New Britain Palm Oil Limited, one of the world's largest fully integrated producers of sustainable palm oil, has announced its first quarter report and trading update for the period from 1 January 2014 to 31 March 2014.
Nick Thompson, Chief Executive Officer, stated: "The Group’s profit before tax in the first quarter, excluding unrealised non-cash foreign exchange losses, was USD 32.4 million, an increase of over 150% on the same period last year reflecting higher production at better extraction rates, higher selling prices achieved and lower costs of production, a very pleasing result during the typical monsoon season at our operating sites.”
In the first quarter of 2014, the Group processed 618,880 tonnes of Fresh Fruit Bunches (“FFB”), some 10.3% higher than the same period last year, including 162,892 tonnes from smallholders (2013: 155,906 tonnes). Crude Palm Oil (“CPO”) extraction rates during the period averaged 22.14%, as compared to the corresponding period in 2013 of 21.70%. As a result of higher FFB production and higher extraction rates, 137,031 tonnes of CPO was produced, some 12.5% higher than the same period last year. Palm Kernel Oil (“PKO”) production was 13,505 tonnes, some 13.5% higher than the same period last year.
The Group shipped 149,439 tonnes of CPO, PKO and refined oils during the first quarter of 2014 at an average price of USD 958/tonne, compared to 143,526 tonnes in the first quarter of 2013 at an average price of USD 901/tonne. The higher volumes shipped at higher average selling prices, together with a lower PGK-USD exchange rate and the cost saving measures implemented in the prior year have resulted in improved gross margins and improved profitability when compared to the same period last year.
The lower PGK-USD exchange rate during the period has continued to mitigate some of the cost pressure on our domestic wages and locally consumed services in US Dollar terms, however this has also resulted in net currency losses of USD 9.6 million in the first quarter as compared to losses of USD 7.5 million in the same period last year. These losses include some USD 11 million of non-cash unrealised exchange losses on restatement of USD borrowings (2013: USD 8 million). The PGK-USD exchange rate is currently trading at around 0.3637.
Palm oil prices during the period have been trading in a range between USD 890 and USD 990 per tonne and the outlook for palm oil demand remains robust with a strengthening of the global economy and higher local consumption in Malaysia and Indonesia driven primarily by mandatory biodiesel mandates. Although supply of alternative vegetable oils could surprise on the upside with the CPO discount to soy bean oil widening to USD 120/tonne from USD 60/tonne in March, dry weather impacts and a possible “El Nino” in South East Asia could significantly reduce palm oil production from the world’s two biggest producers and provide strength for future palm oil pricing. As at the end of the April, the Group had 113,750 tonnes of CPO sold or priced forward for 2014 at an average price of USD 967 per tonne.
Subsequent to the end of the quarter, the Group’s 6,300 Ha oil palm site in the Solomon Islands was impacted by heavy rain from a tropical depression (which later became Tropical Cyclone Ita). The storm caused severe flooding to our estates and smallholders as well as damaging road and bridge infrastructure in Honiara resulting in a one week shut down of operations at GPPOL. Major cleanup and sanitation works are continuing and no major operational impact is expected at this stage.
On 25 April 2014, the Company paid a gross final dividend for 2013 of USD 5 cents per share to shareholders listed on the Jersey and PNG registers on 28 March 2014. Taken together with the USD 10 cents per share interim dividend paid in November 2013, this equates to a full year 2013 dividend of USD 15 cents per share, and a net full year dividend of USD 12.45 cents after deducting PNG withholding tax of 17%.
Overall, the Group continues to trade in line with the Board's expectations and the Board remains confident of reporting further progress in the year ahead.”
