13th May 2019 12:47
LONDON (Alliance News) - Equatorial Palm Oil PLC on Monday said its loss more than doubled in the first half of its financial year due to an increased share of operating loss from an associate and said it may have to write-down its Butaw estate in light of new guidance.
Shares in Equatorial Palm Oil fell 21% to 1.25 pence in midday trading.
The company is awaiting the conclusion of the assessments and consents now required in line with the Roundtable on Sustainable Palm Oil's guidelines. These guidelines require free, prior, and informed consent for palm oil planting. Due to these assessments, the company does not expect to complete any further land development or planting before the end of its financial year in September.
The palm oil company is reviewing is Butaw estate operations in light of new regulations, having spoken with the Liberian government about more suitable areas of land and ways to cut costs at Butaw.
If the company cannot acquire enough land to develop palm oil in Butaw then it will look to curb costs elsewhere, such as by shrinking its workforce.
"The company is looking at ways to streamline costs at its Butaw estate in light of the reduced planting area which may include downsizing its workforce if there are not sufficient lands available for the development of oil palm. In the event the performance of Butaw operations deteriorates, the company would have to assess the value of its investment in Butaw and provide for a write-down of its investment," said Equatorial Palm Oil Chair Michael Frayne.
The Liberia-focused palm oil production firm posted a USD4.7 million pretax loss for the six months ended March 31, substantially wider than its USD2.0 million loss the year before.
This was due to an increased share of loss from Liberian Palm Developments Ltd, in which Equatorial Palm Oil owns a 50% interest.
In 2017, Liberian Palm Oil entered a USD30.0 million loan agreement with Equatorial Palm Oil's major shareholder, Kuala Lumpur Kepong Berhad. As at March 31, USD28.7 million of the loan has been drawn down.
The company's revenue dropped 5.6% to USD85,000 from USD90,000. During the period, the company's palm oil mill at Palm Bay has been in its ramp-up phase since September 2018 and presently runs on alternate days due to insufficient fresh fruit bunches for daily running of the mill. Volumes are due to increase as palms mature.
"The new palm oil mill at Palm Bay estate is ramping up well, with the mill operating as expected and with no material issues experienced to date. The current challenge is to harvest enough fresh fruits to optimize the running of the mill, which we hope to achieve as the [fresh fruit bunch] yields from our palms increase with their maturity. In addition to the mill, the group is also building a kernel crushing plant and a bio-gas plant, both of which will be the first of their kind in Liberia, which are due to be commissioned later this year," said Frayne.
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