Dekel Agri-Vision Plc (LON:DKL), the West African agribusiness company focused on building a portfolio of sustainable and diversified projects, has announced its unaudited interim results for the six months ended 30 June 2023.
Key Highlights
Palm Oil Operation
· H1 2022 revenue of €20.7m, a 5.1% increase from €19.7m in H1 2022 – includes sales of CPO, Palm Kernel Oil (‘PKO’), Palm Kernel Cake (‘PKC’) and Nursery Plants
· We achieved a 49% increase in H1 2023 CPO production compared to H1 2022, however, the H1 2022 gross margin – €3.5m, EBITDA – €2.3m and net profit after tax €1.2m were below H1 2022 comparisons due to the timing difference of a high volume of sales occurring post H1 2023 due to the late and strong production high season:
o H1 2023 CPO inventory of 4,870 tonnes compared to 650 tonnes at H1 2022
o H1 2023 PKO inventory of 1,080 tonnes compared to 300 tonnes at H2 2022
· H1 2023 stock on hand has been sold in H2 2023 and whilst CPO and PKO prices traded lower than the record prices in 2022, our current sales prices remain historically strong and together with continued strong production H2 2023 is currently tracking significantly ahead of H2 2022.
Cashew Operation
· The Cashew Operation commenced commercial operations in H1 2023 recording first revenue of €0.6m and a loss after tax of €1.1m. The loss is due to daily production volumes achieved being below operational capacity during the ramp-up phase of the operation.
· The Cashew Operation production volumes continue to gradually improve in H2 2023 which should drive improvement in financial outcomes.
· The other main value drivers of the Cashew Operation including the price of Raw Cashew Nut (‘RCN’), the Cashew extraction rate and sales prices are delivering in line with expectations.
Financial Highlights
| Six months ended 30 June | H1 2023 | H1 2022 |
| Palm Oil Operation | ||
| Revenue | €20.7m | €19.7m |
| Gross Margin | €3.8m | €5.0m |
| Gross Margin % | 17.4% | 25.4% |
| EBITDA | €3.3m | €4.2m |
| Net profit / (loss) after tax | €1.5m | €2.5m |
| Cashew Operation | ||
| Revenue | €0.6m | nil |
| Gross Margin | (€0.4m) | n/a |
| EBITDA | (€0.8m) | n/a |
| Net profit/ (loss) after tax | (€1.1m) | (€0.2m) |
| Dekel Group | ||
| Revenue | €21.3m | €19.7m |
| EBITDA | €2.5m | €4.0m |
| Dekel Group Net profit / (loss) after tax | €0.4m | €2.3m |
Operational Highlights – Palm Oil Operation
· The Palm Oil Operation experienced a significantly stronger high season compared to H1 2022 with Fresh Fruit Bunch (‘FFB’) volumes and Crude Palm Oil (‘CPO’) production increasing 52.1% and 49.0% respectively compared to H1 2022.
· CPO sales quantities increased 22.4% in H1 2023 compared to last year. Given the high season arrived much later than normal our CPO stock levels at the end of H1 2023 are much higher than typical at over 4,800tn.
· The H1 2023 average CPO sales price achieved was historically strong at €934 per tonne, albeit 7.8% below the record H1 2022 CPO sales price.
· The CPO extraction rate for H1 2023 of 21.9% was slightly lower than H2 2022 but remains well in line with expectations.
| H1-2023 | H1-2022 | Change | |
| FFB processed (tonnes) | 114,745 | 75,448 | 52.1% |
| CPO Extraction Rate | 21.9% | 22.4% | -2.2% |
| CPO production (tonnes) | 25,166 | 16,893 | 49.0% |
| CPO Sales (tonnes) | 20,758 | 16,966 | 22.4% |
| Average CPO price per tonne | €934 | €1,013 | -7.8% |
| Palm Kernel Oil (‘PKO’) production (tonnes) | 1,442 | 1,162 | 24.1% |
| PKO Sales (tonnes) | 515 | 1,180 | -56.3% |
| Average PKO price per tonne | €947 | €1,454 | -34.9% |
Operational Highlights – Cashew Operation
· The Cashew Operation achieved a number of key milestones during H1 2023 including, increasing ownership to 100%, commencing commercial operations, first operational sales and post period end completing the BRC global food standard assessment.
· The ramp up of daily production whilst slower than expected, is continually increasing which should be reflected in the upcoming Q3 2023 production volumes.
· All other key elements of the value chain from raw material purchasing to sales prices with the exception of daily production volumes are in line with expectations.
| H1-2023 | |
| RCN Inventory | |
| Opening RCN Inventory (tonnes) | 1,841 |
| RCN Purchased (tonnes) | 1,378 |
| RCN Processed (tonnes) | 759 |
| Closing RCN Inventory (tonnes) | 2,460 |
| Cashew Processing | |
| Opening Cashews (tonnes) | 111 |
| RCN Processed (tonnes) | 759 |
| Cashew Extraction Rate | 23.3% |
| Cashew Produced (tonnes) | 177 |
| Cashew Sales (tonnes) | 170 |
| Closing Cashews (tonnes) | 118 |
| Average Sales prices per tonne | |
| – Unpeeled Cashews | €3,500 |
| – Peeled Cashews | €4,500 |
Lincoln Moore, Dekel Agri-Vision’s Executive Director, said: “The Palm Oil Operation is experiencing potentially its best year in terms of both relatively strong production volumes and sales price which sets up a strong full year financial performance. The Cashew Operation has significant upside as daily production volumes continue to increase since transitioning to commercial production in early 2023 and we look forward to seeing the benefits of both operations working well in tandem as 2023 progresses”.
CHAIRMAN’S STATEMENT
Palm Oil Operation
Although the production high season commenced later than typical, we saw an excellent period of production from March to June 2023 which culminated in an increase in CPO production of 49% in H1 2023 compared to H1 2022. The period of relatively high CPO production has continued into H2 where in September 2023 we expect to record our 8th consecutive month of higher like for like production compared to 2022. The improvement in production volumes is largely due to a much stronger FFB harvesting season compared to 2022 and a period of smooth operating performance from our logistics and milling teams who have been able to take full advantage of improved market volumes. CPO sales volumes in H1 2023 also increased 22.4% compared to H1 2022 although the strong and late timing of the high season meant we held over 4,000tn of additional CPO stock at the end of H1 2023. This stock has been sold subsequent to half year end and we are tracking to achieve annual CPO production and sales volumes close to record levels in 2023.
International CPO and PKO sales prices traded well above historically averages, albeit lower than the record levels achieved in 2022. International CPO prices currently sit at around €875-900 per tonne and whilst we have seen some recent pressure on our local CPO prices largely due to high inventory levels resulting from the late strong high season, CPO prices currently remain very supporting for our Palm Oil Operation.
The combined balance of relatively strong CPO production and relatively high CPO prices positions the Palm Oil Operation very well to exceed our record 2021 results.
Cashew Operation
The Cashew Operation achieved a number of key milestones during H1 2023 including commencing commercial operations, first operational sales and post period end completing the BRC global food standard assessment. All other key elements of the value chain from raw material purchasing to sales prices with the exception of daily production volumes are in line with expectations. The ramp up of daily production has been slower than we would like due to teething problems particularly in the shelling and peeling machinery. We are however seeing gradual improvement which should be reflected in the upcoming Q3 2023 production volumes data and we are hopeful to see a move towards operational profitability in Q4 2023.
As previously stated, the Cashew Operation is integral to our short and medium term growth plans. It has a nameplate capacity of 15,000 tonnes per annum (‘tpa’), production at the plant can be ramped up by 50% at no extra cost by simply increasing the number of shifts from two to three per day. From 15,000tpa and at a capex cost of €5-6 million, the mill’s capacity can be doubled to 30,000tpa, which the Directors estimate could generate revenues in the region of approximately €35 million per annum based on current prices.
Other Projects
Whilst we have further expansion plans, including the processing of a third commodity in addition to clean energy aspirations, these projects are on hold as we focus on enhancing the production volumes of the Cashew Operation.
Group Financial
A summary of the financial performance for H1 2023, in addition to the comparatives for the previous 5 years, is outlined in the table below.
| H1 2023 | H1 2022 | H1 2021 | H1 2020 | H1 2019 | H1 2018 | |
| CPO production (tonnes) | 25,166 | 16,893 | 26,515 | 23,882 | 28,934 | 22,242 |
| Average CPO price per tonne | €934 | €1,013 | €817 | €602 | €505 | €549 |
| Total Revenue (all products) | €21.3m | €19.7m | €21.7m | €15.4m | €14.6m | €14.1m |
| Gross Margin | €3.4m | €5.0m | €4.9m | €2.6m | €2.3m | €2.1m |
| Gross Margin % | 15.5% | 25.4% | 22.6% | 16.9% | 15.8% | 14.9% |
| Overheads | (€1.8m) | (€1.7m) | (€1.7m) | (€1.4m) | (€1.5m) | (€1.6m) |
| EBITDA | €2.5m | €4.0m | €3.9m | €1.9m | €1.4m | €1.1m |
| Net Profit / (Loss) After Tax | €0.4m | €2.3m | €2.0m | €0.5m | (€0.1m) | (€0.5m) |
Dekel achieved H1 2023 EBITDA of €2.2m and net profit after tax of €0.4m compared to €4m EBITDA and €2.3m net profit after tax in H1 2022. This result was driven by:
· A decrease in the H1 2023 Palm Oil Operation EBITDA was largely due to timing differences associated with the sale of significant quantities of H1 2023 CPO and PKO production taking place after H1 2023 period end. Conversely the significant increase in sales volumes in H2 2023 should set up a strong H2 2023 compared to H2 2022.
· A decrease in CPO and PKO selling prices in H1 2023 compared to record prices in achieved in H1 2022 as well as a small decrease in the CPO extraction rate.
· The commercial commencement of the Cashew Operation in 2023 meaning previous costs which were capitalised pre commercial production being recorded as operational costs resulting in an increase in the Net loss.
Outlook
In the past, we have seen the Palm Oil operation have periods of strong pricing and weak volumes or vice versa. 2023 is arguably the best year we have seen in terms of both relatively strong volumes and pricing which sets us up for a strong financial performance. The Cashew Operation has significant upside as daily production volumes continue to improve and we look forward to seeing the benefits of both operations working well in tandem as quickly as possible.
I would like to thank the Board, Management, our employees and advisers for their support and hard work over the course of the year.
Andrew Tillery
Non-Executive Chairman, Dekel Agri-Vision Date: 27 September 2023
