New Britain Palm Oil Limited Reports Third Quarter Results

28 Nov 2013 --- New Britain Palm Oil Limited, one of the world's largest fully integrated producers of sustainable palm oil, today announces its third quarter report and trading update for the period from 1 January 2013 to 30 September 2013.

In the first nine months of 2013, the Group processed 1,620,000 tonnes of Fresh Fruit Bunches (“FFB”), some 7.2% lower than the same period last year, including 463,750 tonnes from smallholders (12.2% lower). We have reported in previous trading updates the negative impact of heavy rainfall and the replanting of over 6,500ha of aged palms on this year’s FFB production.  Furthermore, we have seen a sharper than expected drop in available FFB for harvest during the third quarter, even allowing for the typical seasonal drop in volumes during this period. Comparing Q3 2013 to Q3 2012 reflects a drop in FFB production of 9.1% and 18.4% from our estates and smallholders respectively.  While volumes have been disappointing, these results are broadly in line with regional yield declines reported across Malaysia and Indonesia suggesting that this is likely to be a biological yield effect.

Crude Palm Oil (“CPO”) extraction rates during the period averaged 21.98%, as compared to the corresponding period in 2012 of 22.24%. As a result of lower FFB production and lower extraction rates, 356,085 tonnes of CPO was produced, some 8.3% lower than the same period last year. Palm Kernel Oil (“PKO”) production was 35,411 tonnes, some 30.3% higher than the same period last year reflecting the Group’s increased palm kernel crushing capacity.

The Group shipped 417,702 tonnes of CPO, PKO and refined oils during the first nine months of 2013 at an average price of USD 904/tonne compared to 402,949 tonnes in the first nine months of 2012 at an average price of USD 1,122/tonne. Despite the higher volumes shipped and the implementation of several cost saving measures, our profitability has been impacted by the lower average selling prices achieved when compared to the same period last year.

Global palm oil prices during the first nine months of the year have been trading in a range between USD 800 and USD 890 per tonne, but have subsequently increased to be trading at around USD 925 per tonne.

As at the end of September, the Group had 38,500 tonnes of CPO sold or priced forward into the fourth quarter at an average price of USD 853 per tonne. We are continuing with our established forward selling strategy where we believe it can deliver the best prices for the Group and have since added 29,000 tonnes at an average price of USD 886 per tonne, as well as 35,000 tonnes into 2014 at USD 905 per tonne.

The lower PGK-USD exchange rate has resulted in year to date currency losses of USD 24.9 million as compared to USD 12.0 million of currency gains in the same period last year.

The year to date net foreign exchange losses reported are comprised primarily of non-cash currency adjustments on the Group’s US Dollar denominated loans.

The cost saving initiatives we have identified for oil freight can be seen in Distribution Costs, currently over 10% lower per tonne of oil shipped than the comparative period. Reductions in management and general overhead costs have resulted in a 17.9% year on year decrease in our Administrative Expenses equating to over USD 14 million.

The positive effects of the lower PGK-USD exchange rate during the period coupled with management’s initiatives are also evident in the Group’s gross profit margin which is unchanged year on year despite a reduction of over 19% in the achieved selling price of CPO.

On 15 November 2013, the Company paid a gross interim dividend for 2013 of USD 10 cents per share to shareholders listed on the Jersey and PNG registers on 16 October 2013. This equates to a net dividend of USD 8.30 cents after deducting PNG withholding tax of 17%.

Commenting on the results, Nick Thompson, Chief Executive Officer, stated: “The current financial year continues to be challenging for the Group. However, the business is now well positioned to capitalise on an improving palm oil pricing environment with the expected return to normalised FFB production and extraction rates in 2014. Significant cost base reductions achieved through management initiatives and the circa 20% devaluation of the PNG Kina year to date should further contribute to improved operating margins.”