1st Feb 2007 08:00
D1 Oils Plc01 February 2007 Press Release D1 Oils Q4 2006 Business Update 1 February, 2007 D1 Oils plc (D1), the UK-based global producer of biodiesel, today announces itsquarterly business update for the fourth quarter ended 31 December 2006. Agronomy Up to 31 December 2006, D1 has planted or obtained the rights to offtake from a total of over 124,000 hectares of jatropha worldwide. This represents anincrease of 10,000 hectares on the total of 114,000 hectares as at 30 September2006. In Southern Africa, we were pleased with the increase in jatropha planting bycommunities in Zambia under oil and seed supply agreements. In South East Asia,where we have experienced rapid increases in planting over previous quarters, wehave concentrated on consolidating our new planting relationships in preparationfor expanding planting in 2007. Rainfall patterns in India during this quarterwere not conducive to extensive planting, and project teams focused onpreparation for the 2007 season. We anticipate strong planting activity in thefirst quarter of 2007. The cumulative position at 31 December 2006 is summarised in the table below: Managed Contract Seed purchase and oil Total plantations farming supply agreements India - 12,740 36,361 49,101 Southern 5,155 - 6,046 11,201Africa South - 30,494 33,260 63,754East Asia Total 5,155 43,234 75,667 124,056 Our jatropha plant science and agronomy programme is making strong progress. Wehave now collected over 180 accessions of jatropha material, including newmaterial from Central America. We are in possession of the first grain and oilyield data, which we will use to steer our international breeding programme andas a guide for an international network of product placement trials. In thesetrials we intend to identify individual jatropha cultivars optimally adapted todifferent cultivation zones in our target planting areas. Meanwhile,multiplication of our first selected E1 seed is underway in Southern Africa,India and South East Asia, and we are on track for planting out a significantquantity of this material in 2008. We have established a new RegionalDevelopment Centre (RDC) in Swaziland. We are also initiating the design of oursustainability policies for the crop. Refining We completed the purchase of a second major biodiesel site at Bromborough onMerseyside in early January to access a cost-effective means to expandproduction capacity. The first phase of operations is now underway to convertthe existing facilities to add 100,000 tonnes of biodiesel capacity during 2007. Refining margins across the industry were affected during the quarter by thecontinuing combination of lower diesel prices and increased feedstock costs,particularly the high cost of soya oil which has remained above $750 per tonnefor over 3 months. Having made the decision to secure supplies of soya for ourMiddlesbrough refinery at significantly lower prices earlier in 2006, we areactively managing stocks to ensure that they last as long as possible consistentwith producing positive margins and meeting our contractual obligations. As aresult we ran our refineries below capacity during the quarter producing lessbiodiesel than originally planned. Sales of biodiesel for the quarter totalled3,286 tonnes. Under the circumstances, we believe that it is now prudent to plan for ediblevegetable oil prices remaining relatively high for the immediately foreseeablefuture. However, we believe that the introduction in the UK of a mandatory 5%biodiesel blend to be phased in progressively from April 2008 under theRenewable Transport Fuels Obligation (RTFO), supported by a continuation of the20 pence duty derogation and the addition of a 15 pence per litre penalty,should make a significant and positive difference to margins. Furthermore, webelieve the persistence of higher prices of edible vegetable oils reconfirms andreinforces our strategy to land crude jatropha oil in the UK at a target priceof $475 to $500 per tonne. Accordingly the Board now plans to extend the phasing for the full rollout ofour target of 320,000 tonnes of refining capacity from the end of 2007 to theend of 2008. We are confident that the programme can be accelerated prior to theimplementation of the RTFO, should there be a sustained return to increaseddiesel prices and to historic levels for commodity prices. Trading The first delivery of product to Petroplus, under our first major UK biodieselofftake contract, was made on 26 October 2006. Offer period update As announced on 21 November 2006, the Board has ceased discussions regarding apossible offer, but is continuing negotiations with certain of the partiesregarding the possible acquisition of a substantial, but less than acontrolling, shareholding in the Company. These negotiations are continuing witha view to assisting the Company to accelerate significantly the roll out of itsbusiness plan. Elliott Mannis, Chief Executive Officer of D1 Oils, commented: "Whilst the current high prices for traditional food-grade feedstocks are a challenge, we believe they are a validation of our strategy of creating, in jatropha, a low-cost, long-term supply of inedible feedstock, the price of which should be driven solely by its fuel value. We also believe that our modular approach to refining is a significant advantage in providing flexibility in uncertain markets. We made steady progress in planting in the last quarter and our plant science and agronomy programme is developing strongly. We are very pleased to see planting gaining traction in Southern Africa. Our planting plans for 2007 remain on track. Having successfully completed our placing, we are well positioned to respond tothe current challenges that the industry is facing and to seize theopportunities that are clearly on the horizon." Contacts: D1 Oils:Graham Prince, Head of Corporate CommunicationsTel: +44 (0) 1642 755580Mobile: +44 (0) 7973 323840 Brunswick Group:Mark AntelmeTel: +44 (0) 20 7404 5959 Notes to Editors D1 Oils plc is a UK-based global producer of biodiesel. We are building a globalsupply chain and network that is sustainable and delivers value from'earth-to-engine'. Our operations cover agronomy, refining and trading. We arepioneering the science, planting and production of inedible vegetable oils; wedesign, build, own, operate and market biodiesel refineries; and we source,transport and trade seeds and seedlings, seedcake, crude vegetable oils andbiodiesel. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
NEOS.L