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LONDON (Thomson Financial) - REA Holdings Plc. said its crop of oil palm
fresh fruit bunches (FFB) harvested during the first half of 2008 rose to
231,102 tonnes, from 165,000 tonnes in the corresponding period of 2007, and was
around 30,000 tonnes ahead of budget.
In a trading update, the company said crude palm oil (CPO) and palm kernel
production for the six months to June 30 rose to 53,770 tonnes and 10,476 tonnes
respectively from 40,700 tonnes and 7,000 tonnes respectively in the previous
year.
The company also said Monday that it has recently entered into a non-binding
memorandum of understanding to buy PT Prasetia Utama (PU) for around $7.3
million. It said this would be funded 95 percent by the group and 5 percent by a
local Indonesian investor.
REA said it will pay half of the $7.3 million when a binding agreement on PU
is signed and the rest on completion after receiving the necessary Indonesian
regulatory approvals.
REA also said that, although it is enjoying significant positive cash flows
at the current level of CPO prices, thre is no certainty that these levels will
continue and it is therefore contemplating the creation of a further 28 million
pounds of sterling notes with a view to issuing an initial tranche of up to 15
million pounds.
Under the company's current plans, its cash flows, if maintained, coupled
with the cash resources already held could be expected to fund a substantial
proportion, if not all, of development expenditure.
But the board said it is committed to new development and, with this in
mind, it should endeavour to ensure that the group has enough cash reserves to
meet those development costs in case projected cash flows from operations fail
to materialise. Even if the group finds itself with greater cash reserves than
the directors consider necessary for current development plans, good use can be
made of surplus funds in accelerating or expanding those plans, the group added.
In addition to its crop development plans, the group said it has now
established a small office in Jakarta to pursue a possible investment in coal
mining. The office, which is quite separate from the group's plantation
operations, has secured for the group a short term arrangement to source coal
from Kalimantan and supply it to a power station in Sumatra.
REA said profits from this arrangement are expected to cover the costs of
the office.
The group is now actively pursuing the purchase for $3.5 million cash of
mining rights in respect of a concession area in East Kalimantan with existing
permits for coal mining and geological reports confirming proven coal reserves
suitable for open cast mining. REA said a final decision as to whether to
proceed with this acquisition should be made in the near future.
TFN.newsdesk@thomson.com
ami/ajb/ami/slm
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