Feronia Inc. ("Feronia" or the "Company") (TSX VENTURE:FRN) today released its
audited financial results for the year ended December 31, 2011. All amounts in
this release are expressed in US dollars unless otherwise indicated.
2011 Highlights
-- Revenue up 91% at $7.45 million from $3.91 million in 2010
-- Crude Palm Oil ("CPO") production up 61% at 7,981 tonnes from 4,951
tonnes in 2010
-- Realized average sales price for CPO of $984/tonne compared to
$746/tonne in 2010
-- Fresh fruit bunch ("FFB") average yield increased to 3.66 tonnes per ha
from 2.28 tonnes per ha in 2010
-- Oil-extraction rate ("OER") increased to 17.1% from 16.3% in 2010
-- Replanted 2,110 hectares of oil palms during the year
-- Raised $29.6 million (gross proceeds) in additional equity in March 2011
to fund the expansion of the business
-- Ordered new palm oil mill for Yaligimba plantation for scheduled
delivery in the second quarter of 2012 and commissioning in the fourth
quarter of 2012
-- Completed first Palm Kernel Oil ("PKO") sales to refinery in Kinshasa,
Democratic Republic of Congo ("DRC")
-- Completed first commercial rice sowing in the quarter ended December 31,
2011
-- Cash balance at December 31, 2011 of $13,521,000
-- Net loss attributable to Feronia was $(5,714,000) or $(0.04) per share,
compared to a loss of $(6,877,000) or $(0.09) per share in 2010
Bill Dry, Feronia CEO stated: "In 2011, Feronia accomplished several key
objectives. We raised new equity which allowed the Company to accelerate its
re-planting programme and advance the construction of a new palm oil mill at
Yaligimba plantation. We completed the re-planting of 2,110 hectares of oil
palm, exceeding our 2,000 ha target. With our existing palms, we increased
realized yields and oil extraction ratios, resulting in a 61% increase in CPO
production. In our arable farming division, we succeeded in getting all required
inputs and machinery into the country, commenced construction of our drying,
storage and processing facilities, and sowed 1,200 hectares of rice, the largest
single sowing in the history of the DRC."
Operational Summary and Key Metrics by Division
Palm Oil Operations
Key Metrics:
Year Ended December 31, 2011
Total Total Total
Lokutu Yaligimba Boteka 2011 2010 2009
--------------------------------------------------------
Immature Hectares 2,227 1,815 1,136 5,178 3,183 3,149
Producing Hectares 6,319 4,343 2,091 12,753 13,338 13,110
Fruit Prod. (tonnes) 31,679 5,243 9,710 46,632 30,424 24,351
Oil Produced 5,664 623 1,694 7,981 4,951 3,773
Oil Extraction Rate 17.9% 11.9% 17.4% 17.1% 16.3% 15.5%
PKO Produced
(tonnes) 99 - - 99 - -
FFB Yield/ha 5.01 1.21 4.64 3.66 2.28 1.86
Recent Developments:
-- First application of fertilizer to oil palms aged between 4 and 16
years, with 821 ha covered to date
-- 880 ha of oil palms replanted so far in 2012
-- First stage of civil work completed for new palm oil mill at Yaligimba
The palm oil mill being commissioned in the fourth quarter of 2012 at the
Yaligimba plantation is expected to have an initial processing capacity of 30
tonnes per hour of FFB. The capacity is expected to be increased to 60 tonnes
per hour in a phase 2 expansion which will be implemented as the mill approaches
full capacity utilization.
The aggressive planting programme and ongoing measures to increase yields from
existing plantings is expected to allow the Company to leverage the excess
capacity at the new Yaligimba mill and at the existing mills at Lokutu and
Boteka plantations.
It is anticipated that under the current planting programme and internal
forecasts for yields, there will be no requirement for additional processing
capacity beyond the phase 2 expansion of the Yaligimba mill until 2021.
Arable Farm Operations
Key Metrics:
Year Ended December 31, Year Ended December 31,
Arable 2011 2010
----------------------------------------------------------------------------
Land Available (ha) 10,000 10,000
Land Cleared (ha) 2,000 200
Land Prepared (ha) 1,500 -
Land Planted (ha) 1,200 -
Recent Developments:
-- 1st stage drying and storage commissioned in January 2012
-- 300 ha of rice planted in February 2012
-- 2nd stage drying and storage equipment arrived in March 2012
-- 200 ha of edible beans planted in April 2012
The Company's first commercial rice crop of 1,200 ha was sown in October and
November 2011. Due to shipping congestion in Pointe Noire in the second half of
2011, there was a delay importing the Company's large horsepower tractors,
resulting in the planting taking longer than planned due to reliance on smaller
horsepower units. While germination was achieved across the entire planted area,
the later plantings did not have the benefit of sufficient rainfall. This,
together with an abnormally dry period in the DRC from late December 2011 to
February 2012, meant that a significant area of the late sowings did not flower
and therefore did not yield. While the harvest in February 2012 produced yields
of up to 2.3 tonnes of paddy per ha on the early sown fields, the delay in
planting and atypical adverse climate conditions resulted in only minimal
yields.
In February 2012, with all the tractors now on site, 300 ha of rice were
planted. In March 2012, rainfall in the DRC was above average and the Company
expects to harvest this crop in May 2012.
In April 2012, 200 ha of edible beans were sown as part of the Company's
strategy of smaller scale proof of yield plantings. These will build on the
Company's knowledge of local conditions in preparation for future large-scale
planting.
Work on the arable storage, drying and processing facilities is well advanced
with the first stage of storage and drying commissioned in January 2012 and the
processing capacity anticipated to be completed in the second quarter of 2012.
Imports of fertiliser and equipment were in place on the farm before the current
planting season commenced.
Outlook
"In 2012, Feronia plans to complete several capital investments that it
commenced in 2011. The equity financing completed in March 2011 allowed the
Company to start construction of a new palm oil mill at Yaligimba sooner than it
had planned and to build a larger mill with greater capacity than previously
contemplated. Once commissioned, the new mill is expected to allow an immediate
and material increase in CPO and revenue contribution from the Yaligimba
plantation as fruit was left in the trees last year. In 2011, management
succeeded in significantly improving the results from the existing oil palm
plantings and increasing revenue by 91% on a year-over-year basis. We anticipate
further incremental improvements from existing areas. The Yaligimba mill is
scheduled to be commissioned in the fourth quarter of 2012 and once this occurs,
the Company expects to have substantial excess processing capacity which it
plans to leverage in coming years through new plantings," said Feronia Executive
Chairman Ravi Sood.
"In 2012, the Company's arable farming group expects to complete and commission
its rice mill and additional drying and storage capacity. Management will be
focused on improving yields at the arable farming operation and completing the
division's first commercial sales. We also plan on adding more technical skill.
The key objectives for the Company in 2012 are:
i) commissioning the palm oil mill at the Yaligimba plantation, thereby
enabling the Company to harvest all available fruit;
ii) completing up to 5,000 ha of re-planting across its oil palm
plantations; and
iii) proving commercial yields of rice and beans at its arable farming
division.
The Company's core plan of rehabilitating and aggressively expanding its oil
palm plantations is advancing. With the advent of its arable farming division
from a standing start in 2010, the Company aims to prove that it has the ability
to leverage its century of operating history in plantations to launch other
businesses in the agriculture sector," concluded Mr. Sood.
Revenue
Revenue and Gross Margin
--------------------------------------------- ------------------------------
--------------------------------------------- ------------------------------
(Expressed in
thousands of
US dollars) Three months ended Dec 31, Year ended Dec 31,
2011 2010 % Change 2011 2010 % Change
----------------------------------------------------------------------------
Oil palm $ 2,518 $ 875 188% $ 6,631 $ 3,614 83%
Other 493 3 16333% 818 291 181%
--------------------------------------------- ------------------------------
Revenue 3,011 878 243% 7,449 3,905 91%
Cost of
operations 1,667 (450)(1) 488% 4,102 2,348 75%
--------------------------------------------- ------------------------------
Gross Margin $ 1,344 $ 1,328 (5)% $ 3,347 $ 1,557 115%
Gross Margin
% 45% 151%(1) 45% 40%
--------------------------------------------- ------------------------------
Note:
(1) Cost of operations for the three months ended December 31, 2010 was
negative due to an accounting adjustment related to the employee
incentive liability scheme.
The following table provides a summary of palm fruit production and CPO:
Three months ended Dec 31 Year ended Dec 31
2011 2010 % Change 2011 2010 % Change
----------------------------------------------------------------------------
Palm Fruit Production
Total Tonnes 10,270 7,215 42% 46,632 30,424 53%
Crude Palm Oil (CPO)
Total Tonnes 1,769 1,187 49% 7,981 4,951 61%
Oil Extraction Rate
("OER") 17.2% 16.5% 17.1% 16.3%
As a result of the replanting programme and the focus on replacing older, lower
yielding oil palms, there were fewer producing hectares in 2011 (12,753 ha)
compared to 2010 (13,338 ha). Notwithstanding the reduced productive area, the
total tonnage of fruit production increased by 53% on a year-over-year basis.
This increase is attributed to improved harvesting and collection practices that
have resulted in higher realized yields. The improved harvesting and collection
can be attributed to investments made in road improvements and the introduction
of additional vehicles.
Gain (loss) on Biological Assets and Planting
costs
-------------------------------------------------- -------------------------
-------------------------------------------------- -------------------------
(Expressed in
thousands of US
dollars) Three months ended Dec 31, Year ended Dec 31,
2011 2010 % Change 2011 2010 % Change
Gain (loss) on
biological assets $ (4,932) - - $ 2,107 - -
Planting costs (1,453) 218 (767)% (1,453) (553) 163%
-------------------------------------------------- -------------------------
Gain (loss) on
Biological Assets
less Planting costs $ (6,385)$ 218 (3029)% $ 654 $ (553) 218%
-------------------------------------------------- -------------------------
Under IFRS, biological assets are identified as bearer assets, which are the
plantations, and which will generate revenue in the future.
In the three months and year ended December 31, 2011, the (loss) gain on the
valuation of the plantations was $(4,932,000) and $2,107,000, respectively. This
decrease in gain of $4,932,000 results from material adjustments which the
Company has made to the model used to value biological assets for IFRS:
-- a correction to the allocation of yield relative to the age of trees;
-- inclusion of income taxes at a rate of 40%;
-- inclusion of 2009 plantings for each plantation;
-- updates to estimated production and cashflows; and
-- inclusion of inflation at a rate of 20% to account for future cost
increases
The plantation costs previously capitalized under Canadian GAAP have been
expensed. No value was recognized for the biological assets in 2010.
Net Loss
------------------------------------------------ ---------------------------
------------------------------------------------ ---------------------------
(Expressed in
thousands of US
dollars) Three months ended Dec 31, Year ended Dec 31,
2011 2010 % Change 2011 2010 % Change
Net loss
attributable to
Feronia $ (4,793) $ (2,097) (129)% $ (5,714)$ (6,877) 17%
------------------------------------------------ ---------------------------
Net loss attributable to Feronia for the three months and year ended December
31, 2011 was $(4,793,000) and $(5,714,000), respectively, or $(0.04) and $(0.04)
per share, respectively, compared to a net loss of $(2,097,000) and
$(6,877,000), or $(0.03) and $(0.09) per share, in the three months and year
ended December 31, 2010, respectively.
Cash used in operating activities
----------------------------------------------- ----------------------------
----------------------------------------------- ----------------------------
(Expressed in
thousands of US
dollars) Three months ended Dec 31, Year ended Dec 31,
2011 2010 % Change 2011 2010 % Change
Cash (used in)/from
operating
activities $ (992) $ (4,891) (80)% $(13,576) $ (7,821) 74%
----------------------------------------------- ----------------------------
Cash used in operating activities in the three months and year ended December
31, 2011 increased/(decreased) by (80)% and 74%, respectively, at $(992,000) and
$(13,576,000), compared to cash used in operating activities of $(4,891,000) and
$(7,821,000) for the three months and year ended December 31, 2010. The increase
in cash used of $5,755,000 during 2011 is due to the significant investment in
working capital during the year. The level of fixed asset acquisitions increased
from $4,779,000 in 2010 to $9,380,000 in 2011.
Cash Flows and Liquidity
Cash, cash equivalents and short-term investments were $13,521,000 as at
December 31, 2011, compared to $8,908,000 as at December 31, 2010 and $478,000
as at January 1, 2010.
For 2011, working capital requirements resulted in cash outflows of $4,787,000
compared to cash outflows of $1,319,000 for 2010. For 2011, net cash outflows of
$4,787,000 were driven by increases in payables of $1,171,000, prepaid expenses
of $2,031,000, inventory of $3,511,000, and receivables of $416,000. Working
capital outflows of $1,319,000 for 2010 were driven by lower receivables of
$126,000 and payables of $332,000, but increases in inventory of $404,000 and
prepaid expenses of $709,000.
Investing activities resulted in cash outflows of $9,376,000 for 2011, compared
to cash outflows of $3,549,000 in 2010, due to capital spending for
manufacturing equipment in order to build production capacity.
Major outstanding anticipated capital expenditures are:
i) completion and construction of the new oil palm mill at Yaligimba
(approximately $7,000,000; expected completion in the fourth quarter
of 2012);
ii) completion of the rice mill to service the arable operations
(approximately $300,000; expected completion in the third quarter of
2012); and
iii) completion of the storage and drying facilities to service the arable
operations (approximately $800,000; expected completion in the third
quarter of 2012).
Adjustments to 2011 Quarterly Information
Notice to Readers: As a result of the audit of the financial statements for the
year ended December 31, 2011, the Company has determined that certain
IFRS-determined information in its interim filings for each of the first three
quarters of 2011 will require adjustments to correct for changes in the
valuation model for the biological assets of the Company and the
reclassification of the warrants as financial liabilities. The Company is
currently in the process of determining the required adjustments and will update
its interim filings as soon as practicable. Readers are cautioned not to rely on
the unaudited figures presented for the interim periods ending March 31, 2011,
June 30, 2011 and September 30, 2011. Further, any adjustments made to such
quarterly information may affect the figures presented for the three month
period ended December 31, 2011.
Appointment of Ravi Sood as Executive Chairman
The Company is pleased to announce that it has entered into an agreement with
Mr. Ravi Sood pursuant to which he will serve as the Executive Chairman of the
Company. In addition to his existing responsibilities as Founder, Chairman and a
director of the Company, the duties of Mr. Sood will be expanded to include,
among others: (i) working closely with the Chief Executive Officer and the Board
on the strategic development of the Company and its business; and (ii) having
primary responsibility for capital market initiatives.
Mr. Dry stated: "We are extremely pleased that Mr. Sood has agreed to this
expanded role with the Company. By sharing some of these tasks with Mr. Sood, I
can focus even more on creating value in the operations."
About Feronia Inc.
Feronia is a large-scale commercial farmland and plantation operator in the DRC.
The Company uses modern agricultural practices to operate and develop its oil
palm plantations and arable farming business division. Feronia believes in the
immense agricultural potential of the DRC for high-quality foodstuffs and edible
oils given its ideal climate, excellent soil and highly skilled and experienced
workforce. Feronia's management team is comprised of senior agriculturalists
with extensive experience in managing both plantations and large-scale
mechanized farming operations in emerging markets. Feronia is committed to
sustainable agriculture, environmental protection and providing support for
local communities. For more information please see www.feronia.com.
Cautionary Notes
Except for statements of historical fact contained herein, the information in
this press release constitutes "forward-looking information" within the meaning
of Canadian securities law. Such forward-looking information may be identified
by words such as "anticipates", "plans", "proposes", "estimates", "intends",
"expects", "believes", "may", "will" and include without limitation, statements
regarding proposed capital expenditure; the Company's plan of operations and
comparative advantages; plans regarding sowing rice and replanting oil palms;
improvements in harvesting and collection; and positive trends regarding OERs.
There can be no assurance that such statements will prove to be accurate; actual
results and future events could differ materially from such statements. Factors
that could cause actual results to differ materially include, among others:
risks related to foreign operations (including various political, economic and
other risks and uncertainties), the interpretation and implementation of the
"Loi Portant Principes Fondamentaux Relatifs A L'Agriculture" (the DRC's
agriculture law, as discussed in the Company's annual management's discussion
and analysis for the year ended December 31, 2011), termination or non-renewal
of concession rights or expropriation of property rights, political instability
and bureaucracy, limited operating history, lack of profitability, lack of
infrastructure in the DRC, high inflation rates, limited availability of debt
financing in the DRC, fluctuations in currency exchange rates, competition from
other businesses, reliance on various factors (including local labour,
importation of machinery and other key items and business relationships), the
Company's reliance on two refining factories and one major customer, lower
productivity at the Company's plantations and arable farming operations, risks
related to the agricultural industry (including adverse weather conditions,
shifting weather patterns, and crop failure due to infestations), a shift in
commodity trends and demands, vulnerability to fluctuations in the world market,
the lack of availability of qualified management personnel and stock market
volatility. Most of these factors are outside the control of the Company.
Investors are cautioned not to put undue reliance on forward-looking
information. Except as otherwise required by applicable securities statutes or
regulation, the Company expressly disclaims any intent or obligation to update
publicly forward-looking information, whether as a result of new information,
future events or otherwise.
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