Dekel Agri-Vision Plc (LON:DKL), the West African focused agriculture company, has announced its audited results for the year ended 31 December 2020.
Financial Overview – across the board uplift in key financial metrics driven by 22.6% rise in crude palm oil (‘CPO’) prices and higher extraction rates more than offsetting lower CPO production
Full year revenues up 7.7% to €22.5 million; EBITDA up 500% to €1.2million; net loss decreased to €2.3m (2019: €3.3m), as detailed in the table below:
| 2020 | 2019 | % change | |
| Revenue | €22.5m | €20.9m | 7.7% |
| Gross Margin | €2.3m | €1.7m | 35.3% |
| Gross Margin % | 10.2% | 8.1% | 25.9% |
| G&A | (€2.8m) | (€3.2m) | 12.5% |
| EBITDA | €1.2m | €0.2m | 500% |
| Net profit / (loss) after tax | (€2.2m) | (€3.3m) | 33.3% |
Production – palm oil project, Ayenouan Côte d’Ivoire
· 22.6% increase in average realised global CPO prices to €602 per tonne of CPO (2019: €491) more than offset lower CPO volumes produced and sold
o After retracing from US$850 per tonne in January 2020 due to COVID-19, CPO prices rallied strongly in H2 2020 ending the year at around the US$1,000 per tonne level
· 34,002 tonnes of CPO produced (2019: 37,649 tonnes) follows 12.4% decrease in Fresh Fruit Bunches (‘FFB’) delivered to 154,151 tonnes (2019: 176,019 tonnes) – in line with wider sector
o Smaller decrease in CPO produced compared to FFB volumes due to significantly higher extraction rate of 22.1% (2019: 21.4%) as a result of higher oil content of FFB delivered
· 34,016 tonnes of CPO sold in 2020 (2019: 37,713 tonnes)
· ESG initiatives:
– Roll-out of fruit traceability programme across the region
– Maintaining 300 plus staffing levels at Ayenouan despite COVID-19
Development – cashew processing project at Tiebissou in Côte d’Ivoire
· Acquisition of controlling stake in cashew project which is on course to become Dekel’s second producing asset when first production commences in the coming weeks
· Interest in project increased to 70.7% post period end
· Tiebissou is expected to make meaningful contribution to 2021 group financials and ramp up further in 2022, the first year of full production
New Ventures – growing pipeline of new opportunities
· Third commodity project in Côte d’Ivoire – under active consideration following positive results of internal feasibility study
· Hybrid power project in Côte d’Ivoire – feasibility study being undertaken by JV partner Green Enesys on the development of a 30MW solar PV plant and a 5-6MW biomass plant using feedstock from Ayenouan – discussions ongoing with government
Dekel Executive Director Lincoln Moore said, “12 months ago, in the face of the pandemic, we said that the year ahead would demonstrate that Dekel Agri-Vision is both a resilient and a growing business. 12 months on, and while the pandemic remains ongoing, we are reporting full year results which show a strong improvement in Dekel’s financial performance compared to the prior year. This set of results, in our view, clearly demonstrates the resilience of the Company that we had predicted. 12 months on, and with a strong performance from our palm oil operations in H1 2021, coupled with the imminent commissioning phase of the Tiebissou cashew processing project approaching, we believe we are on the cusp of a material step up in financial performance.
“Importantly, Tiebissou offers not one but a series of step-ups in revenue generation and profitability. We expect to increase capacity at the plant by 50% to 15,000tpa within 12-24 months at no cost and from there to double production to 30,000tpa. Together with Ayenouan we have a defined path in place to treble group revenues to c. €60million within the next two to three years. Arguably, this is a conservative estimate as it does not take into account our plans to add a third commodity to our portfolio and also the joint venture agreement we have with Green Enesys regarding the potential development of a 30MW solar PV plant and a 5-6MW biomass plant using feedstock from Ayenouan. The possible biomass plant would also add to our already strong ESG credentials, which are expected to be independently validated later this year following the completion of the RSPO certification process, which could in turn open up export markets for our palm oil.
“We are delivering on our objective to build a multi-project, multi-commodity agriculture business, which benefits not just investors but all stakeholders, including the local community in which we operate. With this in mind, I look forward to providing further updates on our progress in the year ahead.”
CHAIRMAN’S STATEMENT
2020 was very much a year of two halves for Dekel Agri-Vision, its established palm oil operations and its soon to be producing cashew processing plant in Cote d’Ivoire:
· Highly challenging first half due to the global pandemic and associated lockdowns
· Strong second half pick-up in activity which partially made up for the ground lost in the first half and which has since gathered further momentum in 2021
Specifically, H1 2020 saw our Ayenouan crude palm oil (‘CPO’) operations contend with a near halving in global prices from US$850 per tonne in January to US$500-550 per tonne in April and May 2020, a price trajectory that was in line with other commodities following the onset of the pandemic. At the same time, construction activity at our Tiebissou cashew plant was held back due to delays in the manufacture and shipping of milling and infrastructure equipment in Italy and China, two countries that were severely impacted by the pandemic in the first half.
H2 2020 witnessed a sharp rebound. Global CPO prices soared to the US$1,000 per tonne level they currently trade at today following a strong recovery in CPO demand, which has enabled us to report an improvement across all of Ayenouan’s key financial metrics for the full year compared to 2019. In addition, thanks to the progress made on the ground in the second half, the commissioning of the 10,000tpa mill at Tiebissou is expected in the coming weeks.
Importantly, the strong finish to the year has laid the foundations for what promises to be a transformative 2021 for the Company. Once operations commence at Tiebissou, Dekel will have two projects producing two commodities and generating two independent revenue streams. Not only will this lead to the scaling up of our revenues and earnings, but also to the diversification of our end markets. The directors have sought to increase shareholder value by reducing risk through a combination of sustainably higher earnings and multiple end markets.
With the commissioning of the cashew processing plant at Tiebissou within sight, we believe recent corporate transactions indicate that we are already starting to see a lowering in the Company’s risk profile:
· Execution of transactions during the year and post period end, which resulted in the Company securing a controlling stake in the Tiebissou cashew project in exchange for Dekel shares that were issued at premia to the then market price
· Completion of a £3.2m equity raise post period end that was oversubscribed
· c.€15.2 million bond facility secured post period end which extends the maturity of Dekel’s debt profile and significantly strengthens the balance sheet – €5.9m was drawn down in January 2021
Taken together, it is clear that Dekel is entering a new phase in its history in which a highly cash generative platform and a strong balance sheet promise to accelerate the implementation of our growth strategy. This remains focused on building a multi-project, multi-commodity agriculture company for the benefit of both shareholders and the local communities in which we operate.
Ayenouan Palm Oil
Being a producer of crude palm oil, key performance drivers for our Ayenouan operations are global CPO prices, fresh fruit bunch (‘FFB’) deliveries / production levels, and extraction rates. The year under review saw significant improvements in two of these metrics: global CPO prices and extraction rates. The 22.6% increase in CPO prices to €602 per tonne and the jump in the extraction rate to 22.1% from 21.4% the previous year were more than enough to offset a 12.5% drop in FFB delivered to the mill and a 9.6% fall in volumes of CPO produced during the year. In turn, this has driven a material improvement in our full year financial performance at the revenue, EBITDA and net profit / loss levels compared to 2019, as detailed in the table below.
The average realised price of €602 per tonne of CPO achieved during the year does not tell the whole story. Global CPO prices began and ended the year under review at over US$800 per tonne, a level rarely seen in the eight years since our 60,000tpa mill was commissioned in 2013. Had prices traded at or around this level throughout the year then, despite lower volumes of CPO produced at Ayenouan in 2020, it is likely we would be reporting results closer to those of 2017, a record year in terms of revenue generation and profitability with €30.2m revenues, €4.5m EBITDA and €1.6m net profits posted. During 2020 CPO prices were anything but stable, dropping below €500 per tonne as the pandemic took hold and societies around the world went into lockdown, before rebounding equally dramatically in the second half of the year, as major importers in Asia replenished inventories.
The above paragraph has not been included to illustrate a ‘what could have been’ scenario – rather a case of ‘what might be’. We are almost halfway through the current year and we have reported average realised prices of €794 per tonne for Q1 2021, €803 for April and €774 for May. Together with a material improvement in the peak harvest season, resulting in volumes of CPO produced increasing to 23,877 tonnes during the five months to 31 May 2021, compared to 21,539 tonnes in the equivalent five-month period in 2020, we believe we are on course to report another year of material revenue and profits growth at Ayenouan, one that could potentially challenge 2017’s record outcome. By way of illustration, in Q1 2017 16,398 tonnes of CPO were produced and average realised prices of €731 were achieved. The relevant figures for Q1 2021 are 15,327 tonnes of CPO produced and average realised prices of €794 per tonne. Much can happen between now and the end of the year but, as things stand, at the very least we are confident of another year of progress at Ayenouan.
| FY 2020 | FY 2019 | FY 2018 | FY 2017 | FY 2016 | |
| FFB collected (tonnes) | 154,151 | 176,019 | 146,036 | 171,696 | 171,301 |
| CPO production (tonnes) | 34,002 | 37,649 | 33,077 | 38,736 | 39,111 |
| CPO Sales (tonnes) | 34,008 | 37,713 | 32,692 | 38,373 | 39,498 |
| Average CPO price tonne | €602 | €491 | €542 | €680 | €575 |
| Revenue (All products) | €22.5m | €20.9m | €20.9m | €30.2m | €26.6m |
| Gross Margin | €2.3m | €1.7m | €1.7m | €6.9m | €6.6m |
| Gross Margin % | 10.2% | 8.1% | 8.3% | 22.8% | 24.8% |
| EBITDA | €1.2m | €0.2m | (€0.2m) | €4.5m | €4.1m |
| EBITDA % | 5.3% | 1% | – | 14.9% | 15.4% |
| NPAT | (€2.2m) | (€3.3m) | (€3.3m) | €1.6m | €1.3m |
| NPAT % | – | – | – | 5.3% | 4.9% |
ESG
Progress at Ayenouan this year will not be confined to operations and financials. Following major advances made in 2020 preparing for the Round Table for Sustainable Palm Oil (‘RSPO’) certification process, we believe we are on course to attain RSPO certification later this year. A pre-audit of the Company’s programmes and management systems by Oxford-based environmental consultancy Proforest, as well as an assessment of the processes and procedures to manage environmental and social risks and impacts at Ayenouan, has now been completed. We are currently reviewing the final recommendations of the report ahead of commencing the formal RSPO audit process later this year.
Certification would see Ayenouan become one of the few operations in the region with the RSPO stamp of approval. It would also be a validation of our collaborative model which places local smallholders and communities at the centre of our operations: over 90% of the CPO we produce at Ayenouan originates from fruit harvested by local smallholders; while our state-of-the-art nursery supplies farmers with hundreds of thousands of young trees each year. We have always believed that strong ESG credentials and corporate profitability can go hand in hand, and we believe RSPO certification can demonstrate this. By providing third-party endorsement, RSPO certification will differentiate Dekel from non-ESG focused peers. This has the potential to increase deliveries of fruit grown in the region by local smallholders to Ayenouan for processing, which in turn could help increase CPO production at the project towards the mill’s nameplate 60,000tpa capacity. Furthermore, having RSPO certification has the potential to open up export markets for our CPO.
Tiebissou cashew project
Up until now, the financial results of Ayenouan and those of the group as a whole have mirrored each other, at least at the revenue and gross profit levels, as our palm oil operation has been the only one in our portfolio that has been in production. All this is set to change with the imminent commissioning of the 10,000tpa mill at our cashew processing project. Thanks to the progress made during the second half of 2020, we are set to commence production in the coming weeks and are also currently purchasing sufficient volumes of nuts from local co-operatives for processing in the second half. Tiebissou is therefore on track to contribute to Dekel’s financial performance in the current year before transforming Dekel’s financial profile in 2022, the first full year of production.
We are confident that sufficient volumes of RCN will be secured to fully utilise the plant’s capacity because, unlike palm oil, Cote d’Ivoire is not only one of the world’s largest RCN producers but there is a major shortfall in cashew processing capacity in the country – just 15-20% of the c. 750,000MT of RCN grown each year is processed domestically. Even after taking into account additional processing capacity that is due to come on stream in the years ahead, we believe RCN supply will continue to outstrip demand from local processing plants for some time to come. This demand / supply imbalance also has positive implications for the project’s margins which are expected to be higher than those of our palm oil operations at Ayenouan.
With such favourable RCN demand / supply dynamics and higher margins on offer, we are keen to expand capacity at Tiebissou at the earliest opportunity and we have a roadmap in place to achieve this. The plant we are installing has a nameplate capacity of 15,000tpa, which provides us with the opportunity to ramp up production by 50% at no extra cost by increasing the number of shifts from two to three. We will look to do this within 12-24 months of the commissioning of the plant. From this point onwards we aim to increase the plant’s capacity to 30,000tpa which, based on today’s prices, could generate annual revenues of around €40 million. The imminent commissioning of the plant is therefore just the first of a series of growth steps at Tiebissou.
That Tiebissou is on track to commence operations in the coming weeks is testament to the hard work of our team on the ground and those of our equipment suppliers in Italy and China in the face of severe disruption caused by the pandemic. The progress made in the second half of the year gave us the confidence to execute the series of transactions, both during the year under review and post period end, that has seen Dekel’s interest in the project increase to 70.7%.
Other projects
The development of our pipeline of projects was put on hold during the year in response to COVID-19. As the global situation improves, and once Tiebissou is up and running, we will look to advance these projects, one of which is centred around building a state-of-the-art processing plant for a third commodity. We also have a joint venture with established renewable energy company Green Enesys Holdings to develop a hybrid power project (‘HCTPP’) in Côte d’Ivoire. This project is at the feasibility study stage and is evaluating the construction of a HCTPP comprising a 30MW solar PV plant and a 5-6MW biomass plant using empty fruit bunches from Dekel’s mill at Ayenouan as feedstock. Discussions with the government in Cote d’Ivoire are ongoing.
Financial
During the period under review, total revenues at Ayenouan were €22.5 million, a 7.7% increase on the previous year. The higher revenues were driven by a 22.6% increase in CPO prices achieved and a higher extraction rate which together more than offset lower year on year CPO production at the mill during the period (2020: 34,002 tonnes / 2019: 37,649 tonnes). The higher full year revenues generated a 500% increase in EBITDA to €1.2 million (excluding share based compensation).
In response to the pandemic, management implemented a cost saving programme at both project and corporate levels, resulting in a 12.5% reduction in general administration expenses compared to 2019.
In June 2020, Bloomfield Investment Corporation, the credit rating agent for West Africa, renewed the Company’s credit rating as investment grade unchanged: long term BBB- and short term A3.
Outlook
Dekel has emerged from what was a highly challenging year in a strengthened position, both operationally and financially. In spite of the disruption caused by the pandemic, we have reported an improved set of full year financial results for our palm oil operations, we have advanced our large-scale cashew processing project, and we have secured a controlling interest in the same project ahead of the commencement of first production.
The momentum behind the business continues to build in the current year: our palm oil operations are on course to post another improved set of financial results for the first half; the cashew purchasing programme has commenced in anticipation of the plant at Tiebissou commencing processing in the coming weeks; the post period end long term debt refinancing has extended the maturity of our debt profile and strengthened our balance sheet; and the planned completion of the RSPO certification process for our palm oil operations later this year will potentially highlight the attractiveness of our project and open up export routes. Takeaways from each of the above neatly sum up what we at Dekel Agri-Vision are focused on building: a highly cash generative agriculture group; a diversified portfolio of growing revenues streams; a strong balance sheet to support future growth; and a business with best-in-class ESG credentials among its peers.
Finally, I would like to thank the Board, management, our employees and advisers for their support and hard work over the course of the year. It is because of their efforts that Dekel is in the strong position it is today and that shareholders can look forward to an exciting year ahead.
Andrew Tillery
Non-Executive Chairman Date: 23 June 2021
