12th Jun 2015 10:30
(An item published on June 11 misstated REA's average selling prices of palm oil due to a mistake by the issuer. The corrected version follows.)
LONDON (Alliance News) - REA Holdings PLC Thursday said it harvested 230,000 tonnes of oil palm fresh fruit bunches in the five months to end-May, down from 258,000 tonnes a year earlier, and increased external purchases to 58,000 tonnes, from 57,000 tonnes, while prices are down on last year and it intends to raise new funding.
It said that with prices down, it is moving to reduce costs and improve its operating efficiency, and it's being helped by the continuing weakness of the Indonesian rupiah.
The company will also issue up to 5.9 million new preference shares in a placing in coming weeks, and said it hopes to replace a substantial proportion of its existing sterling notes 2015-2017 with new sterling notes redeemable in one instalment on December 31, 2020. It has held preliminary talks with major holders of its sterling notes, it said, and also intends to place a "limited number" of new sterling notes when it does the exchange offer.
The palm oil producer in Indonesia and Malaysia said production in the areas in which it operates was generally down due to a dry September and October followed by unusually high rainfall in February, although it said cropping rates since April have improved to "normal monthly levels".
In a statement ahead of its annual general meeting, the company said the world crude palm oil benchmark price has mostly traded between USD650 and USD700 a tonne so far in 2015, with some occasional dips towards USD600. Its own average selling price in the first five months of the year was USD549 a tonne, down from USD721 a tonne a year earlier. Its average kernel oil price was USD873 a tonne, down from USD1,059 a tonne.
"Latterly the price has had a firmer tone, no doubt reflecting increasing indications of an El Niño weather event in 2015 coupled with a recent announcement that the US will mandate increased use of biofuels with effect from 2016," it said.
"The previously announced new Indonesian levy on exports of CPO has not yet been implemented and the amount of the levy is still under discussion with suggestions that this may be reduced from the level of $50 per tonne initially proposed. The planned use of levy proceeds to support increased mandatory blending of biodiesel in fuel sold within Indonesia is likely to improve biodiesel offtake and may well result in further firming in the CPO price," it added.
It produced 61,000 tonnes of crude palm oil in the five months to end-May, down from 68,000 tonnes a year earlier, and 4,000 tonnes of crude palm kernel oil, down from 5,000 tonnes.
"With extension planting gathering momentum, the group should remain a low cost producer of CPO and, as such, well placed to weather the current low period in the CPO price cycle and to ensure that any upturn in prices (of which the first signs may now be visible) flows through directly into profit," it said in the AGM statement.
By Steve McGrath; [email protected]; @stevemcgrath1
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