Dekel Agri-Vision Plc (LON:DKL), the West African agribusiness company focused on building a portfolio of sustainable and diversified projects, has today announced its audited results for the year ended 31 December 2021 (the ‘Accounts’). The Company also gives notice that its Annual General Meeting will be held at Hill Dickinson LLP, The Broadgate Tower, 20 Primrose Street, London EC2A 2EW on 26 July 2022 at 10am BST. The Notice of AGM will be sent to shareholders and the Notice of AGM and Accounts will be made available to download later today from the Company’s website www.dekelagrivision.com.
Financial Highlights
· Record Revenue and EBITDA delivered from the Ayenouan palm oil plant in Côte d’Ivoire (‘Palm Oil Operation’) primarily driven by record Crude Palm Oil (‘CPO’) production and record CPO pricing:
o 66.2% increase in revenues to €37.4m (2020: €22.5m) – includes sale of CPO, Palm Kernel Oil (‘PKO’), Palm Kernel Cake (‘PKC’) and Nursery Plants
o Gross margin increased by 70.6% to 17.4% (2020: 10.2%), with post period end margins further improving towards historical levels
o 333.3% increase in EBITDA to €5.2m (2020: €1.2m)
o Net profit after tax of €1.0m (2020: €2.2m net loss)
· The Company’s cashew processing plant at Tiebissou in Côte d’Ivoire (the ‘Cashew Operation’) recorded a Net Loss of €0.4m in 2021 during its construction phase and entered the commissioning phase in December 2021 with pilot production and sales commencing in early January after 2021 year-end.
| Year ended 31 December | 2021 | 2020 | % change |
| Palm Oil Operation | |||
| Revenue | €37.4m | €22.5m | 66.2% |
| Gross Margin | €6.5m | €2.3m | 182.6% |
| Gross Margin % | 17.4% | 10.2% | 70.6% |
| G&A | (€3.5m) | (€2.8m) | (25.0%) |
| EBITDA | €5.2m | €1.2m | 333.3% |
| Net profit / (loss) after tax | €1.0m | (€2.2m) | n/a |
| Cashew Operation | |||
| Net Loss* | (€0.4m) | Nil | n/a |
| Dekel Group Net profit / (loss) after tax | €0.6m | (€2.2m) | n/a |
*Cashew pilot production commenced in early January post-2021 year-end
Operational Highlights – Palm Oil Operation
· 17.5% increase in FY2021 CPO production compared to FY2020, resulting in record annual production of 39,953 tonnes
· 21.0% extraction rate achieved in FY 2021 (FY2020: 22.1%)
· 14.9% increase in FY2021 CPO sales compared to FY2020, resulting in record annual sales of 39,092 tonnes
· 44.2% increase in average CPO prices to €868 per tonne in FY2021 (FY2020: €602). This represents an annual Company record sales price
· 22.7% increase in FY2021 PKO sales compared to FY2020
· 42.5% increase in average PKO prices to €851 in FY2021 (FY2020: €597)
Operational Highlights – Cashew Operation
· Cashew Operation capital works progressed significantly in FY2021 from a project at an early land preparation and construction phase to a largely commissioned plant with pilot production having commenced in early January 2022
· Delays in final key equipment items have stalled the ramp-up of production in H1 2022; however, with the arrival of the colour sorter on 12 June 2022, we expect to see a material increase in operating capacity shortly
· Cashew Operation expected to become net operating cash flow positive in Q4 2022
Lincoln Moore, Dekel Agri-Vision Executive Director, said: “It was a significant year for Dekel with our Palm Oil Operation delivering record breaking operating and financial results and our Cashew Operation moving materially towards first production, albeit with unprecedented macro conditions impacting the timing of delivery of full capacity. Whilst macro conditions are challenging, CPO prices continue to remain strong, underpinning the profitability of the Palm Oil Operation despite a period of weaker fresh fruit bunches (‘FFB’) volumes in H1 2022 and, together with the imminent ramp-up phase of the Cashew Operation, Dekel is well positioned to deliver a period of transformational operating and financial growth.”
CHAIRMAN’S STATEMENT
2021 has seen a year of record breaking results in our Palm Oil Operation and considerable progress towards commencement of production from our Cashew Operation, our second commodity to enter production and a key part of our short and medium term strategies to increase both the scale and diversity of Dekel.
The excellent performance of our Palm Oil Operation has been reflected in our full year financial results. Both revenue of €37.4 million (2020: €22.5 million) and EBITDA of €5.2 million (2020: €1.2m) were records for our Palm Oil Operation. 2021 also saw a return to net profitability of the Palm Oil Operation which delivered a net profit after tax of €1.0m, having reported a loss of €2.2 million in 2020. While supportive palm oil prices have played a major role in these results, it is also due to Dekel’s ability to navigate and withstand the various operational challenges resulting from Covid-19 and maintain stability within the Palm 0il Operation.
In terms of delivering the Cashew Operation to production, significant progress was achieved in 2021, albeit slower than we envisaged. At the time of writing this statement, we will now shortly commence the process of increasing production to over 50% of capacity with final commissioning and 100% capacity to follow. We believe the delivery of this project will be transformational in terms of increasing the scale, diversity and most importantly the future profit potential of Dekel.
Palm Oil Operation
2021 Palm Oil production can be summarised in two halves: a solid high season during H1 where production increased 11% compared to H1 2020 and an exceptionally high low season during H2 where production increased 33% compared to H2 2020. Combined, the FY2021 CPO production of 39,959 tn was an annual record. Tempering this result to a small degree was a lower CPO extraction rate of 21.0% in FY2021 compared to FY2020 of 22.1%.
The high levels of CPO production continued into January 2022; however, over the past few months we have seen unusually weak quantities of FFB during the high season which typically takes place from February to May. The weak FFB levels have been experienced throughout the east of Cote d’Ivoire and into the west of Ghana. Our agronomists and other technical experts have had difficulty pin-pointing the exact reason for this unusual seasonal trend. However, we have historically seen that periods of exceptionally high production, as we experienced in H2 2021, are often followed by a weaker period of production. Critically, during H1 2022, we have seen a dramatic improvement in the CPO extraction rate to well over 22%, which is in part offsetting the weaker FFB volumes. Again, this is consistent with historical trends where FFB production volumes and extraction rates have had an indirect relationship.
CPO prices achieved by the Company commenced 2021 at €796 per tonne and ended the year significantly higher at €968 per tonne. During 2021 we saw CPO demand rise as economies reopened after Covid-19 lockdowns and supply remained constricted following a number of years of low global new planting levels, coupled with labour, logistics and shipping challenges associated with the reopening of economies.
Currently, we are experiencing a ‘super peak’ in CPO prices as the impact of the war in Ukraine, which produces approximately 50% of the world’s sunflower oil (a substitute for CPO) has created further supply constraints and has led to numerous vegetable oil producing countries (including soya producers, the main substitute to CPO) to restrict exports in order to meet local demands. This has resulted in global CPO prices rising to as high as €1,800 per tonne in March 2022. Whilst the current global uncertainty means predictions are difficult, we expect to see some softening in prices during 2022 from these unprecedented levels. However, we maintain our view that CPO prices should remain well above the long-term average of €700 per tonne for the foreseeable future which would be very supportive for our Palm Oil Operation. We also remain bullish on medium to long term price dynamics.
The CPO and PKO prices achieved by Dekel locally in Côte d’Ivoire in FY2021 rose by 44.2% and 42.5% respectively compared to FY2020. Despite these significant increases, local prices have now traded at a material discount to the international market due to local market price caps being set at approximately €900 per tonne to protect local consumers. Whilst we continue to sell the majority of our products locally, we have also commenced the export of a portion of our products in 2021. This commenced with our PKO which we are currently selling for over €400 per tonne more than in 2021. In addition we are now exporting a portion of our CPO production where our prices achieved have increased over €200 per tonne in recent months. We aim to continue to export a portion of our products to gain access to the higher international prices while balancing our obligations to local stakeholders.
Final Roundtable on Sustainable Palm Oil (‘RSPO’) audit and certification of our Palm Oil Mill has been stalled firstly as a result of the inability of consultants and auditors to travel in H1 2021 due to Covid-19 and a current resultant backlog of companies seeking RSPO audits and RSPO renewal audits post Covid-19 travel restrictions. During this waiting period we have been consulting with RSPO in relation to the audit of our Company estates. As our estates consist of over 100 small plots rather than one large plot the audit process, in our view, needed clarification and a bespoke approach. RSPO has now provided a clear pathway to completing the Company estates audit and we are now preparing the works required with the objective of completing the audits of the Palm Oil Mill and Company estates at the same time. We will continue to update the market with our progress on this process.
Cashew Operation
The Cashew Operation site commenced 2021 as an early-stage construction site and finished the year with all site and infrastructure works completed. The equipment, with the exception of the sorting and shelling machinery was also largely commissioned, with pilot cashew production commencing in early January after year-end. Whilst progress has been considerable, we have encountered a host of supplier equipment delays due to our suppliers experiencing raw material shortages, logistics and shipping issues and additional Covid-19 lockdowns. This has meant a number of key components, most notably the sorting and shelling machines, have been severely delayed and stalled our intended timeline to ramp-up the Cashew Operation towards full production. We believe we are finally seeing the light at the end of the tunnel including the arrival of the colour sorting equipment from China on 12 June 2022 which, once installed, will allow production to increase to above 50% of capacity shortly. In addition, shipment of the shelling machines are being prepared for shipment imminently. These machines when working together with substitute shelling machines already on site will enable 100% capacity to finally be delivered. As announced on 15 June 2021, we acquired approximately 2,000tn of raw cashew nut feedstock during 2021 and we are continuing to acquire feedstock with the current objective of transitioning to full scale production as quickly as possible.
Whilst the delays have been very frustrating, we remain excited about the potential of the Cashew Operation which is being developed in such a way that capacity can be increased significantly once the initial raw material capacity of 10,000 tonnes per annum is reached. With 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 increasing the number of shifts from two to three when operations have reached an appropriate sustained period of stabilisation. From 15,000tpa and at a cost of €5-6 million, the mill’s capacity can be doubled to 30,000tpa, which we estimate could generate revenues in the region of approximately €35-40 million per annum based on today’s cashew prices.
Other projects
We continue to assess and undertake low-cost feasibility studies on additional projects, including a third commodity for which we believe we can leverage our existing infrastructure, logistics network and technical expertise. In addition, we have medium term plans to create a clean energy operation from waste material from both our Palm Oil Operation and Cashew Operation, which would underpin a biomass operation. Both projects are proceeding cautiously with current work being low cost and will remain so, at least until the Cashew Operation is up and running. We will provide further updates as appropriate.
Financial
A summary of the financial performance for FY2021, in addition to the comparatives for the previous 5 years, is outlined in the table below.
| FY2021 | FY 2020 | FY 2019 | FY 2018 | FY 2017 | FY 2016 | |
| FFB collected (tonnes) | 190,020 | 154,151 | 176,019 | 146,036 | 171,696 | 171,301 |
| CPO production (tonnes) | 39,953 | 34,002 | 37,649 | 33,077 | 38,736 | 39,111 |
| CPO sales (tonnes) | 39,092 | 34,008 | 37,713 | 32,692 | 38,373 | 39,498 |
| Average CPO price per tonne | €868 | €602 | €491 | €542 | €680 | €575 |
| Total Revenue (all products) | €37.4m | €22.5m | €20.9m | €20.9m | €30.2m | €26.6m |
| Gross Margin | €6.5m | €2.3m | €1.7m | €1.7m | €6.9m | €6.6m |
| Gross Margin % | 17.4% | 10.2% | 8.1% | 8.3% | 22.8% | 24.8% |
| Overheads | €3.8m | €2.8m | €3.2m | €3.2m | €3.6m | €3.2m |
| EBITDA | €4.8m | €1.2m | €0.2m | (€0.2m) | €4.5m | €4.1m |
| EBITDA % | 12.8% | 5.3% | 1.0% | – | 14.9% | 15.4% |
| Net Profit / (Loss) After Tax | €0.6m | (€2.2m) | (€3.3m) | (€3.3m) | €1.6m | €1.3m |
| Net Profit / (Loss) After Tax % | 1.6% | – | – | – | 5.3% | 4.9% |
FY2021 Revenue was a record for the Company and 66.2% higher than FY2020. This was driven by both record production in addition to record CPO and PKO pricing. The Gross Margin improved by 7.2 percentage points compared to FY2020, largely due to increased efficiencies associated with processing higher volumes, as well as premium sales prices. However, the Gross Margin % fell short of previous strong years in FY2016 and FY2017 due to a relatively low CPO extraction rate of 21.0% compared to historical levels above 22%. The CPO extraction rate is primarily driven by variation in the FFB oil content and, pleasingly, we have seen the extraction rate increase to historical levels above 22% in early 2022.
FY2021 Overheads rose by €1m to €3.8m compared to FY2020. This was mainly attributable to the first-time consolidation of the Cashew Operation overhead (€0.4m), increases in salaries post Covid-19 (€0.4m) and one-off expenses related to the equity and debt raises completed in FY2021 (€0.2m).
Dekel achieved record FY2021 EBITDA of €4.8m, in addition to a return to profitability with a Net Profit After Tax of €0.6m. We believe this was a strong outcome, particularly in a year of significant pre-production investment, operating and financial costs of the Cashew Operation. We expect to see the financial benefits of this significant investment start to pay dividends in Q4 2022 and beyond.
Outlook
We believe we have entered a period of supportive macro conditions in terms of selling prices of CPO and PKO. Whilst FY2022 high season FFB volume levels have been weak, the financial results remain relatively robust due to a combination of further increases in the selling prices of CPO and PKO compared to FY2021 and a material improvement in our extraction rate which, together, are driving an improvement in current gross profit margins. We continue to operate as efficiently as possible during what has been a weak high season and remain focused on controlling overheads in a high inflationary macro environment. The Cashew Operation is now finally reaching the point where production volumes can be ramped up and we believe we will see net contributions to Dekel from this operation commence in Q4 and importantly we expect it to be a catalyst for a material uplift in financial performance of Dekel over the next 12 months.
I would like to thank the Board, management, our employees and advisers for their support and hard work over the course of the year. I believe shareholders can look forward to an exciting year ahead.
Andrew Tillery
Non-Executive Chairman Date: 22 June 2022
