New Britain Palm Oil Limited Reports Q1 Result
A further result of such high rainfall is a lower extraction rate at the mill, such that the Group's crude palm oil ("CPO") extraction rate for this period was 22.36% compared to the corresponding period in 2011 of 23.32% and the full year 2011 of 22.79%.
22 May 2012 --- New Britain Palm Oil Limited, one of the world's largest fully integrated producers of sustainable palm oil, announces its first quarter report and trading update for the period from 1 January 2012 to 31 March 2012.
Nick Thompson, Chief Executive, commented:
"In the first quarter of 2012 the Group processed 597,585 tonnes of fresh fruit bunches (FFB), some 8.3% lower than the same period last year, due almost entirely to extremely high rainfall. This adverse weather effect appears cyclical and was also a major factor during Q1 2010 (see announcement on 20 May 2010). For example, in West New Britain, rainfall was almost 60% higher in this period compared to the first quarter of 2011, and in this period alone represented more than half of the total annual rainfall recorded in 2011. Such high rainfall inhibits the ability of our workforce to collect FFB from the field, primarily because of the resulting transportation difficulties.
A further result of such high rainfall is a lower extraction rate at the mill, such that the Group's crude palm oil ("CPO") extraction rate for this period was 22.36% compared to the corresponding period in 2011 of 23.32% and the full year 2011 of 22.79%.
The extremely high rainfall was localised in West New Britain. The Group's other operations at the Kula Palm Oil Limited ("KPOL") sites (Higaturu, Milne Bay and Poliamba), Ramu Agri-Industries Limited, and GPPOL (Solomon Islands) were not as severely impacted, jointly recording a combined 4.0% increase in FFB processed compared to the same period last year.
The period of extremely high rainfall has now ended and more usual weather patterns returned at the end of the period. Although a small proportion of the FFB we were unable to harvest in Q1 is now being harvested, most of the fruit has been irretrievably lost in the field during this period.
Palm oil prices have been robust during the first quarter, trading in a range between USD1,050 and USD1,180 per tonne and global supply and demand fundamentals for vegetable oils remain relatively tight. However, oil shipments from our various ports were also impacted by weather events reducing the number of available ships to our ports. This resulted in closing inventories of CPO and PKO of approximately 58,000 tonnes (an increase of 15,000 tonnes from the end of 2011), all of which has subsequently been shipped.
As a result of the lower volumes shipped and the lower average selling prices achieved (particularly for Palm Kernel Oil ("PKO")) revenue is USD50.7m lower when compared to the same period last year.
The production of palm oil is largely a fixed cost business and hence a reduction in throughput has impacted our profitability in Q1. Also, we have seen some costs rise in US Dollar terms during this period because of the significant year on year appreciation in the Papua New Guinea Kina against the US Dollar by some 24%. Notwithstanding the continuing impact of the currency rates on the profitability of the business, we anticipate volumes for the remainder of the year to return to our original expectations.
It is also important to note that there was an USD8.9m one-off contribution in the first quarter of 2011 in relation to the disposal of the Company's interest in PT Dami Mas Sejahtera.
As at the end of the quarter, the Group had approximately 168,000 tonnes of crude palm oil sold or priced forward for 2012 at an average price of USD1,105 per tonne.
Our UK bakery margarines and fats plant in Liverpool is now fully operational with sales of packed products to the UK bakery and foodservice sectors having commenced in February 2012 and gives the Company the largest range of fully traceable sustainable palm oil products in the UK market. Further investment at our Liverpool site has also started with the addition of a second deodoriser, with the aim to double the refining capacity by mid-2013.
Subsequent to the quarter end, the Company acquired the remaining 20 per cent. holding in KPOL from the Independent Public Business Corporation of Papua New Guinea through the issue of c.3.34 million new ordinary shares pursuant to an authority granted at the General Meeting of the Company held on 30 January 2012. The Company continues to expect to announce the completion of an additional minority shareholding in Poliamba Limited, a further announcement will be made in due course.
In addition, the Company paid a final gross dividend in relation to the year ended 31 December 2011 of USD 15 cents per share to shareholders registered on the record date of 30 March 2012.
We are pleased to have been able to demonstrate our robust workforce and processes during this period of very adverse weather conditions and are pleased to have now returned to a more normalised period of operation."
