- ----------- ---------- --------- -------- ---------
Profit/(loss)
before tax 36,631 30,795 (552) 19,477 (57) (1,226) 85,068 255 (369) 84,954
BA movement (33,718)
---------
Profit for
the year
before
tax per
consolidated
income
statement 51,236
---------
Depreciation (2,385) (2,228) (411) (572) (33) (958) (6,587) (246) - (6,833)
Inter-segment
transactions 3,446 (2,331) (257) (671) - (1,443) (1,256) 962 294 -
Income tax (8,731) (5,775) 1,968 (4,589) 171 4,268 (12,688) 437 (287) (12,538)
Total Assets 202,284 153,418 58,008 84,263 13,078 92,854 603,905 25,398 4,279 633,582
Non-Current
Assets 149,187 121,171 56,539 39,756 12,845 82,236 461,734 18,834 1,193 481,761
Non-Current
Assets -
Additions 10,214 4,845 5,492 1,224 930 26,932 49,637 117 - 49,754
2013
Total sales
revenue (all
external)
* CPO 90,764 63,019 18 38,166 - 2,516 194,483 4,318 2 198,803
* Rubber 2,497 - - - - - 2,497 - - 2,497
Other income 827 112 6 91 - (419) 617 - - 617
--------- --------- --------- -------- ------- ----------- ---------- --------- -------- ---------
Total revenue 94,088 63,131 24 38,257 - 2,097 197,597 4,318 2 201,917
--------- --------- --------- -------- ------- ----------- ---------- --------- -------- ---------
Profit/(loss)
before tax 33,879 15,700 (443) 19,017 1 (6,633) 61,521 206 (1,987) 59,740
BA movement 93,661
---------
Profit for
the year
before
tax per
consolidated
income
statement 153,401
---------
Depreciation (2,248) (2,268) (475) (585) (32) (540) (6,148) (258) - (6,406)
Inter-segment
transactions 2,821 (2,236) (242) (656) - (1,512) (1,825) 845 980 -
Income tax (24,567) (8,086) (554) (6,542) 79 (288) (39,958) 585 (220) (39,593)
Total Assets 195,447 148,268 59,285 67,739 12,744 89,882 573,365 29,720 4,662 607,747
Non-Current
Assets 153,524 122,485 57,673 38,726 12,462 76,259 461,129 22,334 1,363 484,826
Non-Current
Assets -
Additions 13,164 5,952 10,172 1,513 1,069 17,828 49,698 240 - 49,938
In year 2014, revenue from 4 customers of the Indonesian segment
represent approximately $152.1m (2013: $110.1m) of the Group's
total revenue. An analysis of these revenue is provided as below.
Although Customer 1 to 4 are over 10% of the Group total revenue,
there is no over reliance on these Customers as tenders are
performed on a monthly basis.
North South Total
Sumatera Bengkulu Sumatera Riau Bangka Kalimantan Indonesia Malaysia UK Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
2014
Customer
1 - 47,941 - - - - 47,941 - - 47,941
Customer
2 32,935 - - 12,557 - - 45,492 - - 45,492
Customer
3 7,137 24,501 - 1,839 - - 33,477 - - 33,477
Customer
4 13,447 - - 11,721 - - 25,168 - - 25,168
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- ----------
53,519 72,442 - 26,117 - - 152,078 - - 152,078
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- ----------
2013
Customer
1 22,958 - - 8,408 - - 31,366 - - 31,366
Customer
2 9,100 16,139 - 5,270 - - 30,509 - - 30,509
Customer
3 23,617 1,182 - 813 - - 25,612 - - 25,612
Customer
4 11,206 - - 11,374 - - 22,580 - - 22,580
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- ----------
66,881 17,321 - 25,865 - - 110,067 - - 110,067
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- ----------
% % % % % % % % % %
2014
Customer
1 - 19.1 - - - - 19.1 - - 19.1
Customer
2 13.1 - - 5.0 - - 18.1 - - 18.1
Customer
3 2.8 9.8 - 0.7 - - 13.3 - - 13.3
Customer
4 5.4 - - 4.7 - - 10.1 - - 10.1
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- --------
21.3 28.9 - 10.4 - - 60.6 - - 60.6
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- --------
2013
Customer
1 11.4 - - 4.2 - - 15.6 - - 15.6
Customer
2 4.5 8.0 - 2.6 - - 15.1 - - 15.1
Customer
3 11.7 0.6 - 0.4 - - 12.7 - - 12.7
Customer
4 5.5 - - 5.6 - - 11.1 - - 11.1
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- --------
33.1 8.6 - 12.8 - - 54.5 - - 54.5
--------- --------- --------- ------- ------- ----------- ---------- --------- ----- --------
Save for a small amount of rubber, all the Group's operations
are devoted to oil palm. The Group's report is by geographical
area, as each area tends to have different agricultural
conditions.
6 Employees' and Directors' remuneration
2014 2013
Number number
Average numbers employed (primarily
overseas) during the year
- full time 5,522 5,447
- part-time field workers 9,687 10,822
--------- ---------
15,209 16,269
--------- ---------
2014 2013
$000 $000
Staff costs (including Directors)
comprise:
Wages and salaries 26,725 27,422
Social security costs 939 976
Retirement benefit costs 652 300
28,316 28,698
--------- ---------
2014 2013
$000 $000
Directors emoluments 248 236
Remuneration expense for key
management personnel 248 236
------- -------
The Executive Director and Non-Executive Director are considered
to be the key management personnel.
7 Earnings per ordinary share (EPS)
2014 2013
$000 $000
Profit for the year attributable
to owners of the Company before BA
adjustment 52,422 35,950
Net BA adjustment (21,660) 57,571
----------- -----------
Earnings used in basic and diluted
EPS 30,762 93,521
----------- -----------
Number Number
'000 '000
Weighted average number of shares
in issue in year
- used in basic EPS 39,636 39,636
- dilutive effect of outstanding
share options 43 48
----------- -----------
- used in diluted EPS 39,679 39,684
----------- -----------
Basic EPS before BA adjustment 132.26cts 90.70cts
Basic EPS after BA adjustment 77.61cts 235.95cts
Dilutive EPS before BA adjustment 132.12cts 90.59cts
Dilutive EPS after BA adjustment 77.53cts 235.67cts
8 Dividends
2014 2013
$000 $000
Paid during the year
Final dividend of 3.0p per ordinary
share for the year ended 31 December
2013 (2012: 4.5cts) 1,998 1,784
---------- ---------
Proposed final dividend of 3.0p
per ordinary share for the year
ended 31 December 2014 (2013: 3.0p) 1,854 1,969
---------- ---------
The proposed dividend for 2014 is subject to shareholders'
approval at the forthcoming annual general meeting and has not been
included as a liability in these financial statements.
--
9 Biological assets, property, plant and equipment
Biological Estate Office PPE
assets plant, plant, Construction Total
Leasehold equipment equipment in
Mill Land Buildings & vehicle & vehicle progress Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
Cost or valuation
At 1 January 2013
(restated) 207,679 41,753 148,081 32,929 15,591 1,400 2,099 241,853 449,532
Exchange
translations (58,857) (9,762) (33,978) (8,011) (3,354) (228) (505) (55,838) (114,695)
Reclassification (1,194) 106 (2) 9,991 - - (10,095) - (1,194)
Decrease due to
harvest (14,092) - - - - - - - (14,092)
Revaluations 107,753 - 31,807 - - - - 31,807 139,560
Additions 105 6,546 2,712 53 2,383 125 7,157 18,976 19,081
Development costs
capitalised 24,770 1,206 1,460 - - - 3,421 6,087 30,857
Disposal /
Written
off (329) (286) (209) (226) 23 (1) - (699) (1,028)
----------- -------- ----------- ---------- ---------- ---------- ------------- --------- ----------
At 31 December
2013 265,835 39,563 149,871 34,736 14,643 1,296 2,077 242,186 508,021
Exchange
translations (4,420) (1,252) (3,494) (894) (378) (45) (79) (6,142) (10,562)
Reclassification - - - 5,356 1 - (5,357) - -
Decrease due to
harvest (26,021) - - - - - - - (26,021)
Revaluations (7,697) - 386 - - - - 386 (7,311)
Additions 85 13,305 4,219 64 1,840 158 6,057 25,643 25,728
Development costs
capitalised 23,592 112 - - - - 322 434 24,026
Disposals /
Written
off - (72) - (219) (591) (207) - (1,089) (1,089)
At 31 December
2014 251,374 51,656 150,982 39,043 15,515 1,202 3,020 261,418 512,792
----------- -------- ----------- ---------- ---------- ---------- ------------- --------- ----------
Accumulated
depreciation
and impairment
At 1 January 2013 - 12,375 - 6,832 9,561 908 - 29,676 29,676
Exchange
translations - (2,864) - (1,573) (2,031) (161) - (6,629) (6,629)
Charge for the
year - 2,305 - 2,044 1,867 190 - 6,406 6,406
Disposal /
Written
off - (264) - (118) (226) (1) - (609) (609)
----------- -------- ----------- ---------- ---------- ---------- ------------- --------- ----------
At 31 December
2013 - 11,552 - 7,185 9,171 936 - 28,844 28,844
Exchange
translations - (312) - (255) (275) (35) - (877) (877)
Charge for the
year - 2,697 - 2,244 1,723 169 - 6,833 6,833
Disposal /
Written
off - (53) - (99) (438) (172) - (762) (762)
At 31 December
2014 - 13,884 - 9,075 10,181 898 - 34,038 34,038
----------- -------- ----------- ---------- ---------- ---------- ------------- --------- ----------
Carrying amount
At 31 December
2012
(restated) 207,679 29,378 148,081 26,097 6,030 492 2,099 212,177 419,856
At 31 December
2013 265,835 28,011 149,871 27,551 5,472 360 2,077 213,342 479,177
At 31 December
2014 251,374 37,772 150,982 29,968 5,334 304 3,020 227,380 478,754
Net (loss) / gain
arising from
changes
in fair value of
biological
assets
At 31 December
2013 93,661 - - - - - - - 93,661
At 31 December
2014 (33,718) - - - - - - - (33,718)
-------- ----------- ---------- ---------- ---------- -------------
The fair value less costs to sell of FFB harvested during the
period, determined at the point of harvest is exhibited below:
2014 2013
Fair value of FFB
Crop production and yield - FFB
(mt) 857,000 787,000
Fair value of FFB ($000) 132,342 116,578
Fair value of FFB less costs to
sell ($000) 121,850 106,889
The gain arising on the fair value of FFB at the point of
harvest is recognised in the income statement within the biological
asset revaluation. A reconciliation of the amount included within
the income statement and the biological asset has been included
below:
2014 2013
$000 $000
Harvest included in the biological
asset valuation from estimated production
and pricing assumptions less costs
to sell in the prior year 26,021 14,092
Gain from actual production and pricing 95,829 92,797
--------- ----------
Fair value of FFB harvested from
own production 121,850 106,889
--------- ----------
The decrease of $26,021,000 (2013: $14,092,000) from harvest was
included in the prior year valuation for the current year and is
therefore deducted from biological asset valuation in the current
year as the FFB is harvested. The actual fair value of harvested
FFB varies to forecast due to the changes in actual production,
actual FFB price and actual costs incurred. The gain on fair value
of the harvested FFB is written off as the FFB is processed in to
CPO.
The biological asset revaluation movement included within the
income statement is calculated as follows:
2014 2013
$000 $000
Decrease due to harvest (26,021) (14,092)
Revaluations (7,697) 107,753
---------- ----------
Net (loss) / gain arising in the
income statement from changes in
fair value of biological assets (33,718) 93,661
---------- ----------
The Group engaged Muttaqin Bambang Purwanto Rozak Uswatun &
Rekan (MBPRU) with its head office located in Jakarta, Indonesia to
undertake the valuation of biological assets for both financial
years ended 31 December 2013 and 2014. Except for an adjustment on
discount rate, CPO price and the measurement of the notional rent
which are determined by the Directors, the valuation was carried
out independently by MBPRU who has the appropriate professional
qualifications and recent experience in the location and category
of the properties being valued. Further information of MBPRU can be
obtained from 'www.kjpp-mbpru.com'.
MBPRU was also being engaged to undertake the land valuation for
the Group. For the year ended 31 December 2014, valuation was done
on all lands except for those lands that have been valued in year
2013. The growth rates per hectare obtained by comparing the
current valuation against the year 2013's carrying amount were then
applied to the 2013 land value of the remaining companies in the
same geographical location to derive year 2014 fair value of land.
In the year 2013, independent land valuation was undertaken for
five major companies in Indonesia and a Malaysia company. The
growth rates per hectare obtained by comparing the year 2013
valuation against the valuation undertaken in year 2011 were then
applied to the 2011 land value of the remaining companies in the
same geographical location to derive year 2013 fair value of land.
Unplantable land was excluded in this exercise since it has zero
value. Land is valued on a rotational basis and all land is valued
by qualified valuers every two years. Had the revalued land been
measured on a historical cost basis, their net book value would
have been US$47,317,000 (2013: US$44,848,000).
The methodology of the biological asset valuations was using
discounted cash flow ("DCF") over the expected 20-year economic
life of the asset. The assumption applied in the valuation were,
inter alia, an assumed CPO selling price of $700/mt (2013:
$700/mt), discount rate of 16.4% (2013: 15.8%) and notional rent
equivalent to 9% (2013: 9%) of the value of planted land. The
discount rates were determined by the Directors based on their
assessment of various risks including financial, business and
country risk of where the plantations are located as well as taking
into account the Company's weighted average cost of capital. The
CPO price is taken to be the 10-year average (2013: 10-year
average) rounded to the nearest $25 based on historical
widely-quoted commodity price for CPO and represents the Directors'
best estimate of the price sustainable over the longer term. The
CPO price for 2014 was very volatile. It ended the year at $700/mt
lower than the 10-year average CPO price at $750/mt for the first
time. As a result the directors have benchmarked the 10-year
average CPO price assumptions against market expectations and have
adopted the CPO price of $700/mt used in last year's computation of
biological assets to represent a more
sustainable CPO price over the long term and have maintained the
price for the current year. This is supported by the World Bank
Commodities Price Forecast for palm oil for 2015 at $700/mt. An
inflation rate of 4% (2013: 5%) was applied to the second to sixth
years of the DCF. The notional rent charge is based on key capital
market and property indicators in the countries and regions of
operations.
Details of the information about the fair value hierarchy in
relation to biological assets and land at 31 December are as
follows:
Level Level 2 Level Fair value
1 3
$000 $000 $000 $000
At 31 December 2014
Biological assets - - 251,374 251,374
Land - - 150,982 150,982
At 31 December 2013
Biological assets - - 265,835 265,835
Land - - 149,871 149,871
There were no items classified under Level 1 and Level 2 and
thus there were no transfers between Level 1 and Level 2 during the
year.
The valuation techniques and significant unobservable inputs
used in determining the fair value measurement of biological assets
and land, as well as the inter-relationship between key
unobservable inputs and fair value, are set out in the table
below:
Item Valuation approach Inputs used Inter-relationship
between key unobservable
inputs and fair
value
----------- -------------------- ---------------- --------------------------
Land Selling prices Selling prices The higher the
of comparable of comparable selling price,
land in similar land the higher the
location adjusted fair value
for differences Location,
in key attributes. legal title, These are qualitative
The valuation land area, inputs which require
model is based land type significant judgement
on price per and topography by professional
hectare. valuer, MBPRU
----------- -------------------- ---------------- --------------------------
Biological Discounted cash CPO selling The higher the
assets flow over the price CPO selling price,
expected 20-year the higher the
economic life fair value
of the asset Discount rate
The higher the
discount rate,
Notional rent the lower the fair
value
Yield The higher the
notional rent,
the lower the fair
Overhead cost value
The higher the
yield, the higher
the fair value
The higher the
overhead cost,
the lower the fair
value
----------- -------------------- ---------------- --------------------------
There were no changes to the valuation techniques during the
period.
The fair value measurement is based on the above items' highest
and best use, which does not differ from their actual use.
The following table exhibits the sensitivity of the Group's
biological assets to the fluctuation in CPO price, discount rate,
notional rent, CPO yield and overhead cost:
2014 2013
$000 $000
A change of $50 in the price assumption
for CPO
-$50 in the price assumption (54,021) (53,411)
+$50 in the price assumption 53,993 53,381
A change of 1% in the discount
rate
-1% in the discount rate 14,182 15,687
+1% in the discount rate (13,043) (14,363)
A change of notional rent equivalent
to 1% of the value of planted land
-1% in the value of planted land 5,191 5,192
+1% in the value of planted land (5,190) (5,192)
A change of 1% in the CPO yield
-1% in the CPO yield (28,863) (28,611)
+1% in the CPO yield 28,835 28,581
A change of 1% in the overhead
cost
-1% in the overhead cost 7,468 7,390
+1% in the overhead cost (7,496) (7,389)
The Indonesian authorities have granted certain land
exploitation rights and operating permits for the estates. In the
case of established estates in North Sumatera these rights and
permits expire between 2023 and 2038 with rights of renewal
thereafter. As of estates in Bengkulu land titles were issued
between 1994 and 2008 and the titles expire between 2028 and 2034
with rights of renewal thereafter for two consecutive periods of 25
and 35 years respectively. In Riau, land titles were issued in 2004
and expire in 2033. In the case of PT Cahaya Pelita Andhika's
estate acquired in 2007 land titles were issued in 1996 to expire
in 2029.
Subject to compliance with the laws and regulations of
Indonesia, land rights are usually renewed. The cost of renewing
the land rights is not significant.
The land title of the estate in Malaysia is a long-term lease
expiring in 2084.
10 Posting of Annual Financial Report
The Annual Financial Report will be posted to shareholders on or
before 3 June 2015. Copies of the Annual Financial Report will then
be available from the offices of the Company Secretary, CETC
(Nominees) Limited, Quadrant House, 6th Floor, 4 Thomas More
Square, London E1W 1YW and on the Company's website at
www.angloeastern.co.uk.
Copies of this announcement are available from the offices of
the Company Secretary, CETC (Nominees) Limited, Quadrant House, 6th
Floor, 4 Thomas More Square, London E1W 1YW and on the Company's
website.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PKCDKABKDPQB
Anglo-eastern Plantations (LSE:AEP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Anglo-eastern Plantations (LSE:AEP)
Historical Stock Chart
From Apr 2023 to Apr 2024
