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R.E.A. Holdings plc: Annual report in respect of 2020

DJ R.E.A. Holdings plc: Annual report in respect of 2020

R.E.A. Holdings plc (RE.) 
R.E.A. Holdings plc: Annual report in respect of 2020 
27-Apr-2021 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 
(MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
=---------------------------------------------------------------------------------------------------------------------- 
R.E.A. HOLDINGS PLC (the "company") 
 
ANNUAL FINANCIAL REPORT 2020 
 
The company's annual report for the year ended 31 December 2020 (including notice of the annual general meeting to be 
held on 10 June 2021) (the "annual report") will shortly be available for downloading from the group's website at 
www.rea.co.uk. 
 
A copy of the notice of annual general meeting will also be available to download from the Investors section (under 
Shareholder information) of the website. The company has arranged for shareholders to be able to listen to the live 
proceedings of the meeting via an audio webcast available to shareholders via the internet. Shareholders are advised to 
check the home page of the website for details of how to access the AGM webcast. 
 
Upon completion of bulk printing, copies of the annual report will be despatched to persons entitled thereto and will 
be submitted to the National Storage Mechanism to be made available for inspection at https://data.fca.org.uk/#/nsm/ 
nationalstoragemechanism. 
 
The sections below entitled "Chairman's statement", "Dividends", "Principal risks and uncertainties", "Viability 
statement", "Going concern" and "Directors' responsibilities" have been extracted without material adjustment from the 
annual report. The basis of presentation of the financial information set out below is detailed in note 1 to the 
financial statements below. 
 
 
HIGHLIGHTS 
 
Overview 
 
 - Limited Covid-19 effect on operations; revenues increased and FFB crop consistent with previous years 
 
 - Steady recovery and firm CPO prices with corresponding improvement in group's financial performance 
 
Financial 
 
 - Revenue up 11 per cent to USD139.1 million (2019: USD125.0 million) 
 
 - Cost of sales reduced by 10 per cent to USD110.2 million (2019: USD121.8 million) in part reflecting a full year of the 
  cost saving initiatives implemented in previous year 
 
 - EBITDA more than doubled to USD36.8 million and cash generated doubled to USD53.6 million 
 
 - Pre-tax loss significantly reduced to USD23.2 million (2019: loss of USD43.7 million), after non-recurring impairment 
  and similar charges of USD9.5 million (2019: USD3.3 million) 
 
 - Repayment date of GBP30.9 million nominal of 8.75 per cent sterling notes extended from 2020 to 2025 
 
 - USD7.5 million of loan from DSN converted to equity in REA Kaltim and repayment date of balance of loan of USD11.1 
  million postponed from 2020 to 2025 
 
 - Advanced stage discussions to replace outstanding bank loans to REA Kaltim and SYB with new term loans of longer 
  duration, substantially increasing the net bank funding available to the group over the next three years 
 
 - Group net indebtedness reduced from USD207.8 million in 2019 to USD189.4 million in 2020 
 
Agricultural operations 
 
 - FFB production of 785,850 tonnes (2019: 800,666 tonnes) despite excessively wet weather and Covid-19 related travel 
  restrictions impacting harvester availability in peak cropping months 
 
 - Third party FFB of 185,515 tonnes (2019: 198,737 tonnes) 
 
 - Pressure on CPO extraction rates from adverse Covid-19 impact on progress of mill works and sub-optimal loose fruit 
  collection in the peak crop period, with average extraction rate of 22.5 per cent (2019: 23.0 per cent) 
 
Stone and coal interests 
 
 - Arrangements progressing for quarrying of the andesite stone concession (held by local partner, ATP) to produce 
  crushed stone for a neighbouring coal company road through the group's estates, for local government projects and 
  for other local users of crushed stone 
 
 - With better coal prices and Covid-19 concerns subsiding, activity at the Kota Bangun coal concession (held by local 
  partner, IPA) resumed with the contractor aiming to commence operations later in 2021 
 
 - Revenue from IPA coal operations also expected in 2021 from shipping coal on behalf of other coal concessions 
  through IPA's port 
 
 - Group aiming to recover its loans to the coal concession holding companies and to withdraw from its coal interests 
  as soon as practicable 
 
 - Unmeritorious arbitration claims against IPA dismissed and indemnity costs awarded to and recovered by IPA 
 
Outlook 
 
 - CPO prices expected to remain firm at or around current levels with growth in global demand for vegetable oils 
  outstripping the growth in supply 
 
 - Annual capital expenditure to be maintained at recent more moderate levels; 2021 expenditure to be concentrated on 
  completing expansion of the group's newest oil mill and extension planting of remaining small pockets of land 
  available in existing estates 
 
 - Firm CPO prices and steady operational performance underpinning the group's improving financial position and 
  outlook 
 
 - Financing options, including equity, equity-linked instruments and trade finance, being explored to strengthen the 
  balance sheet 
 
 - Preference dividends arising in 2021 to be paid during the year with the group aiming progressively to catch up 
  preference dividend arrears as soon as circumstances prudently permit 
 
 
 
CHAIRMAN'S STATEMENT 
 
2020 was a year of two halves. While operationally, satisfactory crop yields were achieved, the sharp fall in the 
market prices of CPO and CPKO immediately following the onset of the Covid-19 pandemic had a significant negative 
impact on results for the first half. As prices steadily recovered through the second half, there was a corresponding 
improvement in financial performance. 
 
Operationally, the impact of Covid-19 on the group has been limited. The group experienced delays in deliveries of some 
supplies, as well as travel restrictions that prevented or delayed employees and contractors from returning to the 
estates. Changes to work practices, on-site testing of employees and other preventative measures, as recommended in the 
Indonesian government's guidelines, have been introduced and it is pleasing to report that, to date, only some 0.2 per 
cent of the work force has been infected with Covid-19, the majority with no serious symptoms as categorised by the 
Indonesian health department. 
 
Climatic factors and respect for the environment are integral to the operations of an agricultural group and the 
directors are conscious of, and seek to mitigate as far as possible, the impacts of climate change. For some years the 
group has been monitoring and publishing its carbon footprint calculated by using PalmGHG, a tool developed by the 
Roundtable on Sustainable Palm Oil. For 2020, emissions are now disclosed under "Sustainability" in the "Strategic 
report" of the annual report in accordance with the recently implemented Streamlined Energy and Carbon Reporting rules 
("SECR"); emissions under PalmGHG as well as SECR will continue to be published on the group's website at 
www.rea.co.uk. 
 
After an encouraging start to the year, the CPO price fell sharply to a low of USD510 per tonne, CIF Rotterdam, in mid 
May, reflecting the dramatic slowdown in world demand as a result of Covid-19. The recovery in the second half of the 
year saw prices closing the year at USD940 per tonne as a result of restocking in India and China and reduced production 
in the major producing countries. 
 
Unfortunately, producers were not able to realise the full benefit of the price increase as the Indonesian government 
made changes to the export levy scale in order to fund continuing subsidies to Indonesian manufacturers of biodiesel, 
who were under pressure from relatively low crude oil prices, and to support measures designed to benefit the oil palm 
industry. 
 
Notwithstanding the impact of export duty and the increased export levy (as set out in the company's press release in 
December 2020), gross margins in 2020 were a considerable improvement on 2019. The average selling price for the 
group's CPO in 2020, on an FOB basis at the port of Samarinda, net of export levy and duty, was USD558 (2019: USD453) per 
tonne. The average selling price for the group's CPKO, on the same basis, was USD601 (2019: USD533) per tonne. 
 
Despite the impact of delayed crop ripening and excessively wet weather in the second half of the year, as well as some 
shortfall in the availability of harvesters who were unable to travel to the estates due to Covid-19 related travel 
restrictions, the group achieved a good production outcome in 2020. FFB at 785,850 tonnes were slightly short of the 
total for 2019 of 800,666 tonnes, producing a yield per mature hectare of 22.6 tonnes (2019: 24.2 tonnes). Third party 
harvested FFB was similarly impacted in 2020, with FFB totalling 185,515 tonnes compared with 198,737 tonnes in 2019. 
 
CPO production totalled 213,536 tonnes in 2020 compared with 224,856 tonnes in 2019, reflecting both the lower level of 
FFB and lower extraction rates. CPO extraction rates, which averaged 22.5 per cent for the year compared with 23.0 per 
cent in 2019, were squeezed by a combination of delays in completing scheduled works in the mills and some 
inefficiencies in loose fruit collection during the peak crop period in the latter months of the year. The mill works 
were delayed by a shortage of spare parts and the unavailability of contractors during the worst periods of the 
Covid-19 pandemic. Production of both CPKO and palm kernels fared better by contrast at, respectively, 16,164 (2019: 
15,305) tonnes and 47,186 tonnes (2019: 46,326). 
 
Revenue for 2020 amounted to USD139.1 million, approximately 11 per cent higher than the USD125.0 million for 2019, 
reflecting the higher prices for CPO and CPKO during the second half of the year. With a full year's benefit of the 

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