Annual Report • Apr 28, 2011
Annual Report
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| 2010 | 2009 | 2008 | 2007 | 2006 | ||
|---|---|---|---|---|---|---|
| Restated | Restated | |||||
| Activity | ||||||
| palm oil | 192 156 | 196 368 | 169 514 | 171 167 | 167 756 | |
| Total own production of | rubber | 9 608 | 8 633 | 9 026 | 10 033 | 9 553 |
| consolidated companies (in tonnes) |
tea | 3 097 | 3 121 | 6 600 | 6 237 | 5 494 |
| bananas | 20 639 | 20 575 | 11 046 | 10 456 | 11 159 | |
| palm oil | 901 | 683 | 949 | 780 | 478 | |
| Average market price | rubber | 3 654 | 1 921 | 2 619 | 2 290 | 2 101 |
| (USD/tonne) | tea | 2 885 | 2 725 | 2 420 | 2 036 | 1 872 |
| bananas | 1 002 | 1 145 | 1 188 | 1 037 | 897 | |
| Results (in KUSD) | ||||||
| Turnover | 279 400 | 237 829 | 279 402 | 207 292 | 162 861 | |
| Gross profit - before IAS41 | 117 682 | 89 695 | 92 228 | 76 797 | 40 774 | |
| Operating result - before IAS41 | 95 625 | 73 908 | 74 066 | 61 656 | 30 239 | |
| Share of the group in the result | 84 843 | 60 174 | 58 765 | 47 289 | 21 766 |
| Operating fixed assets (1) | 321 512 | 278 118 | 254 621 | 230 089 | 199 060 |
|---|---|---|---|---|---|
| Shareholders' equity | 368 549 | 296 918 | 247 140 | 199 420 | 153 455 |
| Net financial assets (+)/obligations (-) | 56 484 | 36 108 | 14 453 | - 8 280 | - 35 214 |
| Investments in intangible and operating fixed assets (1) | 37 842 | 30 847 | 36 134 | 31 523 | 17 381 |
Cash flow from operating activities after taxes 77 704 64 400 62 293 63 781 27 468 Free cash flow 33 922 34 593 35 809 33 249 - 4 208
| Number of shares | 8 951 740 | 8 951 740 | 8 951 740 | 8 951 740 | 8 828 880 |
|---|---|---|---|---|---|
| Equity | 41.17 | 33.17 | 27.61 | 22.28 | 17.38 |
| Basic earnings per share | 9.48 | 6.72 | 6.56 | 5.34 | 2.49 |
| Cash flow from operating activities after taxes (2) | 8.68 | 7.19 | 6.96 | 7.21 | 3.14 |
| Free cash flow (2) | 3.79 | 3.86 | 4.00 | 3.76 | -0.48 |
| Gross dividend (in EUR) | 1.50 | 1.10 | 0.80 | 0.80 | 0.40 |
| Maximum | 71.93 | 36.80 | 53.00 | 39.90 | 24.71 |
|---|---|---|---|---|---|
| Minimum | 36.80 | 18.00 | 16.80 | 22.50 | 16.22 |
| Closing 31/12 | 71.00 | 34.78 | 18.69 | 39.90 | 24.71 |
| Stock Exchange capitalization at 31/12 (in K€) | 635 574 | 311 342 | 167 308 | 357 165 | 218 162 |
(1) Operating fixed assets = biological assets. property. plant & equipment and investment property
(2) Denominator 2010 = weighted average number of shares issued (8 951 740 shares).
2006 2007 2008 2009 2010
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Report from the Board of Directors and from the Auditor Presented to the 92nd Ordinary General Meeting on 8 June 2011
Periodic and occasional information concerning the company and the group is communicated prior to the opening of the stock market at the following times:
The following ordinary general meeting will be held on 13 June 2012 at 15:00h at kasteel Calesberg, 2900 Schoten.
François Van Hoydonck Johan Nelis Tel 32/3/641.97.00 Fax 32/3/646.57.05 e-mail: [email protected]
Entrepotkaai 5 2000 Antwerpen
Kasteel Calesberg Calesbergdreef 5 2900 Schoten Tel 32/3/641.97.00 Fax 32/3/646.57.05 e-mail: [email protected] Register Legal Persons Antwerpen B.T.W. BE-0404.491.285
www.sipef.com
| Financial calendar | 2 |
|---|---|
| Useful addresses | 2 |
| Content | 3 |
| Significant events for the SIPEF group | 4 |
| History | 5 |
| Principal activities | 5 |
| Company strategy | 6 |
| Board of directors, auditors and management | 7 |
| Organogram | 9 |
| Chairman's message | 11 |
| Annual report by the board of directors | 16 |
| Corporate governance | 24 |
| Activity report by product | 37 |
| Activity report by country | 41 |
| Group production | 56 |
| Group planted area | 57 |
| Age profile | 59 |
| Sustainability | 62 |
| Financial statements | 71 |
Asco Continentale Verzekeringen NV sells Asco Life NV.
B.D.M. NV sells Bruns ten Brink Assuradeuren BV.
The SIPEF Group acquires an additional 6.82% stake in PT Agro Muko.
Certification under ISO 140001 and RSPO renewed for 1 year at Hargy Oil Palms Ltd in Papua New Guinea.
SIPEF sells the remainder of its operations in Brazil.
The certification, in terms of the 'RSPO Principles & Criteria', of the Perlabian and Bukit Maradja palm oil mills and associated plantations in Indonesia was confirmed by the BSI and RSPO auditors.
Distribution of a gross dividend of EUR 1.10.
Moderate fall in palm oil production, by 3.1%, due to weather, but a significant increase in average prices.
The combination of rising volumes of rubber (+5%) and higher market prices more than doubled the contribution made by rubber to the gross profit.
Higher sales prices for all of our products led to a 29.3% rise in profits for the period, group share prior to IAS 41.
Net result, after IAS 41, group share, was USD 84 843 – 41.0% higher than the record result for 2009.
Net cash position rose by KUSD 20 736 to KUSD 56 484.
Proposal for distribution of a gross dividend of EUR 1.50 per share, a rise of 36.4% in relation to the previous year.
Continued oil palm and rubber expansion in Indonesia and Papua New Guinea.
Société Internationale de Plantations et de Finance (SIPEF) was incorporated in 1919 with the principal aims of promoting and managing plantation companies in both tropical and sub-tropical areas. At that time, the company had two "agencies", one operating in Kuala Lumpur, Malaysia, the other in Medan, Indonesia.
Over the course of the years, the company has developed into an agro-industrial group with production and export facilities in Asia and Oceania, Africa and South America, where it manages important plantations of traditional crops such as rubber, palm oil and tea.
Starting in 1970, other crops such as bananas, pineapples, ornamental plants, guava and pepper were also introduced. The group invested in the real estate sector in Belgium and in the US, but these activities were later phased out completely.
Our traditional activities in commodities and their shipping led us to also get involved in the insurance sector where we now offer a wide range of services.
In de last decade, SIPEF has concentrated its efforts in the agro-industrial sector solely on the production of palm oil, rubber, tea and bananas in Indonesia, Papua New Guinea and Ivory Coast. The group sells its own products throughout the world. SA SIPEF NV also provides management and marketing services to third parties.
The plantations currently extend over a planted surface area of 62 604 hectares.
SA SIPEF NV is a Belgian agro-industrial company quoted on the Euronext Brussels stock exchange.
The company mainly holds majority stakes in tropical plantation businesses that it manages and operates.
The group is geographically diversified and produces various commodities, principally palm oil.
It invests mainly in recently industrialised countries.
SA SIPEF NV plays a decisive role in the management of companies in which it holds a majority stake or that it controls together with other partners. This role includes active participation in the boards of directors of these subsidiaries as well as monitoring of the management and operation of these companies. SA SIPEF NV strives to transmit its agronomic experience and management techniques to the local management.
Every effort is made to meet the needs of our customers and to provide them with high-quality goods and services in a timely manner.
In order to optimise the management of the plantations, we attach great importance to the training of our local employees, both in agricultural and management techniques.
The group's policy concerning agricultural, technical, environmental and general aspects is detailed in manuals containing practical guidelines to achieve these goals. Training sessions support proper implementation of these policies. We see to it that all employees are able to work in a healthy and safe environment.
The group recognises that, in addition to its statutory and commercial obligations, it bears responsibility towards the communities and environment in which it operates. In order to preserve the environment, the group applies ecologically-responsible agricultural policies that comply with the principles and criteria of the "Rountable on Sustainable Palm Oil" (RSPO). This covers a broad series of environmental and social topics such as transparency, compliance with legal standards, good agricultural policy, sustainable development of the land and continued efforts to achieve perfection.
A separate chapter in the annual report is devoted to sustainable agriculture and our efforts to implement those policies.
"The Connection to the World of Sustainable Tropical Agriculture"
DELOITTE Bedrijfsrevisoren BV o.v.v.e. CVBA, represented by Philip MAEYAERT Auditor
Management
François VAN HOYDONCK Managing Director Matthew T. ADAMS External Visiting Agent Didier CRUYSMANS Manager Estates Department Johan NELIS Chief Financial Officer Paul NELLENS Manager Marketing Commodities
Thomas HILDENBRAND Manager Marketing Bananas and Flowers
Young rubber - Galley Reach Holdings Ltd (PNG)
* % of interest
I have great pleasure in submitting the annual report to you, along with the consolidated financial statements for the group and the public company, which will be laid before the 92nd annual general meeting to be held on 8 June 2011.
2010 will go down as a record year in the history of SA SIPEF NV. Following record profits in 2008 and 2009, we see once again a consolidated result for this financial year that significantly exceeds those of previous years, and which is primarily based on strong market prices for palm oil, rubber, tea and bananas, our four basic activities.
There was a stable political atmosphere in Indonesia and the country made considerable economic progress as a result of its growing internal market, which was translated into a stronger currency in relation to the American dollar. The political and economic environment in Papua New Guinea was also stable due to the prospects of significant returns from the future Liquid Natural Gas (LNG) project; this allowed us to concentrate on our commercial operations.
Regrettably, the same cannot be said for the Ivory Coast. The presidential elections at the end of 2010, which went off smoothly, ended up in a conflict between two "winners", so the country is now in the grip of a political impasse. The business world has not yet suffered a great deal of damage from this, but the macro-economic measures promulgated by the international community are threatening to complicate our export activities for bananas and flowers. This might end up posing a threat in 2011 to the profitability in the sector, which is dependent on satisfactory logistical processes.
These countries, and the markets for palm oil and rubber in particular, were not significantly affected by the financial crisis.
Good returns from soya beans in South America and the strong demand from the Asiatic market supported the market for vegetable oils in the first six months of 2010. From halfway through the year, the disrupted weather patterns in various parts of the world resulted in a greater volatility in supplies, so that we experienced rising prices. This trend continued further in the new year, and while there are expectations that supply will improve, this may not be translated into price reductions for palm oil until the second six months. Apart from the dampening effect of high export taxes in Indonesia, the group was able to derive full benefits from the record prices and place a significant volume of anticipated production for 2011 on the market.
Incidentally, this was also the case for palm kernel oil, where prices exploded to hitherto unheard-of levels, above USD 2 000 per tonne, due to a chronic gap on the supply side.
The weather also had an adverse impact on the supply of natural rubber in 2010. Increasing demand in China and India caused the prices to rise four-fold within two years. This increasing trend has continued in the new year for precisely the same reasons. At the time of writing this report, prices for natural rubber had broken the barrier of USD 6 000 per tonne FOB. Since there is virtually no flexibility on the supply side, the only likely pressure on prices in the fullness of time would emerge from a reduction in demand from the tyre industry.
The efforts devoted in the past to producing a good quality tea in Cibuni in Indonesia have now borne fruit, with average sale prices above USD 3 per kilogramme. This trend is also continuing in 2011.
Our insurance operations were fundamentally restructured through the sale of the life insurance company and the Dutch subsidiary, the recruitment of a new commercial team for marine insurance and a rearrangement of the management team in the general insurance sector. These shifts were not immediately reflected in the recurrent results of B.D.M. NV and ASCO NV for 2010, but they do lay the groundwork for a healthy future in these operational areas.
The exceptional climatic conditions are also having a temporary impact on expansion plans within the SIPEF group, but at least we can now say that the PT Umbul Mas Wisesa project is virtually complete in terms of planted hectares. Hargy Oil Palms Ltd also undertook the initial plantings that will result in a doubling of our activities in Papua New Guinea. We are forecasting 2 000 additional hectares in 2011.
Starts were made on the construction of new palm oil extraction plants in both North Sumatra and in Papua New Guinea. We are paying a great deal of attention to the associated housing provision and improving the quality of transport in the plantation areas. Once all the procedures for sustainable expansion have been completed, we can also start on the MMAS projects in the province of Bengkulu from the second quarter onwards, with SIPEF extending its own acreage by 4 000 hectares, combined with developing about the same area of palm oil plantations for the surrounding communities.
Taken in aggregate, this all signifies a significant investment budget. Like the acquisition of the minority interests in PT Agro Muko from the World Bank and the German development bank at the start of 2010, this also fits in with the group's long-term plans for gradual expansion towards a total of 100 000 planted hectares of palm oil and rubber in Indonesia and Papua New Guinea.
SIPEF also continues to set an example for corporate social responsibility in the tropical agricultural sector. After the PT Agro Muko factories underwent the audit for RSPO certification at the end of 2010, we can announce that every tonne of palm oil leaving the SIPEF factories today satisfies the strict sustainability requirements imposed by the Roundtable on Sustainable Palm Oil (RSPO). The Indonesian factories are also certificated in accordance with the German standard for the use of palm oil for energy purposes. This application has gained further ground over the past year, but is increasingly being questioned due to high food prices.
We would also now like to congratulate our management teams for achieving and maintaining these standards, which guarantee that the level of our activities satisfies the strictest sectoral requirements, both in social terms and in terms of the environment. This applies to palm oil as well as to our other key activities of rubber, tea and bananas.
For some time now, we have also been working, through a separate foundation, on setting up a biodiversity project in the province of Bengkulu. We are hoping to receive the licences for this shortly from the Indonesian government, with a view to protecting more than 12 000 hectares of tropical forest from gradual deforestation.
In these exceptional market circumstances, SA SIPEF NV closed the financial year with a profit for the period, representing its group share prior to the application of IAS41, of KUSD 70 631, an increase of 29% over the record result of 2009. Taking account of the financial adjustment to the fair value of our plantations, the IFRS results for the group share amounted to KUSD 84 843, an increase of 41% over the previous year.
Our thanks therefore go out to all of the group's employees who made such an effort, each one in his or her own field, to help the group achieve these outstanding results. On the other hand, it remains extremely important for the management and employees to retain their focus on cost management as well as the efficiency and productivity of the production units, in these times of exceptional market prices.
The cash flow further enhanced the group's balance sheet and the cash position is being fortified temporarily to support the expansion of the basic activities, combined with a sound policy on dividends. We are accordingly delighted to confirm that our executive board will be proposing a dividend of EUR 1.50, to be paid in July 2011.
Without anticipating the facts, but taking account of the sales already achieved with our four basic products, it appears that we should once again be able to look forward to a very favourable year, in which the ultimate profit will be determined to a significant extent by price movements in the raw material markets over the course of the second half of 2011.
The long-term prospects for palm oil and rubber remain undoubtedly favourable, with strong demand from the Far East, due to a growing middle class with increased purchasing power, and on the other hand supply that is increasingly subject to the impact of weather and restrictions in growth potential for the available sustainable agricultural areas.
23 February 2011
Baron Bracht Chairman
Oil palm nursery - PT Agro Muko (Indonesia)
To the general meeting of 8 June 2011.
Dear shareholders,
We are honoured to present, for your approval, our report on the operational activities of our company during the past financial year, along with the individual and consolidated annual financial statements, for the financial year to 31 December 2010.
In accordance with the Royal Decree of 14 November 2007 (relating to the obligations affecting issuers of financial instruments that are admitted to trading on a Belgian regulated market), SA SIPEF NV is obliged to make its annual financial report available to the public.
This report includes the stautory and consolidated annual report by the board of directors, prepared in accordance with article 119, final paragraph, of the Belgian Corporate Code.
The report also contains an abbreviated version of the statutory annual financial statements (page 128), prepared in accordance with article 105 of the Belgian Corporate Code, and the integral version of the consolidated annual financial statements (page 71). The complete individual annual financial statements, along with the annual report by the board of directors and auditor's report, have been submitted to the National Bank of Belgium in accordance with articles 98 and 100 of the Belgian Corporate Code.
The auditor has issued an unqualified approval certificate in relation to the statutory annual financial statements.
The annual report, the integral versions of the stautory and consolidated annual financial statements and the certificates from the auditor in relation to the said annual financial statements are available on the website (www. sipef.com) but can also be obtained, free of charge, on request from the following address: Calesbergdreef 5 – 2900 Schoten, Belgium, or by email: [email protected].
There have been no changes in the company's capital during the past financial year. The issued share capital amounts to EUR 34 767 740.80, represented by 8 951 740 shares, which are fully paid-up without having a nominal value.
The company's up-to-date Articles of Association, including information concerning its legal format, objects, capital structure, authorised share capital and types of share, are available on the website (www.sipef.com).
The share option plans from 1999 and 2002 have been fully exercised and have therefore come to an end. No new plans were issued during the financial year.
Reference is made to the "Chairman's Message" (page 11) for an overview of the primary activities of the SIPEF group during the financial year 2010.
The statutory annual financial statements of SA SIPEF NV have been prepared in accordance with Belgian accountancy legislation.
The company's balance sheet total as at 31 December 2010 amounted to KEUR 130 721 as opposed to KEUR 115 986 in the previous year.
The reduction in financial fixed assets relates primarily to a reclassification, from long-term to short-term, of an inter-group claim against Hargy Oil Palms Ltd. The increase in current assets is due to a temporary increase in trading receivables and an increase in available cash reserves, in addition to the reclassification mentioned above.
The equity capital of SA SIPEF NV, prior to the allocation of profit, amounted to KEUR 88 648 or an equivalent of EUR 9.90 per share.
The statutory results of SA SIPEF NV are determined to a large extent by dividends and increases/reductions in values. Since not all of the participating interests in the group are held directly by SA SIPEF NV, the group's consolidated result is a more accurate reflection of the underlying economic trend.
The statutory results for the financial year 2010 amounted to KEUR 7 823 as opposed to a profit of KEUR 2 561 for the previous financial year.
The board of directors proposes to allocate the results as follows (in KEUR):
Profit brought forward from previous financial
| 25 782 |
|---|
| 7 823 |
| 33 605 |
| 0 |
| 13 428 |
| 20 177 |
The board of directors proposes payment of a dividend of EUR 1.50 gross per share. After deduction of the withholding tax, the net dividend amounts to EUR 1.125 per share, or EUR 1.275 for the coupons offered in conjunction with the VVPR strip coupon. If the general meeting approves of this proposal, the dividend will be payable from 6 July 2011.
As has previously been the case, the results for the current financial year will depend to a large extent on the dividends distributed by the subsidiaries.
No significant events have occurred since the close of the financial year 2010 that might have a major influence on the company's growth.
In accordance with article 134, paragraphs 2 and 4, Belgium Corporate Code, we also give you notice that no additional payment was made to the auditor beyond the normal payment (as approved by the general meeting). A sum of KEUR 30 was paid to firms affiliated to the auditor for legal, accountancy and tax opinions.
The company did not undertake any activities in relation to research & development.
No amendments to the Articles of Association were made during 2010.
In terms of a letter dated 31 August 2010, Nationale Investeringsmaatschappij NV (NIM), in association with Ackermans & van Haaren NV (AvH) and acting in consultation with Baron Bracht, Cabra NV and GEDEI NV, gave notification that they collectively held 34.74% of the total voting rights in SA SIPEF NV.
On 29 May 2009, the extraordinary general meeting granted authorisation to the board of directors to acquire or dispose of shares in the company for a period of three years, if this proved necessary to prevent the company from suffering any serious, threatening disadvantage.
The following text reflects the commercial risks as assessed by the management team and the board of directors. Each of these risks could have a significantly adverse impact on our financial situation, operating results or liquidity, and could result in special impairment losses affecting assets.
There may be risks that the SIPEF group currently assesses as being limited, but which might ultimately have a significantly adverse impact. There may also be additional risks of which the group is not aware.
The following have been identified as the main commercial risks that are not covered:
The turnover and margin we achieve are largely dependent on movements in the market prices, particularly of palm oil and palm kernel oil. A change in the palm oil price of USD 10 CIF per tonne has an impact of about USD 1.2 million per annum on the results after tax. The volumes we produce and therefore the turnover and margins we achieve are to a certain extent influenced by climatological circumstances such as rainfall, sunshine, temperature and humidity.
Since the bulk of investments by the SIPEF group are made in developing nations (Indonesia, Papua New Guinea and the Ivory Coast), the geo-political developments in these regions are a matter of extra concern to the management team. Recent history has shown that any upheaval in these countries has a limited impact on the group's net results, subject to the impact of macro-economic measures.
Whether or not the SIPEF group succeeds in achieving its contemplated expansion plans will depend on securing new concession agreements for agronomically suitable land, which satisfies the group's policy on sustainability on economically responsible terms. If the group fails in these efforts, this could exert pressure on its plans for growth.
In addition to these important specific risks, the group is also faced with more general risks, which include:
The consolidated annual financial statements for the financial year 2010 have been prepared in accordance with the International Financial Reporting Standards (IFRS).
The consolidated balance sheet total as at 31 December 2010 amounted to KUSD 500 556 representing an increase of 18.13% in comparison with the balance sheet total of KUSD 423 739 at the close of 2009. The fundamental explanation for this increase lies in the additional investments made in plantations and installations, financed by cash and cash equivalents generated during the financial year. The balance of cash and cash equivalents was applied towards repayment of short-term financial liabilities. The net financial position, of KUSD 36 108 at the close of 2009, was further enhanced to a net cash position of KUSD 56 484 at the close of 2010.
The consolidated equity capital of the SIPEF group, group share prior to allocation of profit, rose to
KUSD 368 549 or a corresponding value of USD 41.17 per share.
Thanks to the increased average sales prices for our most important products (palm oil and rubber), and despite lower volumes produced at a higher cost price, we succeeded in recording profits of KUSD 75 450 for our ongoing commercial operations, prior to the application of IAS 41. This represents a rise of 28.80% in comparison with the previous year.
The IAS 41 recalculation consists of replacing the depreciation costs included in the cost price of sales with the variation in "fair value" of the biological assets between the end of 2009 and the end of December 2010, less the planting costs and associated tax charges. The gross variation in biological assets amounted to KUSD 33 413, arising mainly from the expansion of our oil palm acreage at PT UMW in Indonesia and the rise in long-term average prices for palm oil, rubber and tea. Planting costs of KUSD 14 269 reduced the net pre-tax impact to KUSD 22 586, the base for an average deferred tax charge of 26.75%. The net positive IAS 41 impact, group share, amounts to KUSD 14 212.
The net IFRS result, group share (including IAS 41 adjustments), amounted to KUSD 84 843 and was therefore 41.00% above the record result of the previous year.
The board of directors passed the resolution on 23 February 2011 to issue a voluntary public purchase bid in relation to the shares of Jabelmalux SA. This public bid shall be effective as from 15 March 2011 and relates to the 6 166 shares (22.6% of the capital) that are not yet owned by SA SIPEF NV. The proposed price per share is EUR 2 250 per share.
SA SIPEF NV and its consolidated businesses did not undertake any research & development activities during 2010.
Financial instruments are used for risk management within the SIPEF group. The effect of these financial instruments is to mitigate the rise in interest rates. The other contracting parties for these financial instruments are exclusively Belgian reputable banks with which SA SIPEF NV has built up a long-term relationship.
Current volumes from the palm plantations are again in line with expectations, with a loss of production in some of the plantations in North Sumatra (this is a deferred effect of the period of drought at the start of last year). By contrast, volumes are increasing in Agro Muko in the province of Bengkulu and in Hargy Oil Palms Ltd in Papua New Guinea.
Rubber and tea production is very close to the excellent volumes achieved last year.
At this point, 45% of the anticipated annual production of palm oil has already been sold at average prices exceeding the equivalent of USD 1 100 CIF Rotterdam. Furthermore, 39% of rubber volumes and 32% of tea production have already been sold at slightly higher prices than last year. We can therefore state that a significant proportion of anticipated income for 2011 is already covered.
Despite the high prices, we can still see a persistently strong demand and we therefore expect a shortage in supplies that will give further support to the market in the short term. The current high price levels might only weaken if there were clear signs that improved harvests would result in stocks being built up again. Any reduction in price would probably be regarded as a buying opportunity for users in the energy sector, as Brent crude oil rises above USD 100 per barrel.
Since the start of 2011, the shortage in supply has pushed the price of natural rubber above the USD 6 per kilogramme level. We do not expect this situation to ease in the short term, since we are now on the threshold of the 'wintering' period (when the trees lose their leaves and production falls).
As far as the market for tea is concerned, we suspect that the much-needed rain in Kenya (from March onwards) will not be enough to offset the past three drier months. We are therefore fairly convinced that prices will stay above USD 3 000 per tonne for the foreseeable period.
The sales we have achieved, combined with indications of persistent high market prices for palm oil, rubber and tea over the next few months, convince us that we are once again on course for a year where we can expect high profits for the SIPEF group.
Thanks to the cash flows we have available, SIPEF is ideally placed to press on with the expansion programmes in North Sumatra and Papua New Guinea, to secure a larger interest in existing operations and to seize any new sustainable investment opportunities in the agricultural sector in the Far East.
The undersigned certify that, to their knowledge:
On behalf of the board of directors, 23 February 2011.
François Van Hoydonck Baron Bracht Managing Director Chairman
"The Connection to the World of Sustainable Tropical Agriculture" Sipef | annual report 2010 23
Baron Bertrand Priscilla Bracht François Van Hoydonck Jacques Delen Richard Robinow Antoine Friling Baron Bracht Baron de Gerlache de Gomery Regnier Haegelsteen
SIPEF's Corporate Governance Charter can be found under the heading 'Investor Relations' on the website at www.sipef.com.
The board of directors of SA SIPEF NV approved the first corporate governance charter ("Charter") on 23 November 2005. The Charter was prepared in accordance with the provisions of the Belgian Corporate Governance Code ("Code") that has been announced by the Corporate Governance Committee on 9 December 2004. This version of the Charter already coincided with various Royal Decrees implementing European rules on market abuse.
SA SIPEF NV currently uses the Belgian Corporate Governance Code 2009 as reference code. The corporate governance charter approved by the board of directors of SA SIPEF NV is in compliance with the Belgian Corporate Governance Code 2009.
As specified in the Code, SA SIPEF NV must devote specific attention in a chapter of its annual report (the "Corporate Governance chapter") to factual information concerning corporate governance, any amendments to the corporate governance policy and relevant events in connection with corporate governance that have occurred during the previous year. The "Corporate Governance chapter" also provides a more detailed explanation of the deviations from the Code recommendations, in terms of the "comply or explain" principle, during the past financial year.
The board of directors consists of nine members.
| end of term of appointment | |
|---|---|
| Baron Bracht, chairman | 2014 |
| François Van Hoydonck, managing director | 2011 |
| Baron Bertrand, director | 2012 |
| Priscilla Bracht, director | 2014 |
| Jacques Delen, director | 2012 |
| Antoine Friling, director | 2011 |
| Baron de Gerlache de Gomery, director | 2012 |
| Regnier Haegelsteen, director | 2011 |
| Richard Robinow, director | 2011 |
The board of directors will submit a proposal to the ordinary general meeting on 8 June 2011 to renew the appointments of François Van Hoydonck (as executive director) and Antoine Friling, Regnier Haegelsteen and Richard Robinow (as non-executive directors) for a period of four years, which will expire at the general meeting of 2015.
The board of directors will also propose the appointment of a new director at the ordinary general meeting on 8 June 2011.
François Van Hoydonck has been managing director since 1 September 2007 and does not represent any reference shareholders.
The other eight directors are non-executive directors. The non-independent directors, Baron Bracht and Priscilla Bracht, represent the Bracht family. Baron Bertrand and Jacques Delen represent Ackermans & van Haaren. Ackermans & van Haaren, affiliated to the Nationale Investeringsmaatschappij, have intimated, following mutual consultation with Baron Bracht in
conjunction with Cabra NV and GEDEI NV, that they hold more than 30% of the shares in SA SIPEF NV.
The directors who hold offices in other listed companies outside the group are:
Ackermans & van Haaren, Atenor Group, Leasinvest Real Estate, Groupe Flo (FR) and Schroders (UK);
Floridienne, Leasinvest Real Estate and Texaf;
Jacques Delen: Ackermans & van Haaren;
Atenor Group and Etex Group;
MP Evans (UK), REA (UK) and REA Vipingo Plantations Ltd (Kenya).
Baron de Gerlache de Gomery, Regnier Haegelsteen and Richard Robinow are independent directors on the board. They fulfil the independence criteria as contained in the former article 524 of the Belgian Corporate Code and also all of the independence criteria specified in article 2.2.4 of the company's Charter. Up to the end of June 2011, Regnier Haegelsteen also fulfils the new independence criteria specified in article 526 ter of the Belgian Corporate Code. Baron de Gerlache de Gomery and Richard Robinow fulfil the criteria specified in article 526 ter, apart from 2°, since their mandates exceed a period of 12 years.
If this general meeting approves the reappointment of Antoine Friling and the appointment of a new director, they will fulfil positions as independent directors. Both of them fulfil all of the independence criteria set out in article 526 ter, Belgian Corporate Code.
The board of directors of SA SIPEF NV met on five occasions in 2010. Average attendance stood at 93%. Individual attendance records were as follows:
| Baron Bracht, chairman | 5/5 |
|---|---|
| François Van Hoydonck, managing director | 5/5 |
| Baron Bertrand | 5/5 |
| Priscilla Bracht | 4/5 |
| Jacques Delen | 5/5 |
| Antoine Friling | 5/5 |
| Baron de Gerlache de Gomery | 4/5 |
| Regnier Haegelsteen | 4/5 |
| Richard Robinow | 5/5 |
During 2010, the board of directors followed the group results and the development of activities among the different subsidiaries by means of reports prepared by the management committee. The board of directors also took major investment and disposal decisions during the past financial year.
The board of directors had a special meeting on 30 August 2010 concerning the group's strategic development, based on a business plan covering ten years.
At its meeting on 24 February 2010, the board of directors discussed the relationship between itself and the management committee, in accordance with article 2.7 of the Charter and in the absence of the executive director. The directors who were involved expressed their satisfaction at the transparency and satisfactory collaboration between both of the company bodies and passed a few suggestions in this context to the executive director.
The directors also assessed the size, composition and operation of the board of directors, paying particular attention to its current composition, which was assessed in comparison with the desired composition. It was also established that there was a proportionate balance of specific skills – such as the interpretation of financial reports, familiarity with the sector, experience of management of a company and operation of financial markets – within the current composition of the board of directors.
The board of directors also announced, in the Charter (2.9 and 4.7), its policy in relation to transactions that might give rise to conflicts of interest (whether or not coinciding with the definition in the Belgian Corporate Code). There was no need to apply this policy during the financial year.
The board of directors announced its policy concerning the prevention of market abuse in the Charter (5).
Regnier Haegelsteen – chairman and independent, non-executive director Priscilla Bracht – non-executive director Baron de Gerlache de Gomery – independent and non-executive director
It was confirmed, in accordance with article 526 bis, Belgian Corporate Code, that Regnier Haegelsteen, chairman of the committee, possesses the requisite skills within the disciplines of accountancy and audit. Regnier Haegelsteen fulfils the independence criteria specified in article 526 ter of the Belgian Corporate Code. Baron de Gerlache de Gomery also fulfils the criteria specified in article 526 ter, but his mandate exceeds a period of 12 years.
Bearing in mind that Regnier Haegelsteen and Baron de Gerlache de Gomery will not be entitled to sit on audit committee from 1 July 2011 as independent directors (as specified in article 526 ter), the requisite number of independent directors will not be achieved from then on. This committee will therefore have its membership reviewed in the course of 2011 in order to comply with the new statutory provisions.
The audit committee convened on three occasions in 2010. The attendance rate (either in person or by proxy) was 100%. In February and August, the committee focused primarily on analysing the annual and six monthly financial reports, in the presence of the auditor. It also considered the figures for the proposed press release, as well as the "one-to-one" rule for the waiver of the auditor's independence. The procedures for valuation of the biological assets, in the context of IAS41, were also explained and discussed, accompanied by presentation of a comparative study in relation to IAS41 valuation within the sector. Finally, the committee also held a private session on each occasion with the auditor, but in the absence of members of the executive board.
In November, in addition to considering internal audit committee reports from Indonesia, Hargy Oil Palms Ltd and the insurance issue, the committee also re-examined and supplemented a risk analysis for the group.
These committees were also attended by the chairman of the board of directors, the managing director, the CFO and a representative from Ackermans & van Haaren.
As indicated in recommendation 5 of the Code, the remuneration committee consists exclusively of nonexecutive directors.
The membership of the remuneration committee will be adjusted during the course of 2011 in order to fulfil the new membership criteria (a majority of independent directors), as proposed in article 526 quater of the Belgian Corporate Code.
The remuneration committee met twice in 2010, on 24 February and on 1 December. The average attendance rate was 100%. The remuneration committee submitted recommendations to the board of directors relating to fixed remuneration for the directors and the chairman, remuneration for the management committee, the amount and payment format for bonuses and individual payments for the management committee, salaries and bonuses for board members of subsidiaries who reside abroad and amendments proposed in law relating to payments for executive directors who are demitting office.
– managing director
– Chief Operating Officer (External Visiting Agent from1 November 2010)
– manager Estates Department
– manager Marketing Bananas and Flowers
– Chief Financial Officer
– manager Marketing Commodities
Baron Bracht, chairman of the board of directors, and Priscilla Bracht, non-executive director, periodically attended the meetings of the management committee as observers.
Except in unforeseen circumstances, the management committee meets once each week. The management committee's responsibilities include the day-to-day management of the group and it also prepares the decisions that have to be taken by the board of directors.
The remuneration of non-executive directors consists exclusively of a fixed payment. This fixed payment consists of a basic payment and, in appropriate cases, an additional payment depending on whether the director concerned is a member of a specific committee.
The remuneration committee periodically assesses the payment of non-executive directors. Any amendments proposed by the remuneration committee are submitted to the general meeting for approval.
The members of the management committee receive a fixed payment and a bonus depending on the consolidated recurrent results of the SIPEF group. No share options plans have been awarded since 2002, although there is provision for them in the Charter. They also have use of a company car and membership of a group insurance plan (pension accrual, death benefit cover, invalidity cover), meal tokens, a legal assistance insurance policy offering worldwide coverage and a hospitalisation cover. The group insurance is of a "fixed contribution" type.
These elements are assessed each year by the remuneration committee, and tested for market conformity. This is generally done at a meeting in November or December. The test is undertaken on the basis of public information (for instance the remuneration data included in the annual reports of other comparable listed companies) and salary studies. Any amendments proposed by the remuneration committee are submitted to the board of directors for approval.
The members of the management committee qualify for the award of a bonus, the amount of which depends on the consolidated recurrent result of the SIPEF group.
The remuneration for the directors, for the financial year 2010, was set at a fixed annual amount of KEUR 18 for the chairman and KEUR 15 for each director. These amounts were the same as those for the previous year. Directors who retire or are appointed during the financial year are paid pro rata, depending on the length of the mandate in the financial year. There are also fixed annual payments of KEUR 4 to members of the audit committee and KEUR 2 to members of the remuneration committee. These figures are therefore no longer related to the size of the results and can be regarded as fixed, non-performance-related payments awarded during the financial year itself.
The individual remuneration figures for the directors, as actually received in 2010 in the form of payments for 2010, were:
| Baron Bracht, chairman | 19 |
|---|---|
| François Van Hoydonck, managing director | 15 |
| Baron Bertrand | 17 |
| Priscilla Bracht | 19 |
| Jacques Delen | 15 |
| Antoine Friling | 15 |
| Baron de Gerlache de Gomery | 19 |
| Regnier Haegelsteen | 21 |
| Richard Robinow | 15 |
The fixed and variable remuneration elements, and the other benefits awarded and paid to members of the management committee in 2010, either directly or indirectly, by SA SIPEF NV and its subsidiaries, can be summarised as follows:
In KEUR
| CEO | Other members of management committee |
Total | Relative interest |
|
|---|---|---|---|---|
| Fixed payment | 206 | Total | 1 096 | 48,91% |
| Variable payment | 246 | 433 | 679 | 30,30% |
| Group insurance | 196 | 248 | 444 | 19,81% |
| Benefits in kind (company car) |
3 | 19 | 22 | 0,98% |
| 651 | 1 590 | 2 241 | 100,00% |
No further share option plans have been initiated or awarded since 2002, and the final options that could be exercised were exercised in 2007.
The managing director is subject to the Statute for the Self-employed and has a permanent contract. The contract can be terminated unilaterally by the managing director, subject to a notice period of six months, while the company must observe a notice period of between 18 and 24 months depending on the timing of termination of the contract. The notice period will be extended by 12 months in the event of termination of the agreement as a result of changes in the company's control in terms of which more than half of the directors are replaced, and in the event of serious restrictions in the essential powers introduced unilaterally by the company. This final provision was approved by the extraordinary general meeting on 27 December 2007, in the context of article 556 of the Belgian Corporate Code. The position of External Visiting Agent (EVA) was created on 1 November. The EVA has an exclusivity contract with SIPEF. This contract can be terminated by either party, subject to a notice period of one year. The payment awarded to the EVA is commensurate with the payments awarded to other members of the management committee.
The contracts with the other members of the management committee are subject to the Statute on Employees and contain the normal provisions regarding remuneration (fixed and variable payments) and insurances. The contracts are permanent in nature. Any member of the management committee is entitled to terminate his contract unilaterally, subject to a notice period of six months. The company can terminate the contract with each member of the management committee unilaterally, provided that it gives appropriate notice, determined in accordance with the rules and customs associated with the Statute on Employees.
The company's auditor is Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA, represented by Philip Maeyaert.
The auditor arranges for the external audit of the consolidated and summarised figures for the SIPEF group and reports twice each year to the audit committee and the board of directors.
The auditor was appointed at the ordinary general meeting on the 11 June 2008. His mandate expires in June 2011.
The annual payment to the auditor for the audit of the summarised and consolidated annual financial statements of SA SIPEF NV amounts to KEUR 68. An additional sum of KEUR 30 is also paid to the company with which the auditor is affiliated, for legal, accountancy and fiscal work. These payments are proved by the audit committee, which has received a summary of these honoraria at each meeting.
The total cost for external audit of the SIPEF group amounted to KEUR 308, with a further KEUR 68 as the amount of honoraria paid for opinions from the same auditor and associated companies.
Internal audit for Indonesia and Hargy Oil Palms Ltd in Papua New Guinea is structured within an audit department, with a committee meeting four times each year to consider the internal audit reports. The audit committee at SA SIPEF NV receives a summary of their work, with an explanation and estimate of the potential impact of the findings, which allows it to assess the work of the local audit department. For the other subsidiaries, the internal audit is organised by the financial controller. Bearing in mind the more limited size of these companies, the audit committee has decided that there is no need, for the time being, to set up any separate audit department.
As stated in note 16 in the explanatory notes to the consolidated financial statements, three shareholders have announced a holding in excess of 5% in our company. The company has no knowledge of any agreements among these shareholders, nor of the existence of committees of shareholders or directors, with the exception of the common declaration of 12 February 2007, which is also included in explanatory note 16.
On that date, Nationale Investeringsmaatschappij (NIM) NV, affiliated to Ackermans & van Haaren (AvH) NV and acting in consultation with Baron Bracht, Cabra NV and GEDEI NV, notified the company of the conclusion of a shareholder agreement with a view to the creation of a stable shareholding in SA SIPEF NV. This was done to promote a balanced development and the profitable growth of SA SIPEF NV and its subsidiary companies. The shareholder agreement, which was concluded for a period of 15 years, includes voting arrangements in connection with the appointment of directors and arrangements in connection with the transfer of shares.
The relevant information concerning this transparency report can be found on the company's website (www.sipef.com).
No further share option plans had been initiated or awarded since 2002. The final options that could be exercised were exercised in 2007.
The Charter at SA SIPEF NV deviates from the recommendations of the Code on a limited number of points.
In accordance with recommendation 5.3.1 of Appendix D to the Code, the nomination committee must have a majority of independent non-executive directors. The nomination committee at SA SIPEF NV consists of every member of the board of directors. While only one third of the membership of the board of directors is made up of independent non-executive directors, the Charter deviates from the Code on this point.
The board of directors considers, however, that this deviation is well-founded, bearing in mind the fact that its relatively limited size (with nine members) does not obstruct efficient deliberation and decision-making processes. Furthermore, the board of directors as a whole is in a better position to consider its own size, membership and succession plans.
In terms of recommendation 5.4.1 of Appendix E to the Code, the remuneration committee should consist exclusively of non-executive directors. At the very least, a majority of the members of this committee must be independent.
The remuneration committee at SA SIPEF NV is made up exclusively of non-executive directors. Since only one third of the members are independent, the Charter deviates from the Code on this point.
The board of directors also considers that this deviation is well-founded, bearing in mind the fact that the two dependent directors represent different shareholders and that there is still an independent director present. This still allows for a balanced opinion to be transmitted to the board of directors.
The membership of the remuneration committee will be adjusted during the course of 2011 in order to fulfil the membership criteria (a majority of independent directors), as proposed in article 526 quater of the Belgian Corporate Code.
In terms of recommendation 8.9 of the Code, the required minimum percentage of shares that must be held by a shareholder in order to be able to submit proposals to the general meeting should not exceed 5% of the share capital. The board of directors has decided not to follow this recommendation. The shareholders of SA SIPEF NV can ask questions to the directors and the auditor, at the general meetings, that are connected with the points specified in the agenda.
The board of directors of SIPEF is responsible for assessing the company's inherent risks and the effectiveness of its internal controls.
SIPEF's internal control system was set up in accordance with the accepted principles relating to internal controls (relevant statutory regulations, Code 2009 and international reference framework such as COSO).
The basis of the internal controls and risk management system is established by means of a risk assessment that has been carried out at a group level. Particular attention is paid to the reliability of financial reporting and the communications process.
SIPEF implements a Corporate Governance Charter, which aims to promote the observance of accepted ethical standards by directors, management and staff in carrying out their duties.
The board of directors at SIPEF supports the application of clear rules on sustainability, which are applied in terms of the policy governing our day-to-day operations and which are also more stringent than the statutory requirements in the countries in which we operate. Our operations are assessed in accordance with commonly applied standards such as ISO 9001, ISO 14001, the 'Roundtable on Sustainable Palm Oil' (RSPO), the 'International Sustainability and Carbon Certification' (ISCC), the 'Clean Development Mechanism' (CDM) of the United Nations, the 'Ethical Tea Partnership' (ETP) and 'EurepGAP / GlobalGAP". In general terms, the company structure, company philosophy and management style may be described as being clear and informal, which is supported by the limited number of decision-making processes within its hierarchy. This limited number of decision-making processes, together with the limited degree of staff rotation also enhance the social controls within the company.
The group is subdivided into a number of departments as set out in an organisational chart. Each department and each person within the relevant department has his/ her own job description. The required qualifications and/ or level of experience is specified for each position and job.
There is a clearly defined policy of delegated powers.
Strategic, operational, financial, tax-related and legal objectives are defined in a strategic plan, which is approved annually by the board of directors. The risks that may jeopardise the ability to meet these objectives have been identified and designated according to their potential importance, the probability with which
the risk might occur and the measures that have been taken to deal with the risk according to its importance. Risk management is divided into various categories (reduction, transfer, prevention or acceptance). The necessary instructions and/or procedures have been issued to ensure that the identified risks are managed appropriately.
A complete set of operational and (internal and external) financial reports has been set up to provide the necessary information periodically (daily, weekly, monthly, six-monthly or annually) and at the appropriate levels in order to ensure that assigned responsibilities are performed properly.
It is the responsibility of each employee to report any potential shortcomings in the internal controls in relation to their respective responsibilities. In addition, the internal audit departments (in Indonesia and in Papua New Guinea at Hargy Oil Palms Ltd) are responsible for continuous supervision of the effectiveness and observance of the existing internal controls for their respective activities. They propose any necessary adjustments based upon their findings. The reports from these internal audit departments are discussed on a quarterly basis in a local audit committee. A summary of the most important findings is submitted annually to the group's audit committee. For small subsidiaries, for which no separate internal audit position has been created, supervision of the internal inspection is fulfilled by the responsible member of the management together with the managing director and chief financial officer of the group. In addition, each subsidiary of the group is (as a minimum requirement) subjected annually to scrutiny of its financial statements by an external auditor. Any comments relating to this external audit are passed on to the management in the form of a 'management letter'.
No significant shortcomings in internal controls have been found in the past.
The process for drawing up financial reports is organised as follows:
the corporate finance department and are submitted to the managing director, chairman of the board of directors and group management.
In June and December an update is drawn up of the calculation of the actual value of the biological assets (IAS41 valuation).
The individual financial statements (only in December for smaller entities), the IAS41 valuations as well as the technical consolidation for June and December undergo an external audit before the consolidated IFRS figures are submitted to the audit committee.
Tall oil palm harvesting - PT Agro Muko (Indonesia)
Following good soybean harvests in South America and with the prospect of record harvests in the US, the prices of vegetable oils (including palm oil) varied within narrow margins during the first half of the year. The wide fluctuations of 2008 seem to be behind us. These plentiful harvests were in fact necessary to maintain a balance in the face of ever-increasing consumption.
In the late summer, the market was startled by big changes in supply and demand. Weather patterns were seriously upset in various parts of the world. The great drought hit the harvest of sunflower seeds in Russia and "La Niña" caused heavy rains in Malaysia and Indonesia. Once it became clear that supply was not going to suffice to meet the sharply growing demand of the industry, prices shot up.
After the USDA revised the 2010 soybean harvest downwards in the US in October, the limits of the market became yet clearer. This attracted a great deal of investment money for agricultural commodities and led to an even more rapid rise in prices that persisted until the end of the year. The last quarter of 2010 was characterised by a drought in Argentina and persistent heavy rains in Southeast Asia. This pushed palm oil prices up above USD 1 200 at the end of December.
Though abundant rains augur well for the productivity of palm oil, we will not feel their positive effects until the second half of 2011.
The average price of CPO was USD 901 per tonne CIF Rotterdam compared with USD 683 in 2009.
As a result of the high prices in the last quarter of 2010, vegetable oils have risen above crude oil. It was
not an easy affair to be able to meet the requirements for the biodiesel sector. This will undoubtedly have repercussions on the growth potential of biodiesel over the coming months.
According to the principles of the RSPO, the market is finally witnessing a rise in demand for sustainable palm oil. Nevertheless, this is as of yet limited to European countries where it is either used by the food industry as "segregated" (unmixed) sustainable palm oil or as "mass balance" (mixed with normal palm oil) ISCC (International Sustainability and Carbon Certification) by the energy sector.
The shortage will persist over the very short term. Attracted by the high commodities prices, farmers across the world will be encouraged to plant more. Unless new weather problems arise, the larger harvest will make up for the shortage, leading to lower levels in the second half of 2011.
Lauric oils experienced a genuine price explosion. This is the result of the extremely strong arguments at the beginning of the second half of the year. The price of crude palm kernel oil that varied between USD 900 and USD 1 000 during the first six months suddenly began to rise starting in August and reached USD 1 980 CIF at the end of the year.
Palm kernel oil production, which is lower than expected, cannot keep up with the demand. This difficult situation will persist in 2011.
The average price of CPKO was USD 1 084 per tonne CIF Rotterdam compared with USD 700 in 2009.
In 2009, the market got off to a difficult start, but rubber prices have shot through the roof this year. The shortage that dominated in 2009 continued in 2010. Positive events were observed on both the supply and demand sides. As for demand, the success of the Chinese automobile industry and the increasing imports in India drove prices up. The main concern for supply was the impact of La Niña and the heavy rains that hit the main producing regions in Southeast Asia. As a result, natural rubber prices continued to rise over the course of the year, with only a small dip at the end of the second quarter. The price of RSS3 went from UScts 300 per kilogram in January UScts 500 per kilogram at the end of the year. This means that natural rubber prices more than quadrupled over a period of two years.
The average price of RSS3 in 2010 was UScts 365 compared with UScts 191 in 2009.
Furthermore, the outlook seems to be stable even at this high level as the shortage is likely to last quite some time. Over the short term, supply will not react to these high prices rapidly as too little was invested in rubber plantations for many years and the new plants require seven years before latex can be economically harvested.
The year 2010 began with a global shortage of nearly 100 000 tons of tea. Kenya and Sri Lanka reported record harvests, but necessarily to the detriment of quality. Large producers such as India and China did not experience a rise in production, while increased consumption - estimated at 2 to 3 percent - generated additional demand. This led to a drop in exports from these countries. The larger harvests in Kenya and Sri Lanka were thus rapidly absorbed.
Though wholesalers had bought large volumes of average-quality at lower prices than in previous years, they still needed good tea to preserve their mixture. As a result, demand for this type of tea increased. A sharp drop in high-quality tea from Assam in India was yet another aggravating factor. The difference between good-quality tea and lower-quality tea became so large that the first category was sold at prices that were up to three times higher than those of the second category.
This high demand for good quality was more than welcome for Cibuni as, thanks to our consistent sales policy, we were able to supply our customers regularly with our widely appreciated Melania tea. The outlook for 2011 is good as the shortage of good tea has not yet declined and buyers are prepared to pay high prices for exceptional quality.
In the framework of a slow upturn out of the European crisis, our trade in fruit from Ivory Coast was profitable. We sold the 20 640 tonnes of fruit that we produced and exported through Plantations J. Eglin SA / Société Bananière de Motobé SA, increased by 9 365 tonnes from another producer from Ivory Coast, in large part under contract to regular customers who increasingly stick to fixed and standardised suppliers, specifications and production zones. The year was atypical with good demand during the second half, which is uncommon. This can be explained by a shortage in the main Central American production zones due to poor weather conditions (excess rains). This trend also continued at the start of the new year.
Until the present, the reduction in customs duties for bananas of American origin had no repercussion on our business. The law of supply and demand and uncertainty regarding fluctuating exchange rates remain two deciding factors in the European banana trade. The slow though certain erosion of customs rights will continue on its own in January 2011 with a decrease from EUR 148 to EUR 143 euros per tonne for dollar bananas. Producers from ACP countries (Africa, Caribbean and Pacific), of which we are a member, preceded by European planters, will need to content themselves with supporting financial measures.
The logistics of banana imports was the same as in the past and we imported the entire production in refrigerated containers with "door-to-door" service.
Trade in pineapple flowers was very active this year. We exported and marketed throughout the year, except in December. At that time, the winter conditions in Europe hampered road transport and thus orders for the holidays were cancelled. The other products in the same sector of activities (lotus flowers and ornamental greenery) underwent the same effect, for the same reasons.
The development of ornamental greenery that was started two years ago reached the defined production objectives. The "compacta" and "cordyline" varieties were a good technical and economical choice. The general quality of our entire horticultural production, which was completely exported by air freight, is very good.
Gross profit
Banana flower - Plantations J. Eglin SA (Ivory Coast)
In July 2009, the outgoing president, Susilo Bambang Yudhoyono, was re-elected for a second term of office, which will run until 2014. Since then, Indonesia has been in a stable situation. Observers expect the president to focus on expanding economic development and clamping down on corruption.
As with most Asiatic countries, the economic and financial crisis that primarily affected Europe and America largely bypassed Indonesia. The local banks had been reorganised as a result of the Asiatic crisis in 1997-98, and the emphasis was much more on basic activities. This meant that the impact of collapsing investments in derivative products was very limited. The substantial internal market, with a growing middle class enjoying a rise in its purchasing power, is the engine behind a gradual growth in the mixed economy, with both the private sector and the government playing important parts.
Thanks to this strong internal market, which is based on 240 million consumers, the Indonesian economy grew by 5.9% in 2010 as against 4.5% in 2009. Inflation amounted to 5.3%, slightly up on the 4.8% of the previous year. The trading balance remained largely positive and external debt remained more or less constant in nominal terms, but fell from 29% to 22% of the gross domestic product (GDP). These are all signs of a fundamentally healthy economy.
The local currency strengthened from IDR 9 400/USD to a closing price of IDR 8 991, partly through economic growth but mostly through the enormous inflow of foreign speculative capital; this was a source of concern to the government. Since July 2010, further controls on capital have been established in order to prevent more
short-term speculation. Interest rates have also followed a declining curve.
Indonesia is now the largest economic power in Southeast Asia, as well as a member of the G-20 group of the most significant countries. While the services sector is largest, representing 39% of GDP, agriculture (worth 14% of GDP) is responsible for more than 40% of employment, so that this sector provides an income for more than 40 million people.
Palm oil production for 2010 fell by nearly 2% compared with the exceptionally fine year of 2009. A cyclical trend of generally lower returns per hectare, experienced by all oil palm plantations in the area, was further exacerbated by adverse weather, with lower than normal and irregular rainfall, primarily in North Sumatra.
Fruit production was low in North Sumatra, particularly at the start of the year, with a slump of nearly 10% in the first quarter gradually recovering over the three subsequent quarters to -2% at year end. The average returns per hectare remained the same, at 23.6 tonnes per hectare.
The first fruits are now being harvested in the new PT Umbul Mas Wisesa (UMW) project and processed in the Perlabian factory, but returns per hectare are still limited to 1.2 tonnes per hectare for these relatively new acreages. The fruit will continue to be processed at the Perlabian factory in the new year. From 2012, we expect production to be so large that it can be processed directly in the new palm oil mill, of which construction is to start in the second quarter of 2011.
Fertilisation programmes are being further optimised, primarily in the oil palm plantations in the plains of northern Sumatra, by using mechanical fertiliser
spreading machinery or 'giltraps' to spread out the empty palm oil fruit bunches as an organic fertiliser. In comparison with 2009, and despite increased supervision of the maintenance activities in our acreage, we still noted an overall rise of 15% in production costs (expressed in US dollars). The main reasons for this were the stronger currency and inflation, which was reflected in payments to our workers and the procurement of products and services.
The payments for picking up palm bunches and collecting fallen fruits, which were amended in 2009, again contributed towards an important improvement in quality. The result was that 96% of the fruits offered to the two palm oil factories satisfied the optimum standard for processing, as opposed to 93% in 2009.
The Bukit Maradja palm oil mill thus achieved an average oil extraction rate of 23.61%, which is a new record for this area of origin. The Perlabian factory slightly remained below 2009 levels, at 22.91%, because more of the fruit being offered originates from UMW and is younger and smaller. This fruit does not contain as much oil as the fruit from mature plantations.
In contrast to the palm plantations in North Sumatra, PT Agro Muko in the province of Bengkulu made a strong start to the year. Production exceeded that of 2009, although the generally downwards trend was also perceived here towards the end of the year. The financial year closed with production volumes down by 3.1%. This group of eight plantations in the same region, with a planted area of 16 518 hectares of mature oil palms, generated a total of 317 926 tonnes of fruit, which were processed in the two palm oil factories at MukoMuko and Bunga Tanjung. The average return per hectare fell from 20.11 tonnes in the previous financial year to 19.25 tonnes in 2010.
The hilly landscape makes mechanical fertilisation more difficult, but the use of composite fertilisers in the second half of the year meant that it was still possible to complete the programmes in time. Harvesting is also generally more difficult in this hilly terrain, and fruit is often lost on the steep slopes. The introduction of small mechanical buffalo tractors allows for recovery of all of the fruit using the narrow pathways.
There used to be problems in attracting and retaining sufficient workers for the harvest in these working conditions. This has been dealt with by improving employment conditions in proportion to the degree of difficulty and providing adequate accommodation for the workers' families. This is one of the contributory factors behind the fact that 87% of the fruit offered at the factory met the optimum standard, as opposed to 85% in 2009.
Bearing in mind the rainfall of more than 4 000 mm affecting the majority of these plantations, we continued with the investment programme for improving the internal road network. At the end of 2010, a total of 1 185 km of roads (or about 47% of all roads on the plantations) had been upgraded using hardcore. This allows the fruit to be brought to the factories in good time and in optimum condition, even during the extreme rainy season.
The palm oil factories underwent significant improvement and maintenance work, which was reflected in the production costs. Extraction rates remained at comparable levels with 2009, at 22.71% and 22.99% respectively.
The most recent factory, Bunga Tanjung, is still facing under-capacity. Just half of the additional throughput capacity for production from neighbouring farms, which was asked for by the local authority and provided during construction, was taken up by the production from our
own acreage, due to competition with other factories. This is also reflected in the production costs, of course. We are continuing to look into possibilities of processing fruit from larger private plantations in the vicinity, without jeopardising our sustainability criteria in the context of the RSPO certification.
Following lengthy discussions with the minority shareholders International Finance Corporation (IFC) and Deutsche Investitions- und EntwicklungsGesellschaft (DEG), their respective interests of 7.21% were sold pro rata to the three remaining shareholders, MPEvans, Austindo and SIPEF, in March 2010. This additional proportion of 6.82% of the interest was acquired by PT Tolan Tiga Indonesia, so the group interest in PT Agro Muko now amounts to 44.93%. This acquisition is commensurate with the strategy of gradually acquiring all minority interests in the plantations managed by SIPEF.
Rubber harvests in North Sumatra recovered in full. Rubber production in 2009 in particular was disappointing, following a radical pruning of the young trees in 2008 and a relatively high percentage of trees being tapped on the lower panels. Good climatic conditions, a thorough control over the correct application of agronomic standards, the transition to the upper tapping panels for a number of plantations and an improvement in growth stimulation all resulted in production rising by 21.34% in the Bandar Pinang and Timbang Deli plantations, as compared with 2009. This means that we once again achieved an average return of 1.8 tonnes per hectare.
At the PT Melania plantation in South Sumatra, these positive influences actually resulted in an increase in production volumes by 36.9%, leading to nearly 3 100 tonnes of annual production once again.
Even at PT Agro Muko, where the restructuring of the rubber acreage is fully under way into a plantation with the lowest annual rainfall, the forecast budgets were still exceeded by 8.4% for the old acreage that have not yet been replaced. We are seeing a gradual increase in returns per hectare. However, it will still be a few years before the recent planting on 571 hectares reaches full capacity.
Tea production in Cibuni, on the island of Java, was fully in line with previous years, achieving 3 097 tonnes. Generally speaking, the weather gods were favourably disposed towards Cibuni; we only perceived a drop in anticipated volumes in the fourth quarter. The deliberate choice for quality, by handpicking the tea leaves and processing them in the CTC factory, is bearing fruit. This is because chiefly for better quality tea higher prices have been paid over recent years. There are no signs of further expansion of volumes, due to the shortage of labour force, but Cibuni is attempting to buy in tea leaves from surrounding tea plantations that might meet the same standards.
Production costs (expressed in US dollars) fell in 2009 for palm oil, rubber and tea. This could be traced back to the impact of the global crisis on most raw materials, as well as the weaker local currency. By contrast, 2010 was another year where rising fertiliser prices, the impact of inflation and the stronger currency led to higher production costs for all of our products.
As a sustainable producer, we also continued to concentrate in 2010 on using alternative energy sources. The tea plantation in Java is in an ideal position beside the Cibuni river, where we can make best use of hydro-electric power stations to produce the energy required for the factory and surrounding residential accommodation. The hydro-electric turbines were
recently modernised and the reservoirs were adapted to ensure maximum returns. Any shortfall in power supply for drying the leaves is covered by a coal-fired power station. An additional steam boiler was also installed last year at Agro Muko, operating entirely on organic waste from the palm oil extraction process and supplying enough electricity to power the rubber factory and surrounding workers' houses. Small units using solar cells are used to provide electricity to more distant workers' accommodation and the security posts. Because of the nearby rivers, Agro Muko might also qualify for the construction of a hydro-electric power station. This possibility is being investigated further. The recovery of bio-methane gases is also being provided as an additional source of energy for the steam boilers at the palm oil extraction factory for PT UMW in North Sumatra, where construction will start in 2011.
Since 2008, the decantation ponds at the Perlabian and Bukit Maradja palm oil extraction mills in North Sumatra have been covered with membranes, allowing for the comprehensive collection and combustion of methane gases. Both of these projects were also recognised by UNFCCC in November 2009, and the volumes of methane gas that are recovered provide entitlement to Certified Emission Reductions (CERs) that can be sold on the European energy market. The prices for these CERs dropped due to the partial failure of the environmental conference in Copenhagen, combined with the global crisis. This drop in value also led to the postponement of a similar project for the decantation ponds at two palm oil extraction factories for Agro Muko, because AEV-Agriverde, the joint investor, could not achieve the desired profitability standards. CER market values have now recovered and we will be starting to capture methane gases at the MukoMuko factory in 2011. The Bunga Tanjung factory does not yet qualify for this sort of investment, due to its under-capacity.
As stated in the section on sustainable agriculture, we have been working over the past few years on increasing the standard of practical operating procedures and on formalising these standards in the plantations and the factories. Over the past year, an important further step was taken in the form of the successful audit for RSPO certification at the Perlabian and Bukit Maradja mills, but both factories were also certificated for the ISO 9001 and ISO 14001: 2004 EMS standards. In order to gain access to the European alternative energy market for the sustainable palm oil they produce, both of the factories were also audited for the ISCC standard, in terms of which emission savings are balanced against the raw oil products. These were found to be more than adequate for the use of our palm oil in biofuel and the production of green electricity.
An identical path was sketched out for the Agro Muko palm oil extraction mill, and the audits were duly carried out, but the results were only announced by the relevant authorities after the close of the financial year. These certifications mean that we can now regard the SIPEF palm oil mills and associated plantations as textbook examples as far as the environment and safety are concerned. These certifications also provide a guarantee of the general level of quality of our activities in North Sumatra in relation to social facilities such as worker accommodation, training opportunities, medical care and energy management. While there are no identical certification processes available for Indonesian rubber and tea production, we are also endeavouring to apply the same standards of quality in these operational areas.
Our activities in the Padang region and our tea plantation in Java both remain susceptible to earthquakes, due to their specific location on a geological fault line.
Following a number of earthquakes in the vicinity of Agro Muko, and particularly the serious earthquake in Padang in December 2009 (which devastated large parts of the city), the situation was relatively calmer during this financial year. We are proactively trying to fortify the structure of the residences, adapt the factories and make the tank terminal at Padang more resilient to shock, in order to prevent any new catastrophes. We have also provided psychological help for the workers, to help deal with the post-traumatic impact and support them in their response to any future earthquakes.
Following a period of restless social labour conflicts, with accompanying strikes and redundancies in 2007 and 2008, the plantations in North Sumatra have generated a new business culture. The result is a disciplined group of workers, most of whom live on the plantations. Contacts with the local trade unions are constructive, and there has been no need for any intervention on the part of government departments or others.
The overall growth in plantation activity in the region has made it difficult to recruit and retain a sufficient number of well qualified workers in the province of Bengkulu. Thorough training programmes for poorly educated workers from other sectors and regions should ensure that the number of workers will remain at a satisfactory level and that the work will be done properly. All the workers have now been trained by the sustainability teams in the principles and criteria applied by the Roundtable on Sustainable Palm Oil (RSPO), and have proved, via the audits, that they are applying these principles and criteria in practice.
We are also paying a great deal of attention to the recruitment and training of younger workers, who will form the basis for the future of our company. We hope that the recent increase in salary scales will ensure
an adequate influx of young graduates for the future. They are provided with long-term training programmes to turn them into skilled planters and engineers, by means of training workshops as well as practical on-site courses. Retaining these promising youngsters within the group is a constant strain, due to the significant interest in the sector and the gradual expansion of planted acreage in Indonesia. The management of the Indonesian activities is undertaken by a stable team of Malaysian, European and Indonesian managers, who jointly direct the company while taking account of all the cultural and ideological influences and not losing focus on profitability in a sustainable environment. The training for young managers is combined with an appraisal system using quality indicators to evaluate and improve their individual input and productivity. This is done using "Key Performance Indicators" in combination with the introduction of "Best Management Practice" areas within the plantations, designed to lead to a general improvement in agronomic standards.
We also encourage the managers to develop their creativity and powers of innovation in day-to-day practical activities on the plantations and in the factories. The manager at the Perlabian plantation recently discovered a new procedure to reduce the damage to new planting caused by Oryctes rhinoceros beetles. Following a thorough comparative study, this will now be applied on a group-wide basis. It is often simple but practical, minor improvements that can have a relatively major impact on the overall cost structure.
New planting has continued at PT Umbul Mas Wisesa (UMW) and PT Toton Usaha Mandiri (TUM), the most recent acquisitions in the province of North Sumatra, and should reach its full extent no later than early 2011. We were held back during the financial year by negotiations on payments that had to be made to individuals who
had started unlawful agricultural activities on this land, but who were demanding compensation for the crops they had planted.
During the financial year, 605 additional hectares were planted, resulting in a planted surface area of 8 046 hectares at the close of 2010. There are now 3 435 hectares that have yielded their first limited production, which is being processed at the nearby Perlabian factory. The construction of the new palm oil extraction mill will commence in the second quarter of the new year, with a view to being completed by June 2012. This will allow us to cope with an increased influx of fruit. We have also started expanding the infrastructure, by embarking on the construction of a first group of 80 workers' houses and some warehouses for storing fertilisers. We will need a significant investment budget over the next two years in order to complete the central residential complex.
Our management teams in Medan have devoted great deal of effort to expanding the group. Every proposal for the acquisition of land or existing plantations is examined for its agronomic qualities, the status of ownership rights and its consistency with the principles and criteria of the RSPO. In concrete terms, this means that no expansion can take place in areas containing "high conservation value forest" (HCVF) or on peat moorland. The criteria for HCVF reflect not only the status of the ground cover but also the social impact on existing communities in the vicinity of a potential project.
The search for further expansion is being formalised by setting up an expansion department, which will deal with any proposals to extend our acreage in a structured manner.
Despite the fact that many projects are available, not a single one has yet been found that meets our group's
internal and external quality requirements. We are continuing our search in the most valuable areas, in agronomic terms, of Indonesia.
The political situation in Papua New Guinea is fairly sensitive to minor squabbles, but remains generally stable. Following Prime Minister Somare's re-election for a new five-year term in 2007, the government got back to work on its long-term plan entitled "Vision 2050".
Papua New Guinea is rich in natural raw materials, but the country's economic growth will be based primarily on developing its estimated 227 billion cubic metres of natural gas reserves. A consortium led by an American oil giant has started to construct terminals for liquid natural gas (LNG), with exports potentially starting in 2013 or 2014, followed by other concessions. This, the largest ever investment project in the country's history, has the potential to double the gross domestic product (GDP) and treble export income in the short term. Expectations are therefore high. The government is facing the challenge of using the income flows from these projects in a transparent manner for the long-term future of the country.
For the time being, the agricultural sector, which accounts for 32% of GDP, remains the most significant source of income for 85% of the population, but it is clear that the industrial development is likely to draw the available educated workforce away from the agricultural sector, which will have the impact of increasing costs for our palm oil and rubber production.
The global financial crisis had virtually no impact on the country due to the continuing demand for Papua New Guinea's exported raw materials from mining and agriculture. Growth in GDP is therefore estimated at 6.2% for 2010. Inflation for 2010 will be similar to the 6.9% of 2009, with the level of debt remaining confined to 27.8% of GDP. The local currency, the kina (PGK), rose slightly, by 2.3%, in relation to the US dollar.
Hargy Oil Palms Ltd endured an extremely difficult year. The traditional rainy season in the first quarter deteriorated into a deluge, with more than 4 000 mm of rainfall in the first four months alone, which is equivalent to the normal annual rainfall. Operations were seriously disrupted when bridges and roads were washed away. By the end of April, there had already been a reduction in oil production of 13% compared with the previous year for the company's own plantations and 26% for the surrounding outgrowers. The access roads to the nearest town of Kimbe had been reopened by May, but the bridges remained damaged for a longer period and were only repaired in the second half of the year, with assistance from the government and also the Australian government.
The rainfall also had an impact, of course, on the quality of the oil produced and on the extraction rates in the two palm oil mills. There were also frequent difficulties, during the first six months, in shipping the volumes that had been sold in time.
Production and transportation of fruit returned to normal in the second half of the year and extraction rates at the factory started to climb, with the result that they exceeded forecasts once again in the fourth quarter. The aggregate production of palm oil and palm kernel oil was 98 238 tonnes, as opposed to 102 445 tonnes in the previous year, representing a slight fall of 4.0%.
Thanks to the purchase of our own fleet of trucks, we were able to continue with resurfacing the internal road network on the Hargy plantation (2 431 planted hectares), and this network now stretches to 35.1 km. The acquisition of new tractors also contributed to a better evacuation of the fruit from the most distant fields. These two improvements could not however prevent the Hargy plantation from remaining slightly below the forecast volumes. The fertilisation programmes were fully completed in the second half as a result of improved accessibility.
The Barema plantation, now fully planted across 2 077 hectares, is being brought gradually into production as soon as the palms are two years old. Production also exceeded forecasts by 8.7%, despite the low-lying parts being inundated during the first quarter.
At the largest Navo plantation, the intention is to replace about 2 000 of its 5 269 planted hectares over a period of three years and to proceed with resurfacing the internal roads network to prevent erosion. Only 324 of the forecasted 724 hectares were re-planted during the financial year, because of the exceptional circumstances. The result was that production from the existing planted areas exceeded the original budgets by 8%. The fertilisation programmes were completed in December. The palms from the Navo plantation give high yields, but are also the most susceptible to infestations of insects such as sexava and stick insect. They demand thorough control and attention from the agronomists.
Because the plantations belonging to the surrounding planters are often far distant and were sometimes even cut off from the factory for months on end, it took until the second half of the year for fruit transportation to return to its normal level. This resulted in a 4% fall
in supplies compared with the previous year. These supplies represent 48.3% of annual production of palm oil, so the company pays a great deal of attention to assisting these smallholders, by providing planting material and fertiliser and most of all by encouraging them to replant in good time. The World Bank's financing of this is unfortunately only released sporadically. The World Bank will also now release credits to finance the completion of planted areas. Assistance from local government leaves much to be desired, and this service urgently needs to be restructured. Hargy Oil Palms Ltd therefore took it upon itself to extend its "smallholders" department, with a new manager who will concentrate on promulgating RSPO awareness, by clarifying the procedures for replanting, achieving proper operational standards and applying fertilisers.
The management at both of the palm oil extraction mills made considerable efforts during the period of excessive rainfall to keep extraction rates at the proper level; this is partly obscured by the fact that the fruit often arrived late at the factory, with a high water content. The older Hargy mill has undergone many adaptations in recent years. Apart from replacing the sterilisation process, most of the infrastructure was renewed, so that the annual average palm oil extraction was 23.58%, actually rising to 25.74% in December. The newer Navo mill had to deal with irregular transportation and machinery breakdowns. While an extraction level of 24.85% was achieved in December, the annual average was 22.59%.
The extraction rate for palm kernel oil remained below expectations and the new chief engineer, assisted by our people in Indonesia, has put together an investment programme for 2011 to improve palm oil and palm kernel oil extraction. We will be paying particular attention to waste water processing with the construction of two
new decantation ponds at the Navo factory, combined with an intensive cleaning of existing ponds at the Hargy factory.
We will be able to cope with the increasing throughput of fruit from our own plantations and those of surrounding planters from 2012 in the new Barema factory, which will be able to process 45 tonnes of fruit per hour. The licence applications have been filed and the site is being cleared with a view to starting foundation work in the second quarter of 2011.
We spared neither expense nor trouble in keeping production and transportation at proper levels during the extreme weather conditions of the first half of the year. This was reflected in production costs, which increased by a quarter, in US dollar equivalents, in comparison with 2009. The new financial management team will be assembling a programme for monitoring the cost structure closely in consultation with the staff. A new internal audit department has been set up to supervise the procedures.
The transportation of fruit and oil remains a very important element in the production chain, certainly in relation to the widely distributed plantations in Papua New Guinea. We therefore paid considerable attention to the maintenance of our freight fleet, by recruiting an experienced garage manager and by having the maintenance staff trained by an Australian instructor.
The company had to face many changes in the management team during the financial year. The takeover by our neighbours NBPOL of the CTP plantation group in April created opportunities in the generally limited local labour market. A number of our employees left to join this new project. We were able to fill all of the vacancies
relatively quickly, with better skilled people. The only point that took much more time than anticipated was securing work permits for foreign managers.
A further priority for the management team is the recruitment of enough young workers to deal with harvesting and maintenance. A large number of older workers retired and were repatriated to their original provinces in 2010. Good accommodation is very important in this context. Over recent years, the company has invested substantially in new houses (for more than 150 families in 2010) as well as the maintenance of existing residences, principally for the factory workers. These efforts will be continued in the coming years, along with the construction of new residences in the expansion zones.
The expansion programme in the vicinity of the Navo plantation is being pursued, with the ultimate intention of doubling the planted surface area to at least 20 000 hectares. The landowners have now been identified and approached. We have concluded agreements to safeguard the expansion. All the qualifying plots have also been investigated in connection with compliance with the RSPO principles and criteria. The acquisition of the new plots has been delayed by the government services that have to produce new property titles. The effective planting, estimated at 1 500 hectares, has also faced delays, due to weather conditions and the lack of contractors with good machinery to work the land. We therefore decided to procure our own bulldozers and cranes to cut down this dependence. The operators have been recruited so that the expansion can proceed at a faster rate.
A first re-audit was undertaken in April, following receipt of the initial certification for RSPO in 2009, which runs until 2014. Hargy Oil Palms Ltd was again certified for one year and its ISO 14001 certification was also
renewed. This applies to the complete production process for our own plantations and those of the smallholders who bring their fruit to our two factories. This certification is extremely important for positioning our business in the European market. The vast majority of the oil is shipped as "segregated certified sustainable palm oil", which allows purchasers to process sustainable palm oil directly into their end products.
The rubber operations of Galley Reach Holdings Ltd on the main island of Papua New Guinea were largely comparable with those of previous years, but the operating results were slightly better than 2009 due to the significant increase in the sale price for natural rubber (mainly in the second half of the year).
Production from our own acreage was virtually identical to that of the previous year, but there was a slight reduction in the volumes of purchases from third parties. Because of the higher prices, the competition is also much more intense among buyers of raw rubber in the Moreguina and Upulima regions, who want to export the rubber for processing abroad. Galley Reach Holdings Ltd continues to shadow this competition with cash payments and regular uplifts of the available rubber, that almost 60% of the potential volumes are collected and processed in our own factory. These purchases from third parties represent 36% of the volumes that are produced and account for 28% of operating results.
Due to the stronger local kina currency, as well as the rising prices for fertilisers and fuel, production costs rose by 12% (in US dollar equivalents) in comparison with the previous year. The average prices for procuring rubber from third parties have more than doubled, although they still leave an adequate margin for the company.
As a significant proportion of our own acreage is now at an advanced age, we prepared a long-term replanting plan some years ago. Despite problems obtaining suitable seed and the irregular rainfall, 1 148 hectares have now been replanted. This is a third of the total planted surface area, with something over 700 hectares still being immature. The intention is, to continue with this planting pattern for a few more years, with the aim of gradually replacing the older parts of the plantation with young trees. This will provide better yields per hectare. We are also increasing accessibility to the trees during the rainy season by laying drains and new water courses in the lower-lying parts of the plantation.
Investment is focused primarily at this point on the immature acreage and the replanting of rubber trees. The factory has been significantly updated, apart from the steam boiler, which might have to be replaced in the near future. While we had mainly been building new houses in previous years, we started to address the maintenance of existing houses in 2010. Twenty new houses will also be added to the current stock of 674 workers' residences during the course of the next year.
Since the rubber operations are situated close to the capital city of Port Moresby, we are now beginning to see the initial impact of the LNG project on the labour market for educated workers. The availability of houses, combined with schooling and medical care, is therefore an excellent guarantee for attracting suitable workers and retaining them after they have been trained as rubber tappers.
As this text is written, Ivory Coast finds itself in a complete political gridlock.
The election process in which the population had placed so much hope to pull the country out of a delicate political situation and to establish a climate of lasting peace has degenerated into an unprecedented institutional crisis.
Unless a rapid and peaceful solution is found, the economic and social climate will deteriorate yet further and the entire WAEMU (West African Economic and Monetary Union) will eventually suffer as a result.
The biggest cacao producer in the world was able to benefit in 2010 from the high global prices and the country's economic growth should reach over 3%. Agriculture is one of the most dynamic sectors.
Volatile and unusual weather conditions caused sporadic problems at harvest time and in the transport of the goods for SIPEF-CI SA in which we hold a 32% stake. This led to a drop in agricultural volumes by some 10% compared with the previous year.
The three operational sites in Bolo, Ottawa and Okrouyo supplied a total of 226 669 tonnes of palm fruits, 60% of which was produced by independent planters.
The two mills produced 51 811 tonnes of palm oil: 64% of the production went to the refinery of our partner and biggest shareholder, United Oil Company (UOC, located in Sikensi), and 36% was exported.
At the same site, we also produced 7 392 tonnes of palm kernels supplied to Oil-Tech that also belongs to the Adam-Afrique group.
Thanks to favourable selling prices for palm oil,
SIPEF-CI SA was able to more rapidly implement its renovation plan on its plots and it now has 4 466 hectares with immature young trees planted over the last three years, which, from an agricultural standpoint, affords us a fair amount of optimism for the future.
From an agricultural point of view, 2010 was not exceptionally good: at the beginning of the year, we lost around twenty hectares of production as a result of a tornado on the site of SBM SA. The rains - mainly concentrated during the summer months - exceeded the averages of last year by nearly thirty percent, thus extending the production cycles and lowering productivity. Through the combination of all of these climate factors, we were not able to meet the objectives of SBM SA and there was a shortage of 952 tonnes compared with the budget. Agboville closed the year as expected and was finally able to make up for the backlog that had accumulated initially. Azaguié again largely exceeded the objectives (+ 1 200 tonnes).
From a consolidated standpoint, we closed the year close to expectations (+ 189 tonnes, for a total of 20 639 tonnes) and achievements from the previous year (+ 64 tonnes), and this with the same planted surface area. The geographical diversity of the three production zones was advantageous for us this time. We were fortunate that, despite everything, we were able to ensure a regular supply of fruit to fulfil the commercial contracts.
The packaging and presentation of our fruit was optimised after the visit from a Columbian expert to our packaging stations that are currently being adapted. This will allow us to yet further improve our standard in the future.
The average FOB sale price for the fruit sold to Europe was above our expectations (EUR 441 per tonne compared with EUR 398 per tonne in the budget). Because we suffered from a shortage in volumes during the first half of the year due to the tornado, we missed common sales opportunities in a lucrative market. Sales to neighbouring countries were as predicted (EUR 303 per tonne), as they were completely laid out by contract.
The flowers activity improved with a positive result, though without meeting the expectations that we had set. The margin that we had built up over the course of the fiscal year was completely negated in December by the cold wave on the European continent, which completely hampered logistics and sales during the holiday period. Thanks to our expertise and through renewed commercial activities, we can however look at the coming year with optimism.
The presidential elections held during the last quarter led to an unbelievably disorderly situation and complete chaos in the country. Despite concern about the risks of a civil war, we were still able despite all of this - as this text was written - to produce, harvest, package and export our goods by sea and air, under decent conditions. We can congratulate our management teams heartily for their devotion and the professional preservation and maintenance of our company's activities. We all hope that 2011 will be a year of peace and economic revival for Ivory Coast.
Jabelmalux SA is the parent company of PT Melania, PT Umbul Mas Wisesa (UMW), Toton Usaha Mandiri (TUM) and PT Citra Sawit Mandiri (CSM) in Indonesia. Once local regulations permit, these subsidiaries will be transferred to SA SIPEF NV.
You can find more information about the operational development of these subsidiaries in our "Activities report by country".
The insurance group B.D.M. NV - ASCO NV works through professional brokers to provide chiefly maritime and industrial insurance. B.D.M. NV is an insurance agency that offers risk coverage on niche markets on behalf of the insurer ASCO NV and a number of important international insurers. The presence of ASCO NV with the insurers for which B.D.M. NV underwrites has important advantages: it lends greater stability to B.D.M. NV and reinforces the capacity through direct access to the reinsurance market.
The strategic repositioning of B.D.M. NV started in late 2009 continued in 2010 with the hiring of a number of high profile employees, the development of new products and supporting marketing campaigns.
This increased the premium volume in the marine segment by 7%. Due to the sharp increase in the proportion of workforce costs, we were not yet able to capitalise on the increased market share in the operational results for this segment, which dropped by 13%. Through the internationalisation of the transport activities, we will be able to make full use of the effect of the increased revenues in 2011.
In the Property & Casualty segment, the creation of a new platform for future growth was able to prevent further erosion of the operational results. The focus shifted from the less attractive mass risks to products and solutions with high added value that are actively promoted through a limited number of professional brokers. Despite a drop in the volume of premiums by 8%, the operational results for this segment only decreased by 2%. In 2011, we will focus on the marketing of new niche products and further cost control.
The somewhat lower results in both segments led to an operational result (EBITDA) of EUR 16 477. The extraordinary result from the sale of the Dutch subsidiary Bruns ten Brink Assuradeuren BV was not able to prevent the net results from falling due to increased operating expenses as a result of the strategic repositioning of the activities.
For the insurer ASCO NV, 2010 was characterised by a significant turnabout in its portfolio composition. On the one hand, no new underwritings were carried out this year for the former agencies Bruns ten Brink Assuradeuren BV and I.B.I.S. On the other, the first underwritings were added to the portfolio through the agencies Unireas and Almarisk. As a whole, this resulted in EUR 26.3 million in premiums received (a 29 percent increase compared with 2009).
The damages costs changed positively. The positive gross technical result was neutralised by still too heavy reinsurance costs, despite revision of the reinsurance programme.
For 2011, we predict further refinement of the reinsurance programme.
Tea plucking - Cibuni-Java (Indonesia)
Total production of consolidated companies (≠ share of the group)
| Own | Out growers |
2010 | Own | Out growers |
2009 | |
|---|---|---|---|---|---|---|
| Palm oil | 192 156 | 46 985 | 239 141 | 196 368 | 50 489 | 246 857 |
| Indonesia | 144 450 | 2 949 | 147 399 | 147 373 | 4 316 | 151 689 |
| Tolan Tiga group | 71 643 | - | 71 643 | 72 197 | - | 72 197 |
| Agro Muko group | 72 807 | 2 949 | 75 756 | 75 176 | 4 316 | 79 492 |
| Papua New Guinea | 47 706 | 44 036 | 91 742 | 48 995 | 46 173 | 95 168 |
| Palm kernels | 34 037 | 691 | 34 728 | 35 198 | 994 | 36 192 |
| Indonesia | 34 037 | 691 | 34 728 | 35 198 | 994 | 36 192 |
| Tolan Tiga group | 17 665 | - | 17 665 | 17 977 | - | 17 977 |
| Agro Muko group | 16 372 | 691 | 17 063 | 17 221 | 994 | 18 215 |
| Palm kernel oil | 3 501 | 2 995 | 6 496 | 3 771 | 3 506 | 7 277 |
| Papua New Guinea | 3 501 | 2 995 | 6 496 | 3 771 | 3 506 | 7 277 |
| Rubber | 9 608 | 1 273 | 10 881 | 8 633 | 1 727 | 10 360 |
| Indonesia | 7 344 | 0 | 7 344 | 6 003 | 0 | 6 003 |
| Tolan Tiga group | 6 155 | - | 6 155 | 4 782 | - | 4 782 |
| Agro Muko group | 1 189 | - | 1 189 | 1 221 | - | 1 221 |
| Papua New Guinea | 2 264 | 1 273 | 3 537 | 2 289 | 1 727 | 4 016 |
| Brazil | - | - | 0 | 341 | - | 341 |
| Tea | 3 097 | 11 | 3 108 | 3 121 | 0 | 3 121 |
| Indonesia | 3 097 | 11 | 3 108 | 3 121 | - | 3 121 |
| Pineapple flowers ('000 units) | 833 | 0 | 833 | 824 | 0 | 824 |
| Ivory Coast | 833 | - | 833 | 824 | - | 824 |
| Bananas | 20 639 | 0 | 20 639 | 20 575 | 0 | 20 575 |
| Ivory Coast | 20 639 | - | 20 639 | 20 575 | - | 20 575 |
| Guava | 0 | 0 | 0 | 689 | 0 | 689 |
| Brazil | - | - | 0 | 689 | - | 689 |
| Pepper | 0 | 0 | 0 | 26 | 0 | 26 |
| Brazil | - | - | 0 | 26 | - | 26 |
Total planted area of consolidated companies (≠ share of the group).
| 2010 | 2009 | ||||||
|---|---|---|---|---|---|---|---|
| Mature | Immature | Planted | Mature | Immature | Planted | ||
| Oil palms | 41 134 | 9 746 | 50 880 | 38 062 | 11 138 | 49 200 | |
| Indonesia | 32 955 | 8 098 | 41 053 | 30 831 | 8 764 | 39 595 | |
| Tolan Tiga group | 13 002 | 1 164 | 14 166 | 13 320 | 913 | 14 233 | |
| Umbul Mas Wisesa group | 3 435 | 5 375 | 8 810 | 1 185 | 6 322 | 7 507 | |
| Agro Muko group | 16 518 | 1 559 | 18 077 | 16 326 | 1 529 | 17 855 | |
| Papua New Guinea | 8 179 | 1 648 | 9 827 | 7 231 | 2 374 | 9 605 | |
| Rubber | 7 049 | 2 238 | 9 287 | 8 012 | 2 297 | 10 309 | |
| Indonesia | 4 472 | 1 532 | 6 004 | 4 735 | 1 534 | 6 269 | |
| Tolan Tiga group | 3 491 | 894 | 4 385 | 3 447 | 982 | 4 429 | |
| Agro Muko group | 981 | 638 | 1 619 | 1 288 | 552 | 1 840 | |
| Papua New Guinea | 2 577 | 706 | 3 283 | 2 520 | 763 | 3 283 | |
| Brazil | 0 | 0 | 0 | 757 | 0 | 757 | |
| Tea | 1 740 | 47 | 1 787 | 1 742 | 45 | 1 787 | |
| Indonesia | 1 740 | 47 | 1 787 | 1 742 | 45 | 1 787 | |
| Pineapple flowers | 27 | 49 | 76 | 36 | 50 | 86 | |
| Ivory Coast | 27 | 49 | 76 | 36 | 50 | 86 | |
| Bananas | 516 | 0 | 516 | 512 | 0 | 512 | |
| Ivory Coast | 516 | 0 | 516 | 512 | 0 | 512 | |
| Others | 0 | 58 | 58 | 242 | 241 | 483 | |
| Brazil | 0 | 0 | 0 | 242 | 183 | 425 | |
| Papua New Guinea | 0 | 58 | 58 | 0 | 58 | 58 | |
| Total | 50 466 | 12 138 | 62 604 | 48 606 | 13 771 | 62 377 |
* = actual planted hectares
| Oil palms | Rubber | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Tolan Tiga group |
Umbul Mas Wisesa group |
Agro Muko group |
Hargy Oil Palms |
Total | Tolan Tiga group |
Agro Muko group |
Galley Reach Holdings |
Total | ||
| 2010 | 560 | 1 325 | 312 | 512 | 2 709 | 141 | 101 | 0 | 242 | |
| 2009 | 228 | 1 848 | 537 | 391 | 3 004 | 50 | 65 | 87 | 202 | |
| 2008 | 376 | 2 118 | 413 | 154 | 3 061 | 96 | 114 | 97 | 307 | |
| 2007 | 309 | 2 334 | 446 | 1 676 | 4 765 | 262 | 170 | 200 | 632 | |
| 2006 | 644 | 335 | 1 083 | 879 | 2 941 | 201 | 188 | 200 | 589 | |
| 2005 | 665 | 800 | 525 | 173 | 2 163 | 283 | 0 | 122 | 405 | |
| 2004 | 137 | 0 | 696 | 255 | 1 088 | 243 | 0 | 57 | 300 | |
| 2003 | 1 143 | 50 | 101 | 148 | 1 442 | 253 | 0 | 0 | 253 | |
| 2002 | 653 | 0 | 81 | 359 | 1 093 | 198 | 0 | 0 | 198 | |
| 2001 | 692 | 0 | 475 | 662 | 1 829 | 97 | 0 | 69 | 166 | |
| 2000 | 831 | 0 | 1 034 | 510 | 2 375 | 409 | 93 | 116 | 618 | |
| 1999 | 819 | 0 | 1 608 | 666 | 3 093 | 177 | 100 | 65 | 342 | |
| 1998 | 668 | 0 | 2 293 | 625 | 3 586 | 270 | 215 | 33 | 518 | |
| 1997 | 869 | 0 | 844 | 129 | 1 842 | 228 | 185 | 73 | 486 | |
| 1996 | 986 | 0 | 496 | 558 | 2 040 | 198 | 0 | 0 | 198 | |
| 1995 | 305 | 0 | 257 | 0 | 562 | 195 | 0 | 37 | 232 | |
| 1994 | 468 | 0 | 872 | 472 | 1 812 | 132 | 0 | 0 | 132 | |
| 1993 | 336 | 0 | 217 | 0 | 553 | 225 | 0 | 0 | 225 | |
| 1992 | 828 | 0 | 142 | 0 | 970 | 0 | 0 | 0 | 0 | |
| 1991 | 0 | 0 | 259 | 0 | 259 | 0 | 0 | 0 | 0 | |
| 1990 | 29 | 0 | 3 476 | 0 | 3 505 | 91 | 0 | 0 | 91 | |
| 1989 | 42 | 0 | 1 491 | 0 | 1 533 | 153 | 202 | 0 | 355 | |
| 1988 | 306 | 0 | 419 | 0 | 725 | 324 | 186 | 40 | 550 | |
| 1987 | 194 | 0 | 0 | 0 | 194 | 52 | 0 | 129 | 181 | |
| 1986 | 394 | 0 | 0 | 422 | 816 | 20 | 0 | 365 | 385 | |
| Before 1986 | 1 684 | 0 | 0 | 1 236 | 2 920 | 87 | 0 | 1 593 | 1 680 | |
| 14 166 | 8 810 | 18 077 | 9 827 | 50 880 | 4 385 | 1 619 | 3 283 | 9 287 | ||
| Average age | 12.53 | 2.13 | 12.83 | 10.16 | 10.38 | 11.13 | 10.44 | 24.95 | 15.90 |
Newly opened rubber field - North Sumatra (Indonesia)
For many years, the SIPEF group has been a strong supprter of sustainable business practices. Plantations represent a long-term operation. This means that retaining the natural sources we manage and caring for harmonious social relationships in and around our activities are not only our responsibility but also in the company's interests.
Plantations have to be efficient and profitable and at the same time strive for high social and environmental standards.
The board of directors at SIPEF supports the application of clear rules on sustainability, which are applied in terms of the policy governing our day-to-day operations and which are also stricter than the statutory requirements in the countries where we operate.
Our operations are assessed in accordance with commonly applied standards such as ISO 9001, ISO 14001, the 'Roundtable on Sustainable Palm Oil' (RSPO), the 'International Sustainability and Carbon Certification' (ISCC), the 'Clean Development Mechanism' (CDM) of the United Nations, the 'Ethical Tea Partnership' (ETP) and 'EurepGAP / GlobalGAP'.
Our sustainability department converts these standards into operational procedures, in terms of which we suggest improvements in collaboration with local management teams, and help in achieving these. We organise training sessions for our employees at every level, as well as for employees of other businesses, in order to clarify the new standards and to ensure that
they are applied in practice. We also closely monitor the results, which allows us to ensure correct and uniform application and any appropriate improvements by the various departments.
Our obligation to observe a policy on sustainability in relation to palm oil production is based on the principles and criteria of the 'Roundtable on Sustainable Palm Oil' (RSPO). Since 2004, this organisation has formed a meeting point for the plantations, small-scale planters, NGOs, wholesalers, refineries, manufacturers and financial institutions, with a view to setting up guidelines for the production and processing of sustainable palm oil.
SIPEF is an active member of RSPO, and is represented on the 'National Interpretations Working Group for Papua New Guinea', the 'Trade and Traceability Working Group' and the 'Biodiversity Technical Committee'. We believe that RSPO offers the best prospects for the future in the palm oil industry.
In 2010, all of our mature palm oil plantations in Indonesia underwent an audit in accordance with the RSPO principles and criteria. Our activities in North Sumatra were certificated in May 2010. Later in the year, the operations at Bengkulu were audited and recommended for certification. The certification in Papua New Guinea was confirmed following a successful verification audit. Since the start of 2011, when our Bengkulu plantations were officially certified, all of SIPEF's mature palm oil plantations are now approved by RSPO. SIPEF is the first organisation to apply the 'RSPO New Planting Procedure', for its new expansion at Hargy Oil Palms Ltd (HOPL) in Papua New Guinea.
We also apply strict social and environmental standards to our rubber, tea and banana operations; these
standards are largely comparable with those we use for our palm oil. All the businesses within the SIPEF group are therefore obliged to work with sustainability in mind for all of their operations.
SIPEF is also a member of KAURI asbl, a Belgian network and expertise centre for business ethics and responsibility among NGOs. The SIPEF management team organised a meeting for stakeholders in June 2010, under the leadership of KAURI. The various aspects of corporate social responsibility were discussed there, with recommendations for improving policy on sustainability and responsibility.
The fertility of the soil is of the utmost importance for plantations. SIPEF has formulated detailed guidelines on preserving and improving the fertility of the soil. Each step in the production process, from preparing the land to processing by-products and even waste treatment, can contribute towards this.
A detailed investigation is initiated in relation to the suitability of the land, its situation, the varieties to be planted and anticipated long-term yields before any planting or replanting is undertaken. This process is checked by experienced managers before any work on the land is started.
The preparation of land, for both new planting and replanting, is the subject of a strict "zero burning" policy. The 'ASIAN Zero Burning Policy' governs this in Indonesia. The cropped vegetation is piled up and allowed to rot, so that the organic material is retained in order to improve soil fertility.
Land plots with a slope of more than 25° are kept in their natural condition. These areas are too steep to be planted, due to the risk of serious erosion and accidents at work.
Planting takes place around terraces on undulating or slightly hilly land, in order to counteract any soil erosion. The terraces are sometimes fortified with Vetiver or Guatemala grass, whose deep roots stabilise the soil and prevent erosion. We also sometimes use old tyres to stabilise specific plots, thus reusing them instead of having them taken away for destruction or recycling.
Once a strip of land has been reserved, it is immediately planted with leguminous ground cover plants, which are selected for their ability to cover the ground very quickly and capture nitrogen. This not only provides protection against the sun and erosion through wind and rain, but it also hampers the growth of weeds. The growth of ground cover plants is monitored closely, to ensure that they do not get overgrown or start spreading to land reserved as nature plots.
The river banks are protected in order to retain water quality for downstream users and create transit points for wildlife. These buffer zones also protect the watercourses against accidental erosion.
The use of chemical or inorganic fertilisers is kept to a minimum. The extraction process for palm oil in the palm oil factories, in particular, generates a by-product or 'waste product' that is rich in nutrients. The empty palm bunches are taken back to the field untreated. POME (Palm Oil Mill Effluent), the waste water, is also recycled for irrigation of the land.
SIPEF has long been applying Integrated Pest Management (IPM) for pest control purposes. Every
department prepares an IPM plan to meet local needs. IPM involves a regular and accurate observation of the fields and combines chemical and natural countermeasures. Some sicknesses or plagues are exterminated, whereas others are kept at such a level that they do not cause any damage to plants. The ultimate aim is to use an absolute minimum of chemical products, which means that the workers are exposed to chemicals as little as possible. This is how we also restrict the ecological impact and in fact also reduce our costs, by using them only when absolutely necessary.
We provide our employees with regular training courses, to foster an 'early warning' system among them and maintain high standards of health and safety. A lot of attention is paid here to personal protective equipment for the employees who work with chemicals. They also receive regular medical checks.
Weed control follows the same logical operating method as IPM: chemical products are only used when necessary, in a targeted and responsible manner, in order to limit the adverse impact on the environment and safety risks for the workers.
Each year, we prepare a list of permitted products at our plantations, in order to improve the use of chemicals. Every active ingredient permitted for the following year is first discussed, with its use being specified. This working method is monitored both by the plantation management team and the sustainability department.
Areas reserved for nature purposes are actively protected. The areas that qualify as nature reservations are clearly marked and actively protected. In Indonesia, we gave about 50 of our employees and surrounding farmers a training course as 'Conservation Auxiliaries'. They are responsible for protecting these areas.
Crude palm oil (CPO) is obtained by means of mechanical pressing of the fruit ('Full Fruit Bunches', or FFB). This process generates three by-products, namely the empty bunches (Empty Fruit Bunches, or EFB), fibre (from the fruit) and waste water (Palm Oil Mill Effluent, or POME).
EFB, rich in nutrient elements for the plants, improve the physical and chemical qualities of the soil and are therefore used as a fertiliser on our plantations.
A properly managed factory can normally provide its own energy. We use the fibre and sometimes also part of the EFB as fuel in the heating boilers that provide sufficient steam for power generation. This power generation is generally enough to meet the energy needs of the factory and the workers' residences.
POME is a by-product of one of the procedures that does not involve any chemical product at all. It contains just water from the extraction process with water-soluble materials from the palm fruits and a number of solids and fibres. On the other hand, POME is acidic, with a high BOD ('Biochemical Oxygen Demand') content. This is why it cannot just be released into the water system. The strict rules in Indonesia and Papua New Guinea specify acceptable standards and uses of POME, and we also apply these standards. We regularly undertake analyses at specific points of the process.
The crude POME is normally treated using a ponding system, where it stays for 90 days. After the sedimentation period, POME can be used as an organic fertiliser, through irrigation, in certain parts of our plantations.
While POME sedimentation is an industrial standard, it also releases methane gas (a recognised greenhouse gas). In order to limit these emissions, SIPEF installed a system in 2008 for capturing and burning this gas at two palm oil mills in North Sumatra. We applied for certification from the Clean Development Mechanism Board (CDM), in the context of the Kyoto Protocol. Both projects were approved by the Executive Board of the United Nations Framework Convention on Climate Change (UNFCCC) in November 2009, so that we now receive Carbon Emission Reductions (CERs) for this.
Our two factories at PT Agro Muko (PT AM) have also been adapted for the same system. The mills at Hargy and Navo in Papua New Guinea are also being investigated for the application of a more advanced system, where the gases will be fed back to the factory for the electricity supply.
SIPEF is a pioneer in the palm oil industry as regards methane capture, in both Indonesia and Papua New Guinea. We hope that this exemplary conduct will raise general awareness on global warming and the possibilities for cutting down on greenhouse gases.
SIPEF has committed itself to recognised and transparent standards of sustainability, as well as the application of these standards in its policy procedures. Regular certification audits and inspection visits by independent bodies are an integral part of our efforts to raise our sustainability standards. Preparing for these investigations gives us the opportunity to test our working methods against internationally accepted standards, introduce permanent improvements at every level and perpetuate a generally improved collaborative atmosphere.
ISO 9001 (the quality management system) emphasises the possibility of managing the production process efficiently and complying with high standards of quality. Our four Indonesian palm oil mills were all certificated under ISO 9001:2008 in 2010, as were our tea factory at Cibuni (Indonesia) and the PT AM crumb rubber factory.
ISO 14001 (an environmental management system) is a generally recognised system for environmental policy. HOPL was the first to subscribe to this method and was certificated in 2005. This certification was reaffirmed (for ISO 14001:2004) after the first follow-up audit in 2008. Our four Indonesian palm oil mills were certificated in 2010.
RSPO is an industrial standard developed to promote broad collaboration among stakeholders in the palm oil industry. The RSPO certification process requires the members to prepare a strictly timetabled plan for the audit of all production units (a production unit is defined as a palm oil mill and its associated base for fruit supply) in which the members hold a majority stake. SIPEF is presently operating six palm oil mills in two countries (Indonesia and Papua New Guinea) and has filed a timetable for the audit of all six mills before the end of 2010. SIPEF selected the British Standards Institute (BSI) as its certifying body. BSI is a certifying body officially recognised by the RSPO.
The Navo and Hargy palm oil mills run by HOPL in Papua New Guinea were the subject of an audit in 2008 and were both certificated in April 2009. This certification was reaffirmed in March 2010 after a follow-up audit. A further follow-up audit will take place in March 2011.
HOPL currently produces 100 000 tonnes of CPO per annum.
The palm oil mills at Bukit Maradja and Perlabian, run by PT Tolan Tiga Indonesia (PT TTI), were the subject of an audit in March 2010, and received their certification in May of that year. A further audit is scheduled for May 2011. PT TTI produces 78 000 tonnes of CPO per annum.
The audits at the MukoMuko and Bunga Tanjung palm oil mills run by PT AM were performed in October 2010, with certification in February 2011. Annual production at PT AM amounts to 75 000 tonnes of CPO.
ISCC is a new standard for the palm oil sector: 'International Sustainability and Carbon Certification'. ISCC provides for checks on the emission of greenhouse gases from agricultural products that are used for power generation. Our Perlabian palm oil mill received its certification in November 2010, while the mill at Bukit Maradja followed in January 2011, after an audit in December 2010.
SIPEF carefully studies every opportunity for expansion, to be sure that the land in question coincides with the statutory, ecological and social standards. We prefer acreage that is "degraded", where plant growth is no longer in its original condition and cannot provide any extensive biodiversity.
The first area to be thoroughly investigated for all potential projects is the legal status. Only the acreage that unconditionally fulfils all the requirements will be investigated further.
In relation to expansion for palm oil, the Principles and Criteria of RSPO, along with the New Planting Procedures, impose a strict operating method that is verified for compliance by an external audit body. This is published for public commentary on the RSPO website.
We hold thorough 'first, prior and informed consent' (FPIC) sessions, along with an investigation of valuable forestry areas and a social impact assessment. These are all taken into account in our policy plans.
Areas of primary rainforest and other areas including valuable forestry are excluded from any expansion plans. We do, however, try to keep these areas within our concessions as far as possible, in order to ensure their preservation.
The FPIC procedure provides a facility for stakeholder communities to contribute towards decisions on their future. This process is the first step towards a harmonious relationship between the project and the communities in question.
SIPEF was the first RSPO member to follow the New Planting Procedure, submitting a file for expansion at HOPL in Papua New Guinea in January 2010. After successfully fulfilling the requirements of the New Planting Procedure, this project has now started. HOPL is including and protecting substantial areas for nature reserve as part of the project.
Following the example of palm oil, SIPEF consistently pursues identical operating methods for other crops, with a view to meeting criteria for sustainability.
Our plantations are generally situated in remote areas, with limited infrastructure and economic opportunities.
In addition to direct employment, the local population often also relies on the SIPEF organisation for essential services. In Papua New Guinea and on the banana plantations run by SA Plantations J. Eglin in the Ivory Coast, the surrounding communities benefit from our company maintaining public roads and bridges.
Nearby communities know that they can count on our support for community projects. Over the years, SIPEF has financed the construction of a number of schools, places of worship and local offices.
We pay a great deal of attention to the welfare of our employees and their families on all of our plantations. SIPEF provides residential facilities and free medical care for the workers and their families, as well as schooling for their children. If there are schools in the vicinity, SIPEF provides school transport. If there are none, SIPEF enters into an agreement with the local government authority, to ensure that a school can be built and teachers can be provided, by means of a financing venture. The best students also receive a grant from the company to let them continue their studies at university.
We are extending the 'Kebun Masyarakat Desa' (KMD) programme at our Bengkulu Plantation (PT AM) in Indonesia. This programme, which started in 2000, originally provided the villages near the plantations with a long-term source of income. If a village took part, it made 15 hectares of land available to plant with oil palms, managed by PT AM and supported by a company credit facility.
The management of KMD is transparent and participatory, and the project has been a major success. Villages that are not in the immediate vicinity of plantations have asked if they can participate in the project, and currently there are 51 villages involved at various stages of the KMD programme.
In Papua New Guinea, HOPL is making maximum use of the facilities offered by the "tax credit scheme" to support community projects. After constructing the primary school at Ibana, HOPL has now agreed to provide school amenities for the pupils. At the same time, HOPL will be financing the maintenance and modernisation of three hospitals in West New Britain, at Sale Sege, Vilelo and Soi.
The SIPEF foundation 'Yayasan SIPEF Indonesia', was set up in 2009 to help protect the natural environment in Indonesia. At this point, the foundation is pursuing two projects in the province of Bengkulu. The aim of the long-term project, the 'MukoMuko Biodiversity Project', is to secure the management of a buffer zone in the Kerinci Seblat National Park. This area is under serious threat from deforestation, which would increase the pressure on the National Park. The Indonesian Ministry of Forestry Management is currently examining our licence application and the initial field activities are scheduled to take place in 2011.
A second project was initiated towards the end of 2010. The 'Retak Ilir Turtle Project' is supporting a village community which protects a beach where sea turtles come to lay their eggs. The species of sea turtle on the beach include the 'Eretmochelys imbricata', which is classified as being 'critically endangered' on the 'IUCN Red List'. The community members are being trained to collect the eggs and keep them safe until they hatch, after which the young baby turtles are released back into the sea.
www.rspo.org www.iscc-system.org www.hcvnetwork.org www.iucnredlist.org
PT Agro Muko's drumband (Indonesia)
| Consolidated financial statements | 72 | |
|---|---|---|
| Consolidated statement of financial position | 72 | |
| Consolidated income statement | 74 | |
| Consolidated statement of comprehensive income | 75 | |
| Consolidated cash flow statement | 76 | |
| Consolidated statement of changes in equity | 77 | |
| Notes to the consolidated financial statements | 78 | |
| 1 | Identification | 78 |
| 2 | Statement of compliance | 78 |
| 3 | Accounting policies | 79 |
| 4 | Use of estimates | 84 |
| 5 | Group companies/consolidation scope | 85 |
| 6 | Exchange rates | 86 |
| 7 | Segment reporting | 86 |
| 8 | Intangible assets | 93 |
| 9 | Biological assets | 94 |
| 10 | Property, plant and equipment | 97 |
| 11 | Investment property | 98 |
| 12 | Financial assets | 98 |
| 13 | Other long term receivables | 99 |
| 14 | Inventories | 100 |
| 15 | Other current receivables and other current payables | 100 |
| 16 | Shareholders' equity | 100 |
| 17 | Non-controlling interests | 102 |
| 18 | Provisions | 102 |
| 19 | Pension liabilities | 103 |
| 20 | Net financial assets/(debts) | 104 |
| 21 | Assets/liabilities held for sale | 106 |
| 22 | Non-recurring result | 107 |
| 23 | Financial result | 107 |
| 24 | Income taxes | 108 |
| 25 | Share of results of associated companies | 111 |
| 26 | Change in net working capital | 111 |
| 27 | Financial instruments | 111 |
| 28 | Joint ventures | 119 |
| 29 | Operating leases | 120 |
| 30 | Finance leases | 120 |
| 31 | Cash flow statement – acquisitions and divestitures | 121 |
| 32 | Rights and commitments not reflected in the balance sheet | 121 |
| 33 | Related party transactions | 122 |
| 34 | Earnings per share (basic and diluted) | 123 |
| 35 | Events after balance sheet date | 124 |
| 36 | Recent IFRS accounting pronouncements | 124 |
| 37 | Recent developments | 125 |
| 38 | Services provided by the auditor and related fees | 125 |
| Statutory Auditor's report | 126 | |
Parent company summarized statutory accounts 128
| In KUSD | Note | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| Non-current assets | 355 565 | 307 853 | 285 456 | |
| Goodwill and other intangible assets | 8 | 20 251 | 15 018 | 12 609 |
| Biological assets | 9 | 237 694 | 203 134 | 184 956 |
| Property, plant & equipment | 10 | 83 815 | 74 981 | 69 662 |
| Investment property | 11 | 3 | 3 | 3 |
| Financial assets | 12 | 13 628 | 12 191 | 11 644 |
| Investments in associates | 9 589 | 7 881 | 6 698 | |
| Other financial assets | 4 039 | 4 310 | 4 946 | |
| Receivables > 1 year | 174 | 2 526 | 6 582 | |
| Other receivables | 13 | 145 | 1 820 | 5 780 |
| Deferred tax assets | 24 | 29 | 706 | 802 |
| Current assets | 144 991 | 115 886 | 87 774 | |
| Inventories | 14 | 29 846 | 24 366 | 27 753 |
| Trade and other receivables | 45 872 | 36 077 | 23 032 | |
| Trade receivables | 27 | 26 439 | 18 674 | 12 064 |
| Other receivables | 15 | 19 433 | 17 403 | 10 968 |
|---|---|---|---|---|
| Investments | 15 582 | 10 315 | 4 985 | |
| Other investments and deposits | 20 | 15 582 | 10 315 | 4 985 |
| Cash and cash equivalents | 20 | 49 025 | 42 122 | 30 920 |
| Other current assets | 2 085 | 936 | 1 084 | |
| Assets held for sale | 21 | 2 581 | 2 070 | 0 |
| Total assets | 500 556 | 423 739 | 373 230 |
|---|---|---|---|
| In KUSD | Note | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| Total equity | 395 789 | 318 529 | 265 936 | |
| Shareholders' equity | 16 | 368 549 | 296 918 | 247 140 |
| Issued capital | 45 819 | 45 819 | 45 819 | |
| Share premium | 21 502 | 21 502 | 21 502 | |
| Reserves | 316 133 | 242 889 | 193 083 | |
| Translation differences | -14 905 | -13 292 | -13 264 | |
| Non-controlling interests | 17 | 27 240 | 21 611 | 18 796 |
| Non-current liabilities | 60 614 | 59 911 | 60 934 | |
| Provisions > 1 year | 115 | 177 | 175 | |
| Provisions | 18 | 115 | 177 | 175 |
| Deferred tax liabilities | 24 | 47 508 | 41 532 | 37 799 |
| Trade and other liabilities > 1 year | 0 | 144 | 139 | |
| Financial liabilities > 1 year (incl. derivatives) | 20 | 2 600 | 8 847 | 14 512 |
| Pension liabilities | 19 | 10 391 | 9 211 | 8 309 |
| Current liabilities | 44 153 | 45 299 | 46 360 | |
| Trade and other liabilities < 1 year | 33 177 | 31 947 | 34 964 | |
| Trade payables | 9 195 | 9 525 | 13 630 | |
| Advances received | 286 | 314 | 88 | |
| Other payables | 15 | 8 422 | 12 136 | 11 634 |
| Income taxes | 15 274 | 9 972 | 9 612 | |
| Financial liabilities < 1 year | 5 691 | 8 280 | 7 953 | |
| Current portion of amounts payable after one year | 20 | 5 200 | 5 645 | 5 765 |
| Financial liabilities | 20 | 323 | 1 837 | 1 175 |
| Derivatives | 27 | 168 | 798 | 1 013 |
| Other current liabilities | 4 817 | 4 667 | 3 443 | |
| Liabilities associated with assets held for sale | 21 | 468 | 405 | 0 |
| Total equity and liabilities | 500 556 | 423 739 | 373 230 |
| 2010 | 2009 | 2008 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In KUSD | Notes | Before IAS 41 |
IAS41 | IFRS | Before IAS 41 |
IAS41 | IFRS | Before IAS 41 |
IAS41 | IFRS |
| Revenue | 7 | 279 400 | 279 400 | 237 829 | 237 829 | 279 402 | 279 402 | |||
| Cost of sales | 7, 9 | -161 718 | 3 442 | -158 276 | -148 134 | 2 762 | -145 372 | -187 174 | 2 122 | -185 052 |
| Gross profit | 7 | 117 682 | 3 442 | 121 124 | 89 695 | 2 762 | 92 457 | 92 228 | 2 122 | 94 350 |
| Variation biological assets | 9 | 0 | 33 413 | 33 413 | 0 | 19 209 | 19 209 | 0 | 22 812 | 22 812 |
| Planting cost (net) | 9 | 0 | -14 269 | -14 269 | 0 | -13 208 | -13 208 | 0 | -17 646 | -17 646 |
| Selling, general and administrative expenses | -19 758 | -19 758 | -17 814 | -17 814 | -20 156 | -20 156 | ||||
| Other operating income/(charges) | 24 | -2 299 | -2 299 | 2 027 | 2 027 | 1 994 | 1 994 | |||
| Operating result | 95 625 | 22 586 | 118 211 | 73 908 | 8 763 | 82 671 | 74 066 | 7 288 | 81 354 | |
| Financial income | 977 | 977 | 540 | 540 | 1 851 | 1 851 | ||||
| Financial charges | -1 131 | -1 131 | -1 530 | -1 530 | -2 506 | -2 506 | ||||
| Exchange differences | 440 | 440 | 881 | 881 | 1 860 | 1 860 | ||||
| Financial result | 23 | 286 | 0 | 286 | - 109 | 0 | - 109 | 1 205 | 0 | 1 205 |
| Profit before tax | 95 911 | 22 586 | 118 497 | 73 799 | 8 763 | 82 562 | 75 271 | 7 288 | 82 559 | |
| Tax expense | 24, 9 | -23 048 | -6 041 | -29 089 | -16 133 | -2 768 | -18 901 | -25 502 | 2 843 | -22 659 |
| Profit after tax | 72 863 | 16 545 | 89 408 | 57 666 | 5 995 | 63 661 | 49 769 | 10 131 | 59 900 | |
| Share of results of associated companies |
25 | 2 587 | 0 | 2 587 | 913 | 0 | 913 | 328 | 0 | 328 |
| - Insurance | 2 587 | 2 587 | 913 | 913 | -2 230 | -2 230 | ||||
| - SIPEF-CI SA | 0 | 0 | 0 | 0 | 2 558 | 2 558 | ||||
| Result from continuing operations | 75 450 | 16 545 | 91 995 | 58 579 | 5 995 | 64 574 | 50 097 | 10 131 | 60 228 | |
| Result from discontinued operations | 0 | 0 | 0 | 0 | 0 | 0 | 3 942 | - 260 | 3 682 | |
| Profit for the period | 75 450 | 16 545 | 91 995 | 58 579 | 5 995 | 64 574 | 54 039 | 9 871 | 63 910 | |
| Attributable to: | ||||||||||
| - Non-controlling interests | 17 | 4 819 | 2 333 | 7 152 | 3 935 | 465 | 4 400 | 3 323 | 1 822 | 5 145 |
| - Equity holders of the parent | 70 631 | 14 212 | 84 843 | 54 644 | 5 530 | 60 174 | 50 716 | 8 049 | 58 765 | |
| Earnings per share | USD | |||||||||
| From continuing and discontinued operations |
||||||||||
| Basic earnings per share | 34 | 9.48 | 6.72 | 6.56 | ||||||
| Diluted earnings per share | 34 | 9.48 | 6.72 | 6.56 |
|---|---|---|---|---|
| From continuing operations | ||||
| Basic earnings per share | 34 | 9.48 | 6.72 | 6.17 |
| Diluted earnings per share | 34 | 9.48 | 6.72 | 6.17 |
| 2010 | 2009 | 2008 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| In KUSD | Before IAS 41 |
IAS41 | IFRS | Before IAS 41 |
IAS41 | IFRS | Before IAS 41 |
IAS41 | IFRS |
| Profit for the period | 75 450 | 16 545 | 91 995 | 58 579 | 5 995 | 64 574 | 54 039 | 9 871 | 63 910 |
| Other comprehensive income: | |||||||||
| - Exchange differences on translating foreign operations |
-1 173 | 0 | -1 173 | 364 | 0 | 364 | -931 | 0 | -931 |
| - Reclassification adjustments | -440 | 0 | -440 | -392 | 0 | -392 | 429 | 0 | 429 |
| - Revaluation assets available for sale |
226 | 0 | 226 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total other comprehensive income for the year, net of tax: |
-1 387 | 0 | -1 387 | - 28 | 0 | - 28 | - 502 | 0 | - 502 |
| Other comprehensive income attributable to: |
|||||||||
| - Non-controlling interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| - Equity holders of the parent | -1 387 | 0 | -1 387 | - 28 | 0 | - 28 | - 502 | 0 | - 502 |
| Total comprehensive income for the year | 74 063 | 16 545 | 90 608 | 58 551 | 5 995 | 64 546 | 53 537 | 9 871 | 63 408 |
| Total comprehensive income attributable to: |
|||||||||
| - Non-controlling interests | 4 819 | 2 333 | 7 152 | 3 935 | 465 | 4 400 | 3 323 | 1 822 | 5 145 |
| - Equity holders of the parent | 69 244 | 14 212 | 83 456 | 54 616 | 5 530 | 60 146 | 50 214 | 8 049 | 58 263 |
| In KUSD | Notes | 2010 | 2009 | 2008 |
|---|---|---|---|---|
| Operating activities | ||||
| Profit before tax | 118 497 | 82 562 | 82 559 | |
| Result from discontinued operations before tax | 0 | 0 | 5 459 | |
| Adjusted for: | ||||
| Depreciation | 7 | 9 698 | 8 178 | 8 410 |
| Movement in provisions | 18 | 998 | 889 | -1 373 |
| Impairment assets held for sale | 3 649 | 0 | 0 | |
| Changes in fair value of biological assets | 9 | -19 144 | -6 001 | -4 846 |
| Other non-cash results | - 630 | - 337 | 730 | |
| Financial income and charges | 155 | 989 | 655 | |
| Capital loss on receivables | 181 | - 175 | -1 134 | |
| Result on disposal of property, plant and equipment | 98 | 69 | -5 126 | |
| Result on disposal of financial assets | -1 350 | - 884 | - 408 | |
| Cash flow from operating activities before change in net working capital | 112 152 | 85 290 | 84 926 | |
| Change in net working capital | 26 | -16 906 | -2 464 | -1 761 |
| Cash flow from operating activities after change in net working capital | 95 246 | 82 826 | 83 165 | |
| Income taxes paid | 24, 9 | -17 542 | -18 426 | -20 872 |
| Cash flow from operating activities | 77 704 | 64 400 | 62 293 | |
| Investing activities | ||||
| Acquisition intangible assets | 7 | -4 344 | -2 705 | -3 297 |
| Acquisition biological assets | 7 | -14 541 | -13 615 | -17 934 |
| Acquisition property, plant & equipment | 7 | -18 957 | -14 527 | -14 903 |
| Acquisition financial assets | 31 | -8 335 | 0 | - 544 |
| Proceeds from sale of property, plant & equipment | 848 | 797 | 7 984 | |
| Proceeds from sale of financial assets | 31 | 1 547 | 243 | 2 210 |
| Cash flow from investing activities | -43 782 | -29 807 | -26 484 | |
| Free cash flow | 33 922 | 34 593 | 35 809 | |
| Financing activities | ||||
| Equity transactions with non-controlling parties | 17 | 68 | 0 | 163 |
| Increase/(decrease) in long-term financial borrowings | 20 | -6 692 | -5 784 | -7 824 |
| Increase/(decrease) short-term financial borrowings | 20 | -1 514 | 698 | -14 677 |
| Last year's dividend paid during this bookyear | -11 670 | -10 367 | -10 542 | |
| Dividends paid by subsidiaries to minorities | 17 | -1 582 | -1 463 | -1 644 |
| Financial income and charges | - 354 | -1 146 | - 730 | |
| Cash flow from financing activities | -21 744 | -18 062 | -35 254 | |
| Net increase in investments, cash and cash equivalents | 20 | 12 178 | 16 531 | 555 |
| Investments and cash and cash equivalents (opening balance) | 20 | 52 437 | 35 903 | 35 353 |
| Effect of exchange rate fluctuations on cash and cash equivalents | 20 | - 8 | 3 | - 5 |
| Investments and cash and cash equivalents (closing balance) | 20 | 64 607 | 52 437 | 35 903 |
| In KUSD | Issued capital SA SIPEF NV |
Share premium SA SIPEF NV |
Reserves | Translation differences |
Share holders' equity |
Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|
| January 1, 2010 | 45 819 | 21 502 | 242 889 | -13 292 | 296 918 | 21 611 | 318 529 |
| Total comprehensive income | 85 069 | -1 613 | 83 456 | 7 152 | 90 608 | ||
| Last year's dividend paid | -11 825 | -11 825 | -11 825 | ||||
| Other (note 17) | 0 | -1 523 | -1 523 | ||||
| December 31, 2010 | 45 819 | 21 502 | 316 133 | -14 905 | 368 549 | 27 240 | 395 789 |
| January 1, 2009 | 45 819 | 21 502 | 193 083 | -13 264 | 247 140 | 18 796 | 265 936 |
| Total comprehensive income | 60 174 | - 28 | 60 146 | 4 400 | 64 546 | ||
| Last year's dividend paid | -10 368 | -10 368 | -10 368 | ||||
| Other (note 17) | 0 | -1 585 | -1 585 | ||||
| December 31, 2009 | 45 819 | 21 502 | 242 889 | -13 292 | 296 918 | 21 611 | 318 529 |
SA SIPEF NV (the 'company') is a limited liability company ('naamloze vennootschap' / 'société anonyme') incorporated in Belgium and registered at 2000 Antwerpen, Entrepotkaai 5.
The consolidated financial statements for the year ended 31 December 2010 comprise SA SIPEF NV and its subsidiaries (together referred to as 'SIPEF' or 'the group'). Comparative figures are for the financial years 2009 and 2008.
The consolidated financial statements were authorized for issue by the directors at the board meeting of 23 February 2011 and shall be approved by the shareholders at the annual general meeting of 8 June 2011. A list of the Directors and the statutory auditor ('commissaris' / 'commissaire'), as well as a description of the principal activities of the group, are included in the non-financial section of this annual report.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) which have been adopted by the European Union.
There are no standards or interpretations issued by the IASB in 2009 which have a significant impact on SIPEF's financial statements.
The group did not elect for early application of the following new standards and interpretations which were issued at the date of approval of these financial statements but were not yet effective on the balance sheet date:
• IFRS 9 Financial Instruments (applicable for annual periods beginning on or after 1 January 2013)
At this stage the group does not expect first adoption of these standards and interpretations to have any material impact.
Starting in 2007 the consolidated financial statements are presented in US dollar (until 2006 this was done in euro), rounded off to the nearest thousand (KUSD). This modification is the result of the changed policy with regard to the liquidity and debt management since the end of 2006, whereby the functional currency of the majority of the subsidiaries has been changed from the local currency to the US dollar.
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: investments classified as available-for-sale, financial derivative instruments and biological assets.
The accounting policies have been consistently applied throughout the group and are consistent with those used in the previous year.
Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of acquisition. Any costs directly attributable to the acquisition are recognized in profit or loss. The purchase consideration to acquire a business, including contingent payments, is recorded at fair value at the acquisition date, while subsequent adjustments to the contingent payments resulting from events after the acquisition date are recognized in profit or loss. The 'full goodwill' option, which can be elected on a case by case basis, allows SIPEF to measure the non-controlling interest either at fair value or at its proportionate share of the acquiree's net assets. All acquisition-related costs, such as consulting fees, are expensed.
Changes in the group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the group's interest and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the company.
Where a business combination is achieved in stages, the group's previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the group attains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.
Subsidiaries are those enterprises controlled by the company. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases (or a date nearby).
Associates are those enterprises in which the group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the group's share of the total recognized gains and losses of associates on an equity accounting basis, from the date that significant influence effectively commences until the date that significant influence effectively ceases (or a date nearby). When the group's share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the group has incurred obligations in respect of the associate.
Joint ventures are those enterprises over whose activities the group has joint control, established by contractual agreement. The consolidated financial statements include the group's proportionate share of the enterprise's assets, liabilities, revenue and expenses, from the date that joint control commences (or a date nearby) until the date that joint control ceases. When the ownership interest in a joint venture is increased without losing joint control, the company recognizes a goodwill as the difference between the consideration paid for the additional interest and the book value of the net assets of the joint venture.
All intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with associates are eliminated to the extent of the group's interest in the enterprise against the investment in the associate. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.
In the individual group companies, transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation are recognized in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Functional currency: items included in financial statements of each entity in the group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (the functional currency). Starting from 2007 the consolidated financial statements are presented in USD, this is the functional currency of the majority of the group companies.
To consolidate the group and each of its subsidiaries, the financial statements of the individual entities are translated as follows:
Exchange differences arising from the translation of the net investment in foreign subsidiaries, joint ventures and associated entities at the year-end exchange rate are recorded as part of the shareholders' equity under "translation differences". When a foreign entity is sold, such exchange differences are recognized in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as local currency assets and liabilities of the foreign entity and are translated at the closing rate.
According to IFRS, biological activities are measured at fair value (IAS41).
As from 2006 SIPEF records its biological assets at the value according to internal valuation models (formerly on the basis of external models). These models are mainly based on the discounted cash flow method (DCF).
| Variable | Comment | |||||
|---|---|---|---|---|---|---|
| Currency valuation: | USD | |||||
| Production volumes: |
Estimate based on historical data regarding the yield/ha of the concerning or comparable areas. |
|||||
| Selling price: | Estimate based on the past 20-year average world market price. |
|||||
| Palm oil: 529 USD/tonne CIF Rotterdam Rubber: 1 380 USD/tonne FOB Singapore |
||||||
| Cost price: | Estimate based on actual cost prices ('adjusted current year cost price'). |
|||||
| Planting costs: | Estimated costs for the further development of immature areas are deducted. |
|||||
| Replacement investments: |
Estimated costs for required replacement invest ments (vehicles, houses, infrastructure) are also deducted. |
|||||
| Disount rate: | Future cash flows are, depending on the location of the underlying assets, discounted at following discount rates: |
|||||
| Oil palm: 16% Rubber: 16%-17% Tea: 17% |
The main variables in these models concern:
SIPEF only recognizes a biological asset or agricultural produce when it controls the asset as a result of past events, when it is probable that future economic benefits associated with the asset will flow to SIPEF and when the fair value or cost of the asset can be measured reliably.
A gain or loss arising on initial recognition of a biological asset at fair value less estimated point of sale costs and from the change in fair value less estimated point of sale costs of a biological asset is included in net profit or loss in the period in which it arises.
Goodwill represents the excess of the cost of the business combination over the group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired in a business combination. Goodwill is not amortized but reviewed for impairment at least annually. For the purpose of testing goodwill for impairment, goodwill is allocated to operating companies which is the lowest level at which the goodwill is monitored for internal management purposes (i.e. cashflow generating unit). Any impairment is immediately recognized in the income statement and is not subsequently reversed.
Negative goodwill represents the excess of the group's interest in the fair value of the net identifiable assets acquired over the cost of acquisition. Negative goodwill is immediately recognized in the income statement.
Intangible assets include customer lists that have been acquired by means of business combinations together with computer software, various licenses and concessions. Intangible assets are capitalized and amortized using the straight-line method over their useful life.
Property, plant and equipment , including investment property, are stated at cost less accumulated depreciation and any accumulated impairment losses. Borrowing costs attributable to the construction or production of qualifying assets are capitalized. Expenses for the repair of property, plant and equipment are usually charged against income when incurred.
Property held for sale, if any, is stated at the lower of amortized cost and fair value less selling charges. Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets:
| Buildings | 5 to 30 years |
|---|---|
| Infrastructure | 5 to 25 years |
| Installations and machinery | 5 to 30 years |
| Vehicles | 3 to 20 years |
| Office equipment and furniture | 5 to 10 years |
| Other property, plant and equipment | 2 to 20 years |
Land is not depreciated.
Property, plant and equipment, financial assets and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may be higher than the recoverable amount. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset's net selling price and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. If impairment is no longer justified in future periods due to a recovery in assets' fair value or value in use, the impairment reserve is reversed.
The group uses financial derivative instruments primarily to manage its exposure to interest rate and foreign currency risks arising from operational, financing and investment activities. No derivatives for trading purposes are held nor issued. The group does not apply special hedge accounting under IAS 39 – "Financial Instruments: Recognition and Measurement". Derivatives are stated at fair value. Any gains or losses arising from changes in fair value are charged directly to net profit or loss for the period.
Amounts receivable and payable are measured at their nominal value, less a provision for any doubtful amounts receivable. Amounts receivable and payable in a currency other than the currency of the subsidiary are translated at the prevailing group exchange rates on the balance sheet date.
Cash and cash equivalents are measured at their nominal value and include cash and deposits with an original maturity of three months or less. Negative cash balances are recorded as liabilities.
Borrowings are initially recognized as proceeds received, net of transaction costs. Any difference between cost and redemption value is recognized in the income statement using the effective interest method.
Financial assets available for sale are measured at fair value. Fair value gains and losses are recognized in other comprehensive income. If the fair value of a financial asset cannot be measured reliably, the financial asset will be measured at amortized cost.
When a decrease in fair value of a financial asset available for sale is recognized in other comprehensive income and an objective evidence of impairment exists, the cumulated losses previously recognized in equity will be taken into profit or loss.
Inventories are valued at the lower of cost or net realizable value.
The stock finished products including biological assets are valued by adding production cost to the fair value of the biological asset concerned.
Inventories are written down on a case-by-case basis if the estimated net realizable value declines below the carrying amount of the inventories. Net realizable value is the estimated selling price less the estimated costs necessary to make the sale. When the reason for a write-down of the inventories has ceased to exist, the write-down is reversed.
Dividends of the parent company payable on ordinary shares are only recognized as a liability in the period in which they are declared.
Costs incurred with respect to the issuance of equity instruments are recorded as a deduction in equity.
Non-controlling interests include a proportion of the fair value of identifiable assets and liabilities recognized upon acquisition of a subsidiary, together with the appropriate proportion of subsequent profits and losses. In the income statement the minority share in the company's profit or loss is separated from the consolidated result of the group.
Provisions are recognized when the group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can be made.
Group companies have various pension schemes in accordance with the local conditions and practices in the countries they operate in. The defined benefit plans are generally un-funded but fully provisioned for using the 'projected unit credit'- method. This provision represents the present value of the defined benefit obligation. The actuarial gains and losses are fully and immediately charged to the pension costs of that year. The group pays contributions to publicly or privately administered insurance plans. The payments are recognized as expenses as they fall due, and as such are included in operating charges.
Revenue is measured at the fair value of the amount received for the sale of goods and services net of valueadded tax, rebates and discounts, and after eliminating sales within the group. Revenue from the sale of goods is recognized when significant risks and rewards of ownership of the goods are transferred to the buyer. Revenue from rendering services is based on the stage of completion determined by reference to services performed to date as a percentage of total services to be performed. Interest income is recognized using the effective interest rate method. Dividends are recognized when the right to receive payment is established.
Cost of sales includes all costs associated with harvest, transformation and transport. Purchases are recognized net of cash discounts and other supplier discounts and allowances.
Selling, general and administrative expenses include expenses of the marketing and financial department and general management expenses.
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax liabilities and assets are recognized for temporary differences between the carrying amount in the balance sheet and the tax bases of assets and liabilities and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. Deferred tax assets are included in the consolidated accounts only to the extent that their realization is probable in the foreseeable future.
The preparation of SIPEF's consolidated financial statements in conformity with IFRS requires the group to use estimates and make assumptions that may affect the reported amounts of assets and liabilities at the date of the balance sheets and reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.
The main areas in which estimates are used are:
The ultimate parent of the group, SA SIPEF NV, Antwerpen/Belgium, is the parent company of the following significant subsidiaries:
| Location | % of control | % of interest | |
|---|---|---|---|
| Consolidated companies (full consolidation) | |||
| PT Tolan Tiga | Medan / Indonesia | 95.00 | 95.00 |
| PT Eastern Sumatra | Medan / Indonesia | 95.00 | 90.25 |
| PT Kerasaan | Medan / Indonesia | 57.00 | 57.00 |
| PT Bandar Sumatra | Medan / Indonesia | 95.00 | 95.00 |
| PT Timbang Deli | Medan / Indonesia | 95.00 | 95.00 |
| PT Melania | Jakarta / Indonesia | 95.00 | 73.53 |
| PT MukoMuko Agro Sejahtera | Medan / Indonesia | 95.00 | 90.25 |
| PT Umbul Mas Wisesa | Medan / Indonesia | 95.00 | 73.53 |
| PT Citra Sawit Mandiri | Medan / Indonesia | 95.00 | 73.53 |
| PT Toton Usaha Mandiri | Medan / Indonesia | 100.00 | 77.40 |
| Hargy Oil Palms Ltd | Bialla / Papua N.G. | 100.00 | 100.00 |
| Galley Reach Holdings Ltd | Port Moresby / Papua N.G. | 100.00 | 100.00 |
| Plantations J. Eglin SA | Azaguié / Ivory Coast | 100.00 | 100.00 |
| Société Bananière de Motobé SA | Azaguié / Ivory Coast | 100.00 | 100.00 |
| Bonal SA | Rio Branco / Brazil | sold in 2010 | |
| Senor Ltd | Açailandia / Brazil | sold in 2010 | |
| Jabelmalux SA | Luxembourg / G.D. of Luxemburg | 77.40 | 77.40 |
| Joint ventures (proportionate consolidation) | |||
| PT Agro Muko | Jakarta / Indonesia | 47.29 | 44.93 |
| Associates (equity method) | |||
| B.D.M. NV | Antwerpen / Belgium | 50.00 | 50.00 |
| Bruns ten Brink BV | Wormer / The Netherlands | sold in 2010 | |
| Asco NV | Antwerpen / Belgium | 50.00 | 50.00 |
| Asco Life NV | Antwerpen / Belgium | sold in 2010 | |
| Companies not included | |||
| SIPEF-CI SA | San Pedro / Ivory Coast | 32.01 | 32.01 |
| Horikiki Development Cy Ltd | Honiara /Solomon Islands | 90.80 | 90.80 |
| Sograkin SA | Kinshasa /Congo | 50.00 | 50.00 |
| Yayasan Sipef Indonesia | Medan / Indonesia | 100.00 | 0.00 |
In 2010, the group acquired, through its 95% subsidiary PT Tolan Tiga, an additional 6.82% in the shareholding of PT Agro Muko (note 30). The scope was expanded with the newly established 95% subsidiary PT MukoMuko Agri Sejahtera that shall encompass possible new investments in the Bengkulu Province.
During the first 6 months of 2010 the Brazilian companies Bonal SA and Senor Ltd were sold (note 30).
The insurance subsidiaries Asco Life NV and Bruns ten Brink BV have been sold through our associated insurance companies Asco NV and B.D.M. NV (note 25).
As the shareholding and the management of SIPEF-CI SA changed in June 2008, and trustworthy financial information could no longer be received, it was decided that equity method accounting was not appropriate from the second half of 2008 onwards.
Inspite of the possession of the majority of voting rights, the group has no control over the non consolidated companies because they are established in inaccessible regions (Horikiki Development Cy Ltd and Sograkin SA). The non consolidated companies are seen as financial assets available for sale.
As a result of a revised liquidity- and debt management as from the end of 2006 the functional currency in the majority of the subsidiaries has been changed to US dollar as from January 1, 2007 . Following subsidaries have however another functional currency:
| Plantations J. Eglin SA | EUR |
|---|---|
| Société Bananière de Motobé SA | EUR |
| B.D.M. NV | EUR |
| Asco NV | EUR |
The exchange rates below have been used to convert the balance sheets and the results of these entities into US dollar (this is the currency in which the group presents its results).
| Closing rate | Average rate | |||||
|---|---|---|---|---|---|---|
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |
| EUR | 0.7468 | 0.6942 | 0.7185 | 0.7567 | 0.7181 | 0.6780 |
Segment reporting is based on two segment reporting formats. The primary reporting format represents business segments – palm products, rubber, tea, bananas and plants and insurance – which represent the management structure of the group. The secondary reporting format represents the geographical locations where the group is active. Gross profit per geographical market shows revenue minus cost of sales based on the location where the enterprise's products are produced. Segment result is revenue minus expense that is directly attributable to the segment and the relevant portion of income and expense that can be allocated on a reasonable basis to the segment.
The result of the companies consolidated using the equity method is immediately detailed (insurance/Europe and palm products/Ivory Coast) in the income statement.
| Revenue | Cost of sales | Gross profit before IAS41 |
IAS41 | Gross profit IFRS |
% of total | |
|---|---|---|---|---|---|---|
| 2010 - In KUSD | ||||||
| Palm | 207 358 | -117 573 | 89 785 | 2 964 | 92 749 | 76.57 |
| Rubber | 36 411 | -16 919 | 19 492 | 382 | 19 874 | 16.41 |
| Tea | 9 472 | -5 887 | 3 585 | 31 | 3 616 | 2.99 |
| Bananas and plants | 24 084 | -21 171 | 2 913 | 65 | 2 978 | 2.46 |
| Corporate | 1 874 | 0 | 1 874 | 0 | 1 874 | 1.55 |
| Others | 201 | - 168 | 33 | 0 | 33 | 0.03 |
| Total | 279 400 | -161 718 | 117 682 | 3 442 | 121 124 | 100.00 |
| 2009 - In KUSD | ||||||
| Palm | 175 966 | -102 376 | 73 590 | 2 207 | 75 797 | 81.98 |
| Rubber | 20 856 | -13 520 | 7 336 | 389 | 7 725 | 8.36 |
| Tea | 10 434 | -6 835 | 3 599 | 25 | 3 624 | 3.92 |
| Bananas and plants | 27 411 | -24 125 | 3 286 | 58 | 3 344 | 3.62 |
| Corporate | 2 006 | 0 | 2 006 | 0 | 2 006 | 2.17 |
| Others | 1 156 | -1 278 | - 122 | 83 | - 39 | -0.04 |
| Total | 237 829 | -148 134 | 89 695 | 2 762 | 92 457 | 100.00 |
The segment "corporate" comprises the management fees received from non group entities. Under IFRS (IAS41) depreciation on biological assets is not allowed.
| Other | Gross profit | Gross profit | |||||
|---|---|---|---|---|---|---|---|
| Revenue | Cost of sales | income | before IAS41 | IAS41 | IFRS | % of total | |
| 2010 - In KUSD | |||||||
| Indonesia | 149 428 | -71 396 | 427 | 78 459 | 1 419 | 79 878 | 65.95 |
| Papua New Guinea | 103 813 | -68 983 | 0 | 34 830 | 1 958 | 36 788 | 30.37 |
| Ivory Coast | 24 084 | -21 171 | 0 | 2 913 | 65 | 2 978 | 2.46 |
| Europe | 0 | 0 | 1 447 | 1 447 | 0 | 1 447 | 1.19 |
| Others | 201 | - 168 | 0 | 33 | 0 | 33 | 0.03 |
| Total | 277 526 | -161 718 | 1 874 | 117 682 | 3 442 | 121 124 | 100.00 |
| 2009 - In KUSD | |||||||
| Indonesia | 114 204 | -59 479 | 867 | 55 592 | 925 | 56 517 | 61.13 |
| Papua New Guinea | 91 555 | -62 006 | 0 | 29 549 | 1 638 | 31 187 | 33.73 |
| Ivory Coast | 27 391 | -24 119 | 0 | 3 272 | 58 | 3 330 | 3.60 |
| Europe | 0 | - 4 | 1 289 | 1 285 | 0 | 1 285 | 1.39 |
| Others | 2 523 | -2 526 | 0 | - 3 | 141 | 138 | 0.15 |
| Total | 235 673 | -148 134 | 2 156 | 89 695 | 2 762 | 92 457 | 100.00 |
| In KUSD | 2010 | 2009 |
|---|---|---|
| Singapore | 90 624 | 69 255 |
| Indonesia | 51 297 | 35 851 |
| The Netherlands | 39 627 | 29 718 |
| United Kingdom | 37 801 | 30 881 |
| Germany | 14 714 | 20 802 |
| Switserland | 14 706 | 12 783 |
| France | 9 311 | 10 325 |
| Belgium | 8 500 | 9 136 |
| Pakistan | 5 425 | 6 309 |
| United States | 3 443 | 4 199 |
| Ivory Coast | 2 491 | 2 010 |
| Spain | 776 | 780 |
| Others | 685 | 5 780 |
| Total | 279 400 | 237 829 |
Fair value of biological assets per product and the variation per product is detailed further in the note concerning biological assets. Assets and liabilities of a segment are the assets and liabilities that are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Segment liabilities that can be attributed are immaterial and therefore these liabilities are not attributed (liabilities mainly concern the parent company). The section "unallocated" mainly contains the cash deposits and the cash held by SA SIPEF NV of 44 685 KUSD.
| 2010 | |||||||
|---|---|---|---|---|---|---|---|
| In KUSD | Palm | Rubber | Tea | Bananas & Plants |
Insurance | Un allocated |
Total |
| Goodwill and other intangible assets | 20 251 | 20 251 | |||||
| Biological assets | 215 815 | 17 109 | 2 920 | 1 850 | 237 694 | ||
| Property, plant & equipment | 71 611 | 4 625 | 2 934 | 4 151 | 494 | 83 815 | |
| Investment property | 3 | 3 | |||||
| Investments in associates | 9 589 | 9 589 | |||||
| Other receivables | 145 | 145 | |||||
| Inventories | 13 629 | 3 185 | 992 | 617 | 11 423 | 29 846 | |
| Trade receivables | 22 080 | 1 827 | 397 | 1 942 | 193 | 26 439 | |
| Other current assets | 2 085 | 2 085 | |||||
| Unallocated | 90 689 | 90 689 | |||||
| Total assets | 323 280 | 26 746 | 7 243 | 8 560 | 9 589 | 125 138 | 500 556 |
| % of total assets | 64.58% | 5.34% | 1.45% | 1.71% | 1.92% | 25.00% | 100.00% |
| Total liabilities | 500 556 | ||||||
| Segment capital expenditures: | |||||||
| Goodwill and other intangible assets | 4 344 | 4 344 | |||||
| Biological assets | 12 522 | 1 811 | 71 | 137 | 0 | 14 541 | |
| Property, plant & equipment | 16 231 | 881 | 345 | 1 403 | 97 | 18 957 | |
| Total investments | 28 753 | 2 692 | 416 | 1 540 | 0 | 4 441 | 37 842 |
| Segment depreciation: | |||||||
| Goodwill and other intangible assets | 273 | 273 | |||||
| Property, plant & equipment | 7 411 | 628 | 460 | 615 | 162 | 9 276 | |
| Inventories | 149 | 149 | |||||
| Total depreciation | 7 411 | 628 | 460 | 615 | 0 | 584 | 9 698 |
| 2009 | |||||||
|---|---|---|---|---|---|---|---|
| In KUSD | Palm | Rubber | Tea | Bananas & Plants |
Insurance | Un allocated |
Total |
| Goodwill and other intangible assets | 15 018 | 15 018 | |||||
| Biological assets | 187 670 | 11 811 | 1 741 | 1 912 | 203 134 | ||
| Property, plant & equipment | 63 366 | 4 373 | 3 049 | 3 633 | 560 | 74 981 | |
| Investment property | 3 | 3 | |||||
| Investments in associates | 7 881 | 7 881 | |||||
| Other receivables | 146 | 1 674 | 1 820 | ||||
| Inventories | 10 095 | 1 693 | 1 046 | 736 | 10 796 | 24 366 | |
| Trade receivables | 13 625 | 941 | 789 | 2 733 | 586 | 18 674 | |
| Other current assets | 936 | 936 | |||||
| Unallocated | 76 926 | 76 926 | |||||
| Total assets | 274 902 | 18 818 | 8 299 | 9 014 | 7 881 | 104 825 | 423 739 |
| % of total assets | 64.88% | 4.44% | 1.96% | 2.13% | 1.86% | 24.73% | 100.00% |
| Total liabilities | 423 739 | ||||||
| Segment capital expenditures: | |||||||
| Goodwill and other intangible assets | 2 705 | 2 705 | |||||
| Biological assets | 12 154 | 1 231 | 68 | 162 | 13 615 | ||
| Property, plant & equipment | 13 191 | 328 | 145 | 685 | 178 | 14 527 | |
| Total investments | 25 345 | 1 559 | 213 | 847 | 0 | 2 883 | 30 847 |
| Segmentafschrijvingen op: | |||||||
| Goodwill and other intangible assets | 232 | 232 | |||||
| Property, plant & equipment | 5 963 | 585 | 416 | 768 | 214 | 7 946 | |
| Inventories | 0 | ||||||
| Total depreciation | 5 963 | 585 | 416 | 768 | 0 | 446 | 8 178 |
| 2010 | |||||||
|---|---|---|---|---|---|---|---|
| In KUSD | Indonesia | PNG | Ivory Coast | Europe | Others | Total | |
| Goodwill and other intangible assets | 19 695 | 4 | 552 | 20 251 | |||
| Biological assets | 180 140 | 55 703 | 1 851 | 237 694 | |||
| Property, plant & equipment | 31 862 | 47 592 | 4 152 | 209 | 83 815 | ||
| Investment property | 3 | 3 | |||||
| Investments in associates | 9 589 | 9 589 | |||||
| Other assets | 46 042 | 23 697 | 1 981 | 77 484 | 149 204 | ||
| Total assets | 277 739 | 126 992 | 7 988 | 87 837 | 0 | 500 556 | |
| % of total assets | 55.48% | 25.37% | 1.60% | 17.55% | 0.00% | 100.00% | |
| Segment capital expenditures: | |||||||
| Goodwill and other intangible assets | 4 205 | 4 | 135 | 4 344 | |||
| Biological assets | 8 629 | 5 775 | 137 | 14 541 | |||
| Property, plant & equipment | 6 992 | 10 513 | 1 403 | 49 | 18 957 | ||
| Total investments | 19 826 | 16 288 | 1 544 | 184 | 0 | 37 842 | |
| Segment depreciation: | |||||||
| Goodwill and other intangible assets | 32 | 1 | 240 | 273 | |||
| Property, plant & equipment | 3 698 | 4 912 | 615 | 51 | 9 276 | ||
| Inventories | 149 | 149 | |||||
| Total depreciation | 3 730 | 5 061 | 616 | 291 | 0 | 9 698 |
| 2009 | ||||||
|---|---|---|---|---|---|---|
| In KUSD | Indonesia | PNG | Ivory Coast | Europe | Others | Total |
| Goodwill and other intangible assets | 14 360 | 1 | 657 | 15 018 | ||
| Biological assets | 152 392 | 48 829 | 1 913 | 203 134 | ||
| Property, plant & equipment | 28 919 | 42 214 | 3 633 | 215 | 74 981 | |
| Investment property | 3 | 3 | ||||
| Investments in associates | 7 881 | 7 881 | ||||
| Other assets | 33 102 | 17 831 | 2 461 | 67 247 | 2 081 | 122 722 |
| Total assets | 228 773 | 108 874 | 8 008 | 76 003 | 2 081 | 423 739 |
| % of total assets | 53.99% | 25.69% | 1.89% | 17.94% | 0.49% | 100.00% |
| Segment capital expenditures: | ||||||
| Goodwill and other intangible assets | 2 529 | 176 | 2 705 | |||
| Biological assets | 8 097 | 5 355 | 163 | 13 615 | ||
| Property, plant & equipment | 5 041 | 8 706 | 685 | 67 | 28 | 14 527 |
| Total investments | 15 667 | 14 061 | 848 | 243 | 28 | 30 847 |
| Segment depreciation: | ||||||
| Goodwill and other intangible assets | 26 | 2 | 204 | 232 | ||
| Property, plant & equipment | 2 712 | 4 335 | 764 | 54 | 81 | 7 946 |
| Inventories | 0 | |||||
| Total depreciation | 2 738 | 4 335 | 766 | 258 | 81 | 8 178 |
| 2009 | ||||
|---|---|---|---|---|
| In KUSD | Goodwill | Other | Total | Total |
| Gross carrying amount at January 1 | 1 348 | 14 535 | 15 883 | 13 241 |
| Change in consolidation scope | 3 171 | 85 | 3 256 | - 62 |
| Acquisitions | 4 344 | 4 344 | 2 705 | |
| Sales and disposals | - 1 | - 1 | - 3 | |
| Other | -2 047 | -2 047 | 0 | |
| Translation differences | - 3 | - 3 | 2 | |
| Gross carrying amount at December 31 | 4 519 | 16 913 | 21 432 | 15 883 |
| Accumulated amortization and impairment losses at Januari 1 | 0 | - 865 | - 865 | - 632 |
| Change in consolidation scope | - 47 | - 47 | 0 | |
| Depreciations | - 273 | - 273 | - 232 | |
| Sales and disposals | 1 | 1 | 0 | |
| Translation differences | 3 | 3 | - 1 | |
| Accumulated amortization and impairment losses at December 31 | 0 | -1 181 | -1 181 | - 865 |
| Net carrying amount January 1 | 1 348 | 13 670 | 15 018 | 12 609 |
| Net carrying amount December 31 | 4 519 | 15 732 | 20 251 | 15 018 |
The acquisitions refer mainly to the additionnal payments made for obtaining the landtitles of PT Umbul Mas Wisesa, PT Citra Sawit Mandiri and PT Toton Usaha Mandiri.
The changes in consolidation scope are detailed in note 30.
The variation "other" encompasses the transfers of the concessions of PT Citra Sawit Mandiri to the post "Assets held for sale" (note 21).
In accordance with the accounting policies the goodwill was reviewed for impairment. This had no impact in 2010. The assumptions that were used for these tests are in accordance with the assumptions for the IAS41 valuation. A significant rise/decrease (10% of the selling price and 1% of the discount rate) of these assumptions do not lead to a loss in value.
The valuations, as presented in the internal valuation models based on net present values, take into account the long term exploitation of the plantations. The board of directors retains their view that commodity markets are inherently cyclical and that long term price projections are highly unpredictable. The board of directors is of the opinion that the sensitivity analysis regarding selling price and discount rate variations as included in this note allows every investor to reasonably challenge the financial impact of the assumptions used in the IAS41 valuations as included in the consolidated accounts against his own assumptions.
It does, nevertheless, concern the directors that no estimate of fair value can ever be completely accurate (particularly in a business in which selling prices and costs are subject to very material fluctuations). Moreover, in the case of the group's biological assets, small differences in valuation assumptions can have a quite disproportionate effect on results. Another concern is that, as shown from an international benchmark, there is currently no uniform approach within the plantation sector when it comes to defining the major variables, such as selling price and/or discount rates, in the DCF models resulting in the IAS41 values.
Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the volatility of the prices of the agricultural produce and the absence of a liquid market, their carrying value may differ from their realisable value. The biological assets of SIPEF are mainly on land for which a long term concession has been obtained. When measuring the fair value of the biological assets we assume that these concessions can and will be renewed at normal cost. Future production included in the calculation of the fair value takes into account the age of the asset and not the expiration date of the concessions.
| Hectares | Type | Maturity | Crop | |
|---|---|---|---|---|
| PT Tolan Tiga | 8 479 | Concession | 2023 | Oil palm |
| PT Eastern Sumatra | 3 178 | Concession | 2023 | Oil palm |
| PT Kerasaan | 2 362 | Concession | 2023 | Oil palm |
| PT Bandar Sumatra | 1 412 | Concession | 2023 | Rubber and oil palm |
| PT Timbang Deli | 991 | Concession | 2023 | Rubber and oil palm |
| PT Melania | 5 140 | Concession | 2023 | Rubber, tea and oil palm |
| PT Umbul Mas Wisesa | 8 726 | In negotiation | - | Oil palm |
| PT Citra Sawit Mandiri | 3 604 | In negotiation | - | Oil palm |
| PT Toton Usaha Mandiri | 1 200 | In negotiation | - | Oil palm |
| PT Agro Muko | 10 000 | Concession | 2019 | Rubber and oil palm |
| PT Agro Muko | 2 500 | Concession | 2020 | Rubber and oil palm |
| PT Agro Muko | 315 | Concession | 2011 | Rubber and oil palm |
| PT Agro Muko | 4 313 | Concession | 2028 | Rubber and oil palm |
| PT Agro Muko | 5 786 | Concession | 2022 | Rubber and oil palm |
| Hargy Oil Palms Ltd | 9 952 | Concession | 2072 | Oil palm |
| Hargy Oil Palms Ltd | 2 900 | Concession | 2101 | Oil palm |
| Galley Reach Holdings Ltd | 16 429 | Concession | 2080 | Rubber |
Below is a table with the proprietary rights on which the plantations of SIPEF are established:
| Hectares | Type | Maturity | Crop | |
|---|---|---|---|---|
| Plantations J. Eglin SA | 1 139 | Freehold | na | Bananas and pineapple flowers |
| Plantations J. Eglin SA | 322 | Provisional concession | na | Bananas and pineapple flowers |
| Société Bananière de Motobé SA | 301 | Freehold | na | Bananas |
| 89 049 |
The balance sheet movements in biological assets can be summarized as follows:
| In KUSD | Oil palm | Rubber | Tea | Others | Total |
|---|---|---|---|---|---|
| December 31, 2009 | 187 670 | 11 811 | 1 741 | 1 912 | 203 134 |
| Variation biological assets | 26 925 | 5 237 | 1 179 | 72 | 33 413 |
| Variation consolidation scope | 3 407 | 61 | 3 468 | ||
| Reclassification | - 2 187 | - 2 187 | |||
| 215 815 | 17 109 | 2 920 | 1 984 | 237 828 | |
| Translation differences | - 134 | - 134 | |||
| December 31, 2010 | 215 815 | 17 109 | 2 920 | 1 850 | 237 694 |
The positive variation in fair value of the oil palm is mainly related to the expansion and the young plantings that provide for value creation (mainly oil palm at Umbul Mas Wisesa-group and PT Tolan Tiga).
The reclassification concerns the biological assets of PT Citra Sawit Mandiri that have been transferred to assets held for sale. The variation in consolidation scope are related to the additional acquisition of PT Agro Muko (note 30).
Values as appearing in the balance sheet are very sensitive to price changes with regard to the average sales prices applied. Simulations made for oil palm, rubber and tea show that a rise or decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:
| In KUSD | + 10% | Balance 2010 | - 10% |
|---|---|---|---|
| Oil palm | 277 601 | 215 815 | 154 026 |
| Rubber | 23 280 | 17 109 | 11 041 |
| Tea | 6 779 | 2 920 | - 944 |
| Total | 307 660 | 235 844 | 164 123 |
| Others | 1 850 | ||
| 237 694 |
The sales price for palm oil, in the models approved by the board of directors, is the average world market price of palm oil of the last 20 years (529 USD/tonne CIF Rotterdam). The average price of palmoil for the last 10 years was 580 USD/ tonne. The average price for palmoil for 2010 was 901 USD/tonne.
According to the Board of Directors, current sales prices are not relevant for establishing the expected future margins and are therefore not used in the IAS41 valuation models.
Values as appearing in the balance sheet are very sensitive to price changes with regard to the discount rate applied. Simulations made for oil palm, rubber and tea show that a rise or decrease by 1% of the estimated future selling price has the following effect on the net present value of biological assets:
| In KUSD | + 1% | Balance 2010 | - 1% |
|---|---|---|---|
| Oil palm | 204 652 | 215 815 | 228 023 |
| Rubber | 16 431 | 17 109 | 17 833 |
| Tea | 2 752 | 2 920 | 3 103 |
| Total | 223 835 | 235 844 | 248 959 |
| Others | 1 850 | ||
| 237 694 |
According to IFRS, biological assets are measured at fair value instead of at 'depreciated cost' (IAS41). This means that the amounts paid for the replanting of existing areas or for the planting of new land are immediately charged in the income statement in the year they arise, even if these investments have an economic lifetime of at least 20 years. In addition these biological assets are not depreciated but are adjusted to fair value. Management is of the opinion that capitalising these investments and the depreciation over the economic useful life (as was the previous treatment) presents the recurring result of the group in a better manner. Therefore the IAS41 impact is presented in a separate column on the face of the income statement.
| In KUSD | Oil palm | Rubber | Tea | Others | Total 2010 | Total 2009 |
|---|---|---|---|---|---|---|
| Depreciation | 2 964 | 382 | 31 | 65 | 3 442 | 2 762 |
| Variation biological assets | 26 925 | 5 237 | 1 179 | 72 | 33 413 | 19 209 |
| Planting cost | -12 522 | -1 811 | - 71 | - 137 | -14 541 | -13 615 |
| Disposals | 176 | 96 | 0 | 0 | 272 | 407 |
| Operating result | 17 543 | 3 904 | 1 139 | 0 | 22 586 | 8 763 |
| Tax impact | -6 041 | -2 768 | ||||
| Net impact | 16 545 | 5 995 |
| In KUSD | 2010 | 2009 |
|---|---|---|
| Variation biological assets | -33 413 | -19 209 |
| Planting cost (included in investing activities) | 14 541 | 13 615 |
| Sales and disposals (included in sale of assets) | - 272 | - 407 |
| -19 144 | -6 001 |
| 2010 | 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| In KUSD | Land, buildings and infrastructure |
Installations and machinery |
Vehicles | Office equip ment, furniture and others |
Leases | In progress | Total property, plant & equipment |
Total property, plant & equipment |
| Gross carrying amount at January 1 |
48 125 | 59 002 | 20 658 | 5 808 | 2 021 | 4 881 | 140 495 | 129 698 |
| Change in consolidation scope | 1 089 | 1 138 | 444 | 45 | 53 | 2 769 | - 130 | |
| Acquisitions | 7 209 | 4 053 | 7 011 | 738 | 3 096 | 22 107 | 15 767 | |
| Sales and disposals | - 154 | - 270 | - 1 202 | - 167 | - 59 | - 660 | - 2 512 | - 2 623 |
| Transfers | 259 | - 122 | 1 962 | - 68 | - 1 962 | - 2 827 | - 2 758 | - 1 240 |
| Other | - 376 | - 19 | - 212 | - 230 | - 728 | - 1 565 | - 1 512 | |
| Translation differences | - 706 | - 210 | - 148 | - 41 | 7 | - 1 098 | 535 | |
| Gross carrying amount at December 31 |
55 446 | 63 572 | 28 513 | 6 085 | 0 | 3 822 | 157 438 | 140 495 |
| Accumulated depreciation and impairment losses at January 1 |
- 16 419 | - 31 122 | - 13 983 | - 3 440 | - 550 | 0 | - 65 514 | - 60 036 |
| Change in consolidation scope | - 265 | - 632 | - 281 | - 35 | - 1 213 | 100 | ||
| Depreciation | - 1 872 | - 3 674 | - 2 922 | - 417 | - 392 | - 9 277 | - 7 946 | |
| Sales and disposals | 60 | 254 | 1 083 | 140 | 1 | 1 538 | 2 164 | |
| Transfers | - 91 | 107 | - 941 | - 108 | 941 | - 92 | 0 | |
| Other | 19 | 10 | 46 | 7 | 82 | 616 | ||
| Translation differences | 516 | 179 | 139 | 19 | 853 | - 412 | ||
| Accumulated depreciation and impairment losses at December 31 |
- 18 052 | - 34 878 | - 16 859 | - 3 834 | 0 | 0 | - 73 623 | - 65 514 |
| Net carrying amount January 1 | 31 706 | 27 880 | 6 675 | 2 368 | 1 471 | 4 881 | 74 981 | 69 662 |
| Net carrying amount December 31 |
37 394 | 28 694 | 11 654 | 2 251 | 0 | 3 822 | 83 815 | 74 981 |
The post "other" encompasses the transfers of the assets of PT Citra Sawit Mandiri to the post "Assets held for sale" (see note 23). The changes in consolidation scope are detailed in note 30.
In 2010 in the light of further restructuring of the groups' financing the current financial leasing contracts have been terminated.
| In KUSD | 2010 | 2009 |
|---|---|---|
| Gross carrying amount at January 1 | 46 | 46 |
| Acquisitions | ||
| Sales and disposals | ||
| Gross carrying amount at December 31 | 46 | 46 |
| Accumulated depreciation and impairment losses at January 1 | - 43 | - 43 |
| Depreciation | ||
| Sales and disposals | ||
| Accumulated depreciation and impairment losses at December 31 | - 43 | - 43 |
| Net carrying amount January 1 | 3 | 3 |
| Net carrying amount December 31 | 3 | 3 |
| 2010 | ||||||
|---|---|---|---|---|---|---|
| Other companies | ||||||
| In KUSD | Investments in associates |
Participations | Receivables | Other receivables |
Total | Total |
| Gross carrying amount at January 1 | 7 881 | 5 439 | 3 327 | 531 | 17 178 | 16 328 |
| Share of results of associated companies | 2 587 | 2 587 | 913 | |||
| Other increase (decrease) | 226 | - 234 | - 474 | - 482 | - 1 287 | |
| Translation differences | - 879 | - 1 | - 22 | - 902 | 349 | |
| Gross carrying amount at December 31 | 9 589 | 5 664 | 3 093 | 35 | 18 381 | 16 303 |
| Accumulated impairment losses at January 1 | 0 | - 1 660 | - 3 327 | 0 | - 4 987 | - 4 684 |
| Reversal write-downs | 234 | 234 | 634 | |||
| Translation differences | 0 | - 62 | ||||
| Accumulated impairment losses at December 31 | 0 | - 1 660 | - 3 093 | 0 | - 4 753 | - 4 112 |
| Net carrying amount January 1 | 7 881 | 3 779 | 0 | 531 | 12 191 | 11 644 |
| Net carrying amount December 31 | 9 589 | 4 004 | 0 | 35 | 13 628 | 12 191 |
Investments in associates refer to:
| In KUSD | Functional currency |
% of interest |
Shareholders' equity group share |
Goodwill | Net carrying amount |
|---|---|---|---|---|---|
| B.D.M. NV | EUR | 50,00 | 2 841 | 2 841 | |
| Asco NV | EUR | 50,00 | 6 748 | 6 748 | |
| Total | 9 589 | 0 | 9 589 |
Investments in other enterprises include a 32% stake in SIPEF-CI SA in Ivory Coast (net book value of KUSD 3 801), a 9.6% stake in Gedei NV (net book value of KUSD 166) and KUSD 37 other participations. The net book value of SIPEF-CI SA is impaired at the fair value per 31 december 2010.
On 31 December 2010 an impairment test was effected on the participations based on the latest available information. This test did not lead to an adjustment of the book values.
The reduction in the other receivables (KUSD -474) is mainly the repayment of the long term recivables by SIPEF-CI SA.
In 2009 this was mainly a claim on Phu Ben Tea Company (KUSD 1 674) resulting from the sale in 2008, and for which the necessary guarantees have been obtained that must ensure the repayment of this claim.
In 2010 the proposed repayment schedule of claims on Phu Ben Tea Company have been respected and the amount was transferred to other current receivables.
| KUSD | 2010 | 2009 |
|---|---|---|
| Phu Ben Tea Company | 0 | 1 674 |
| Others | 145 | 146 |
| Total | 145 | 1 820 |
Analysis of inventories
| KUSD | 2010 | 2009 |
|---|---|---|
| Raw materials and supplies | 11 334 | 10 761 |
| Finished goods Advance payments |
18 512 0 |
13 605 0 |
| Total | 29 846 | 24 366 |
The increase in the stocks of finished goods is mainly the result of high prices at year end. During 2010, KUSD 149 was written down from stock spareparts.
Other receivables (KUSD 19 433) mainly include a tax receivable for KUSD 12 639 and a recivable concerning the sale of Phu Ben Tea Company for KUSD 1 674. The remaining amount of KUSD 5 120 mainly concerns recoverable income taxes.
The 'other payables' (KUSD 8 422) mainly concern social obligations (salaries to be paid, provisions for holiday pay and bonus) and invoices to be received.
The issued capital of the company as at December 31, 2010 amounts to KEUR 34 768 (KUSD 45 819), represented by 8 951 740 fully paid ordinary shares without nominal value.
| 2010 | 2009 | |||
|---|---|---|---|---|
| Number of shares | 8 951 740 | 8 951 740 | ||
| Number of VVPR strips | 4 211 800 | 4 211 800 | ||
| 2010 | 2009 | 2010 | 2009 | |
| KEUR | KEUR | KUSD | KUSD | |
| Capital | 34 768 | 34 768 | 45 819 | 45 819 |
| Share premium | 16 285 | 16 285 | 21 502 | 21 502 |
| 51 053 | 51 053 | 67 321 | 67 321 |
The extraordinary general meeting of shareholders on July 17, 2006 reauthorized the board of directors to increase the capital in one or more operations by an amount of KEUR 33 888 over a period of 5 years after the publication of the renewal. The board of directors made use of the authorized capital for an amount of KEUR 880 for the the capital increase in 2006 and 2007.
The company has received following shareholders declarations:
| Number of shares | Date of notifying | Denominator | % | |
|---|---|---|---|---|
| In mutual consent | ||||
| Ackermans & van Haaren NV | 2 273 143 | 03-03-2011 | 8 951 740 | 25.393 |
| Gedei NV | 464 340 | 03-03-2011 | 8 951 740 | 5.187 |
| (in connection with Baron Bracht and Cabra) | ||||
| Cabra NV | 415 190 | 03-03-2011 | 8 951 740 | 4.638 |
| (in connection with Baron Bracht and Gedei) | ||||
| Baron Bracht | 200 180 | 03-03-2011 | 8 951 740 | 2.236 |
| (in connection with Cabra and Gedei) | ||||
| 3 352 853 | 37.454 | |||
| Fortis Investment Management NV | 491 740 | 01-09-2008 | 8 951 740 | 5.493 |
| Alcatel Pensioenfonds VZW | 469 600 | 01-09-2008 | 8 951 740 | 5.246 |
Translation differences comprise all foreign exchange differences arising from the translation of the financial statements of foreign operations that are not integral to the operations of the company.
The evolution compared to last year is mainly the result of a weakening of the USD compared to the Euro (KUSD -828) and a modification in the consolidation scope (KUSD - 785)
| Opening balance at December 31, 2009 Movement, full consolidation Movement, equity method |
Ending balance at December 31, 2010 | -14 905 |
|---|---|---|
| - 878 | ||
| - 735 | ||
| -13 292 |
On February 23, 2011 a dividend of KEUR 13 428 (1.5 EUR gross per ordinary share) has been recommended by the board of directors but has not yet been approved by the general meeting of shareholders of SA SIPEF NV and is therefore not provided for in the financial statements as at December 31, 2010.
The capital structure of the group is based on the financial strategy as defined by the board of directors. This takes into account all the important elements that meet the requirements of the strategy and daily needs of the group. The management puts forward yearly the financial plan for approval by the board of directors.
These consist mainly of non-controlling interests in the equity and net income of:
| 2010 % |
2009 |
|---|---|
| PT Tolan Tiga 5.00 |
5.00 |
| PT Eastern Sumatra 9.75 |
9.75 |
| PT Kerasaan 43.00 |
43.00 |
| PT Bandar Sumatra 5.00 |
5.00 |
| PT Timbang Deli 5.00 |
5.00 |
| PT Melania 26.47 |
26.47 |
| PT MukoMuko Agro Sejahtera 9.75 |
- |
| PT Umbul Mas Wisesa 26.47 |
26.47 |
| PT Citra Sawit Mandiri 26.47 |
26.47 |
| PT Toton Usaha Mandiri 22.60 |
22.60 |
| PT Agro Muko 2.36 |
2.02 |
| Senor Ltd - |
2.71 |
| Jabelmalux SA 22.60 |
22.60 |
The movements of the year can be summarized as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| At the end of the preceding period | 21 611 | 18 796 |
| - Change in consolidation scope | 16 | - 123 |
| - Profit for the period attributable to non-controlling interests | 7 152 | 4 400 |
| - Distributed dividends | -1 582 | -1 462 |
| - Capital increase | 43 | 0 |
| At the end of the period | 27 240 | 21 611 |
These include a provision for "constructed buildings" which are still under guarantee in SA SIPEF NV (KUSD 115).
Pension liabilities mainly represent defined benefit plans in Indonesia. These pension plans, set up in order to pay a lump sum amount at the time of retirement, are not financed with a third party.
The following reconciliation summarizes the variation of total pension liabilities between 2009 and 2010:
| KUSD | 2009 | Pension cost | Payment | Exchange | Translation difference |
Change consolidation scope |
Other | 2010 |
|---|---|---|---|---|---|---|---|---|
| Indonesia | 8 571 | 1 928 | -1 282 | 403 | 164 | - 13 | 9 771 | |
| Ivory Coast | 388 | 12 | - 27 | 373 | ||||
| Others | 252 | - 5 | 247 | |||||
| 9 211 | 1 940 | -1 287 | 403 | - 27 | 164 | - 13 | 10 391 |
Following assumptions are used in the pension calculation of Indonesia:
| 2010 | 2009 | |
|---|---|---|
| Discount rate | 9% | 11% |
| Salary increase | 7% | 8% |
| Past service age | 55 years or 30 years of seniority |
Pension liabilities in Indonesia have changed as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| Opening | 8 571 | 7 813 |
| Change consolidation scope | 164 | 0 |
| Service cost | 644 | 548 |
| Interest cost | 1 017 | 1 055 |
| Benefits paid | -1 282 | -1 817 |
| Actuarial gains and losses | 267 | - 266 |
| Exchange differences | 403 | 1 238 |
| Other | - 13 | 0 |
| Closing | 9 771 | 8 571 |
The amounts recognised in the balance sheet are as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| Pension liabilities | 9 771 | 8 571 |
| Liabilities in the balance sheet | 9 771 | 8 571 |
The amounts recognised in the income statement for Indonesia are as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| Service cost | 644 | 548 |
| Interest cost | 1 017 | 1 055 |
| Actuarial gains and losses | 267 | - 266 |
| Pension cost | 1 928 | 1 337 |
These costs are included under the headings cost of sales and selling, general and administrative expenses of the income statement.
The experience adjustments on plan liabilities are presented as follows:
| KUSD | 2010 | 2009 | 2008 |
|---|---|---|---|
| Pension liabilities | 9 771 | 8 571 | 7 813 |
| Experience adjustments | 185 | - 292 | 187 |
| 2% | -3% | 2% |
Estimated benefit payments in 2011 are KUSD 632.
Contributions paid regarding the defined contribution plans amount to KUSD 848 (KUSD 1 121 in 2009). Contributions paid within the scope of the Belgian pension schemes are provided through insurance companies and meet the minimum return requirement and are therefore treated as defined contribution plans.
Net financial assets/(liabilities) can be analysed as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| Long term financial obligations | -2 600 | -8 847 |
| Current portion of financial obligations payable after one year | -5 200 | -5 645 |
| Obligations initially payable after more than one year | -7 800 | -14 492 |
| Short-term obligations - credit institutions | - 323 | -1 837 |
| Investments and deposits | 15 582 | 10 315 |
| Cash and cash equivalents | 49 025 | 42 122 |
| Net financial assets/(liabilities) | 56 484 | 36 108 |
Analysis of net financial assets/(liabilities) 2010 per currency
| KUSD | EUR | USD | Other | Total |
|---|---|---|---|---|
| Obligations initially payable after more than one year | 0 | -7 800 | 0 | -7 800 |
| Short-term financial obligations | - 298 | - 25 | 0 | - 323 |
| Investments and deposits | 15 582 | 0 | 0 | 15 582 |
| Cash and cash equivalents | 1 896 | 44 256 | 2 873 | 49 025 |
| Total | 17 180 | 36 431 | 2 873 | 56 484 |
The cash deposit in EUR of KUSD 15 582 concerns mainly funds that are reserved for the payment of the proposed dividend.
With regard to the cover of the dividend for the end of the year a devaluation or revaluation of 10% of the Euro versus the USD has the following effect on the profit and loss account.
| KUSD | EUR + 10% | Book value | EUR - 10% |
|---|---|---|---|
| Dividend | 14 024 | 15 582 | 17 140 |
| Gross impact income statement | 1 558 | 0 | -1 558 |
The obligations initially payable after more than one year (KUSD 7 800) with a floating rate (LIBOR USD 3 months +0.95%) are economically covered by IRS to a fixed rate of 6.45%.
The long term financial obligations do not concern subordinated loans.
Due dates of obligations initially payable after more than one year are as follows:
| KUSD | 2010 |
|---|---|
| 2011 | -5 200 |
| 2012 | -2 600 |
| Total | -7 800 |
Net financial position at the beginning of the period`
| KUSD | 2010 | 2009 |
|---|---|---|
| (Increase)/decrease in long-term borrowings | 36 108 | 14 453 |
| (Increase)/decrease in short-term financial obligations | 6 692 | 5 784 |
| Net movement in cash and cash equivalents | 1 514 | - 698 |
| Effect of exchange rate fluctuations on long term obligations | 12 178 | 16 531 |
| Effect of exchange rate fluctuations on cash and cash equivalents | - 8 | 3 |
| Change consolidation scope | 0 | 35 |
| Net financial assets/(liabilities) at the end of the period | 56 484 | 36 108 |
PT Citra Sawit Mandiri is expected to be sold in the first semester of 2011 and assets are measured at the lower of their carrying amount and fair value less costs to sell (note 22).
In 2009 the remaining plantation assets of Senor Ltd were likewise presented in the balance sheet and during the first 6 months of 2010 this Brazilian company was sold.
The most important assets and liabilities that these companies contains are described hereafter:
| Liabilities associated with assets held for sale | - 468 | - 405 |
|---|---|---|
| Other payables | - 404 | - 354 |
| Trade payables | - 64 | - 51 |
| Assets held for sale | 2 581 | 2 070 |
| Revaluation held for sale | - 3 649 | 0 |
| Current assets | 514 | 78 |
| Non current assets | 3 529 | 897 |
| Biological assets | 2 187 | 1 095 |
| KUSD | 2010 | 2009 |
The non-recurring result is included under the heading 'Other operating income/(charges)', 'Taxes' and 'Share of result of associated companies' and can be detailed as follows:
| 2010 | 2009 | |||||
|---|---|---|---|---|---|---|
| KUSD | Equity holders of the parent |
Non-controlling interests |
Total | Equity holders of the parent |
Non-controlling interests |
Total |
| Impairment PT Citra Sawit Mandiri | -2 683 | - 966 | -3 649 | 0 | ||
| Sale Bonal SA and Senor Ltd | 1 350 | 1 350 | 0 | |||
| Goodwill acquisition Bonal SA | 0 | 123 | 123 | |||
| Sale Cavalla Rubber Corporation, CKE | 0 | 74 | 74 | |||
| Sale Sipef Guinée SA | 0 | 513 | 513 | |||
| Result on long term assets Ivory Coast in SA SIPEF NV | 0 | 782 | 782 | |||
| Write down of receivables. | 0 | - 235 | - 235 | |||
| Non-recurring | -1 333 | - 966 | -2 299 | 1 257 | 0 | 1 257 |
| Tax effect on non-recurring result | 1 266 | 1 266 | 0 | |||
| Non-recurring result after taxes | - 67 | - 966 | -1 033 | 1 257 | 0 | 1 257 |
| Sale Bruns ten Brink BV and Asco Life NV | 2 578 | 2 578 | 0 | |||
| Non-recurring result after taxes | 2 511 | - 966 | 1 545 | 1 257 | 0 | 1 257 |
| Adjusted net recurring result | 68 120 | 53 387 |
|---|---|---|
| Adjustment IAS41 | -14 212 | -5 530 |
| Adjustment non-recurring result | -2 511 | -1 257 |
| Net result - part of the group | 84 843 | 60 174 |
| 2010 | 2009 |
The financial income concerns the interests received on current accounts both non-consolidated companies and on temporary excess cash. The financial charges concern the interests on long term and short term borrowings as well as bank charges and other financial costs.
| KUSD | 2010 | 2009 |
|---|---|---|
| Financial income | 347 | 325 |
| Financial charges | -1 131 | -1 530 |
| Exchange result | 440 | 881 |
| Financial result derivatives | 630 | 215 |
| Financial result | 286 | - 109 |
The reconciliation between the tax expenses and tax at local applicable tax rates is as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| Profit before tax | 118 497 | 82 562 |
| Tax at the applicable local rates | -31 331 | -23 792 |
| Average applicable tax rate | 26.44% | 28.82% |
| Impact future change tax % in Indonesia - biological assets | 0 | 0 |
| Impact future change tax % in Indonesia - other | 0 | 86 |
| Withholding tax on dividends | - 210 | - 194 |
| Permanent differences | 349 | 1 806 |
| Deferred tax on non current assets resulting from exchange rate fluctuations | 2 103 | 3 193 |
| Tax expense | -29 089 | -18 901 |
| Average effective tax rate | 24.55% | 22.89% |
In 2009, the tax rate in Indonesia is reduced to 28%. From 2010 onwards, a tax rate of 25% is applicable.
SIPEF prepares consolidated accounts in USD. However, subsidiaries are obliged to pay taxes that are calculated and denominated in local currency. Accordingly, the tax bases of assets and liabilities are in local currency and changes in exchange rates give rise to temporary differences. The resulting deferred tax is charged or credited to profit or loss in accordance with IAS 12.41. This has a significant impact on the effective tax rate.
Deferred tax liabilities and assets are offset per taxable entity which leads to the following split between deferred tax assets and deferred tax liabilities:
| Net deferred taxes | -47 479 | -40 826 |
|---|---|---|
| Deferred tax liabilities | -47 508 | -41 532 |
| Deferred tax assets | 29 | 706 |
| KUSD | 2010 | 2009 |
The movements in net deferred taxes (assets - liabilities) are:
| Reclassification to "assets available for sale" | - 172 | 52 |
|---|---|---|
| Change in consolidation scope | - 650 | 0 |
| Increase (= expense)/decrease (= income) through income statement | -5 831 | -3 881 |
| Opening balance | -40 826 | -36 997 |
| KUSD | 2010 | 2009 |
Deferred taxes in the income statement are the result of:
| KUSD | 2010 | 2009 |
|---|---|---|
| Addition/(utilisation) of tax losses brought forward | 1 782 | - 548 |
| Origin or reversal of temporary differences - biological assets | -6 041 | -2 768 |
| Origin or reversal of temporary differences - other non-current assets | 415 | - 457 |
| Origin or reversal of temporary differences - pension provision | 263 | 189 |
| Origin or reversal of temporary differences - inventories | -1 511 | - 988 |
| Origin or reversal of temporary differences - other | - 739 | 691 |
| -5 831 | -3 881 |
The addition of tax losses brought forward refer mainly to Galley Reach Holdings Ltd where, due to the positive returns on rubber, it has become probable that future taxable profits will be available, against which the unused tax losses can be partly offset.
Total deferred tax assets are not entirely recognized in the balance sheet. The breakdown of total, recognized and unrecognized deferred taxes is as follows:
| 2010 | |||
|---|---|---|---|
| KUSD | Total | Not recorded | Recorded |
| Biological assets | -38 777 | 0 | -38 777 |
| Other non-current assets | -9 187 | 552 | -9 739 |
| Inventories | -5 132 | 0 | -5 132 |
| Long term obligations | 0 | 0 | 0 |
| Pension provision | 2 443 | 0 | 2 443 |
| Tax losses | 9 913 | 6 966 | 2 947 |
| Others | 779 | 0 | 779 |
| Total | -39 961 | 7 518 | -47 479 |
The majority of the unrecognized deferred tax assets at the end of 2010 are located at the parent company (KUSD 5 409), at Plantations J. Eglin SA (KUSD 552) and Jabelmalux SA (KUSD 1 557). For these entities there is uncertainty regarding the availability of sufficient future taxable profit. The reasons for these uncertainties are:
Total tax losses (recognized and unrecognized) have the following maturity structure:
| 2010 | |||
|---|---|---|---|
| KUSD | Total | Not recorded | Recorded |
| 1 year | 0 | 0 | 0 |
| 2 years | 150 | 0 | 150 |
| 3 years | 1 068 | 0 | 1 068 |
| 4 years | 0 | 0 | 0 |
| 5 years | 485 | 0 | 485 |
| Unlimited | 8 210 | 6 966 | 1 244 |
| Total | 9 913 | 6 966 | 2 947 |
The net taxes to be paid relate mainly to the taxes to be paid in Indonesia and Papua New Guinea.
| KUSD | 2010 | 2009 |
|---|---|---|
| Taxes to receive | 5 122 | 5 307 |
| Taxes to pay | -15 274 | -9 972 |
| Net taxes to pay | -10 152 | -4 665 |
| KUSD | 2010 | 2009 |
| Net taxes to pay at the beginning of the period | -4 665 | -8 071 |
| Change consolidation scope | 229 | 0 |
| Taxes to pay | -23 258 | -15 020 |
| Paid taxes | 17 542 | 18 426 |
| -10 152 | -4 665 |
Taxes paid as presented in the consolidated cash flow statement are detailed as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| Tax expense | -29 089 | -18 901 |
| Deferred tax | 5 831 | 3 881 |
| Current taxes | -23 258 | -15 020 |
| Variation prepaid taxes | 404 | -3 765 |
| Variation payable taxes | 5 312 | 359 |
| Paid taxes | -17 542 | -18 426 |
The share of our associates in the insurance sector benefited through capital gains on the sale of the Dutch agency Bruns ten Brink BV (KUSD 2 358) and the life insurance company Asco Life NV (KUSD 220). Following the sale of these subsidiaries the restructured agency B.D.M. NV and the insurance company Asco NV can, out of Antwerp, focus on the core activities marine and general risk insurance.
The substantially improved prices and the higher amounts receivable due to shipments prior to the end of the year had an effect on the required working capital (inventories KUSD -5 427, trade receivables KUSD -6 670 and various movements KUSD - 4 871).
Exposure to fluctuations in the market price of core products, currencies, interest rates and credit risk arises in the normal course of the group's business. Financial derivative instruments are used to a limited extend to reduce the exposure to fluctuations in foreign exchange rates and interest rates.
SIPEF is exposed to structural price risks of their core products. The risk is primarily related to palm oil and palm kernel oil and to a lesser extent to rubber. A change of the palm oil price of 10 USD CIF per ton has an impact of about KUSD 1 250 per year (without taking into account the impact of the current export tax in Indonesia) on result after tax. This risk is assumed to be a business risk.
The group faces transactional price risks on products sold. The transactional risk is the risk that the price of products purchased from third parties fluctuates between the time the price is fixed with a customer and the time the transaction is settled. This risk is assumed to be a business risk.
The group's currency risk can be split into three distinct categories: structural, transactional and translational:
A portion of the group's revenues are denominated in USD, while all of the operations are located outside the USD zone (particularly in Indonesia, Papua New Guinea, Ivory Coast and Europe). Any change in the USD against the local currency will therefore have a considerable impact on the operating result of the company. Most of these risks are considered to be a business risk.
The group is also subject to transactional risks in respect of currencies, i.e. the risk of currency exchange rates fluctuating between the time the price is fixed with a customer, supplier or financial institution and the time the transaction is settled. This risk, with the exception of naturally covered positions, is not covered since most receivables and payables have a short settlement term.
The pension liabilities in Indonesia are important long term liabilities that are fully payable in IDR. A devaluation or revaluation of 10% of the IDR versus the USD has the following effect on the income statement:
| KUSD | IDR + 10% | Book value | IDR - 10% |
|---|---|---|---|
| Pension liabilities in Indonesia | 8 883 | 9 771 | 10 858 |
| Gross impact income statement | 888 | 0 | -1 087 |
On the February 23, 2011 the board of directors proposed the payment of KEUR 13 428 (1.5 EUR gross per ordinary share). In the light of our liquidity and currency policy the exchange risk on the payment of this dividend was covered in five forward exchange contracts for the sale of KUSD 17 781 for KEUR 13 428 (average exchange rate of 0.7552).
Sensitivity analysis: see note 20
SIPEF is an international company and has operations which do not use the USD as their reporting currency. When such results are consolidated into the group's accounts the translated amount is exposed to variations in the value of such local currencies against the USD. SIPEF does not hedge against such risk (see accounting policies). As from 1st of January 2007 onwards the functional currency of most of our activities is the same as the presentation currency, this risk has been largely restricted.
The group's exposure to changes in interest rates relates to the group's financial debt obligations. At the end of December 2010, the group's net financial assets/(liabilities) amounted to KUSD 56 484 (2009: KUSD 36 108), of which KUSD 7 800 (2009: 14 492) loans initially payable after more than one year and KUSD 64 284 (2009: KUSD 50 600)net short term cash and cash equivalents.
As part of the management of its overall costs of funding, the group has "economically" hedged its interest rate risk exposure by entering into interest rate swaps (see also the note regarding net financial debt) so that 100% of the borrowings with an initial term of more than 1 year have a fixed rate of interest (see also note with regard to the net financial debt).
Available funds are invested in short term deposits.
Credit risk is the risk that one party will fail to discharge an obligation and cause the other party to incur a loss. This credit risk can be split into a commercial and a financial credit risk. With regard to the commercial credit risk management has established a credit policy and the exposure to this credit risk is monitored on a continous basis. In practice a difference is made between:
| KUSD | 2010 | 2009 |
|---|---|---|
| - receivables from the sale of palm oil/rubber/tea | 24 507 | 15 969 |
| - receivables from the sale of bananas and plants | 1 932 | 2 705 |
| 26 439 | 18 674 |
The credit risk for the first category is rather limited as these sales are for the most part immediately paid against presentation of documents. Moreover it concerns a relatively small number of first class buyers (per product about 90% of the turnover is realized with maximum 10 clients of which none is over 30%). Contrary to the first category the credit risk for the receivables from the sales of bananas and plants are more important.
For both categories there is a weekly monitoring of the open balances due and a proactive system of reminders. Depreciations are applied as soon as total or partial payments are seen as unlikely. The elements that are taken into account for these appraisals are the lengths of the delay in payment and the creditworthiness of the client. The receivables from the sales of bananas and plants have the following due date schedule:
| KUSD | 2010 | 2009 |
|---|---|---|
| Not yet due | 1 754 | 1 971 |
| Due < 30 days | 178 | 580 |
| Due between 30 and 60 days | 0 | 154 |
| Due between 60 and 90 days | 0 | 0 |
| 1 932 | 2 705 |
In 2010 there were no material depreciations on receivables.
In order to limit the financial credit risk SIPEF has spread its more important activities over a small number of banking groups with a first class rating for creditworthiness. The company needs to respect certain solvability ratio's for one of her credit lines. In 2010, same as in previous years, there were no infringements on the conditions stated in the credit agreements no were there any shortcomings in repayments.
A material and structural shortage in our cash flow would damage both our creditworthiness as well as the trust of investors and would restrict the capacity of the group to attract fresh capital.
The operational cash flow provides the means to finance the financial obligations and to increase shareholder value. SIPEF manages the liquidity risk by evaluating the short term and long term cash flows. SIPEF maintains an access to the capital market through short and long term debt programs.
The following table gives the contractually determined (not-discounted) cash flows resulting from liabilities at balance sheet date.
| 2010 - KUSD | Carrying amount |
Contractual cash flows |
Less than 1 year |
1-2 years | 2-3 years | 3-4 years | More than 5 years |
|---|---|---|---|---|---|---|---|
| Trade and other liabilities > 1 year | |||||||
| Financial liabilities > 1 year | 2 600 | -2 677 | -2 677 | ||||
| Non-current financial liabilities | 2 600 | -2 677 | 0 | -2 677 | 0 | 0 | 0 |
| Trade & other liabilities < 1 year | |||||||
| Trade payables | 9 195 | -9 195 | -9 195 | ||||
| Advances received | 286 | - 286 | - 286 | ||||
| Financial liabilities < 1 year | |||||||
| Current portion of amounts payable after one year |
5 200 | -5 487 | -5 487 | ||||
| Financial liabilities | 323 | - 323 | - 323 | ||||
| Derivatives | 168 | - 169 | - 158 | - 11 | |||
| Other current liabilities | 4 817 | -4 817 | -4 817 | ||||
| Current liabilities | 19 989 | -20 277 | -20 266 | - 11 | 0 | 0 | 0 |
| 2009 - KUSD | Carrying amount |
Contractual cash flows |
Less than 1 year |
1-2 years | 2-3 years | 3-4 years | More than 5 years |
|---|---|---|---|---|---|---|---|
| Trade and other liabilities > 1 year | 144 | - 144 | - 144 | ||||
| Financial liabilities > 1 year | 8 847 | -9 394 | -6 142 | -3 252 | |||
| Non-current financial liabilities | 8 991 | -9 538 | 0 | -6 142 | -3 252 | 0 | - 144 |
| Trade & other liabilities < 1 year | |||||||
| Trade payables | 9 525 | -9 525 | -9 525 | ||||
| Advances received | 314 | - 314 | - 314 | ||||
| Financial liabilities < 1 year | |||||||
| Current portion of amounts payable after one year |
5 645 | -6 788 | -6 788 | ||||
| Financial liabilities | 1 837 | -1 837 | -1 837 | ||||
| Derivatives | 798 | - 803 | - 562 | - 230 | - 11 | ||
| Other current liabilities | 4 667 | -4 667 | -4 667 | ||||
| Current liabilities | 22 786 | -23 934 | -23 693 | - 230 | - 11 | 0 | 0 |
Fair values of derivatives are:
| KUSD | 2010 | 2009 |
|---|---|---|
| Forward exchange transactions | 119 | - |
| Interest rate swaps | - 287 | - 798 |
| Fair value (+ = asset; - = liability) | - 168 | - 798 |
In accordance with IFRS 7 financial derivates are brought under in 3 levels:
The fair value of the interest rate swap was determined based on the interbank interest rates as per December 31st, 2010 and 2009 and was classified as level 2.
The fair value of the forward exchange contracts calculated at the closing value on the 31st of December 2010 were also incorporated in level 2.
The notional amount of the amortized swap amounts to KUSD 7 800 and from the forward exchange contracts KUSD 7 324. A rise or drop of the interest rate by 10 basis points leads to a rise of drop of the fair value of KUSD 8.
The next table gives the financial instruments per category as per end 2010 and end 2009. The carrying amount mentioned in this summary is also representative for the actual faire value.
The obligations with a term of more than one year (KUSD 7 800; 2009 KUSD 14 492) comprise for KUSD 7 800 loans covered with an Interest Rate Swap. The management is of the opinion that in view of the market circumstances, the carrying amount of the loans with a fixed interest rate is representative for the fair value.
| 2010 - KUSD | Assets available for sale |
Loans and receivables |
Derivatives | Total carrying amount |
|---|---|---|---|---|
| (1) | ||||
| Financial assets | ||||
| Other investments | 0 | |||
| Other financial assets | 4 004 | 35 | 4 039 | |
| Receivables > 1 year | ||||
| Other receivables | 145 | 145 | ||
| Total non-current financial assets | 4 004 | 180 | 0 | 4 184 |
| Trade and other receivables | ||||
| Trade receivables | 26 439 | 26 439 | ||
| Investments | ||||
| Other investments and deposits | 15 582 | 15 582 | ||
| Cash and cash equivalents | 49 025 | 49 025 | ||
| Other current assets | 2 085 | 2 085 | ||
| Total current financial assets | 0 | 93 131 | 0 | 93 131 |
| Total financial assets | 4 004 | 93 311 | 0 | 97 315 |
| Derivatives | Other liabilities |
Total carrying amount |
|
|---|---|---|---|
| (2) | |||
| Trade and other obligations > 1 year | 0 | ||
| Financial obligations > 1 year (incl. derivatives) | 2 600 | 2 600 | |
| Total non-current financial liabilities | 0 | 2 600 | 2 600 |
| Trade & other obligations < 1 year | |||
| Trade payables | 9 195 | 9 195 | |
| Advances received | 286 | 286 | |
| Financial obligations < 1 year | |||
| Current portion of amounts payable after one year | 5 200 | 5 200 | |
| Financial obligations | 323 | 323 | |
| Derivatives | 168 | 168 | |
| Other current liabilities | 4 817 | 4 817 | |
| Total current financial liabilities | 168 | 19 821 | 19 989 |
| Total financial liabilities | 168 | 22 421 | 22 589 |
(1) is technically considered as held for trading under IAS 39 (2) at amortized cost
| 2009 - KUSD | Assets available for sale |
Loans and receivables |
Derivatives | Total carrying amount |
|---|---|---|---|---|
| (1) | ||||
| Financial assets | ||||
| Other financial assets | 0 | |||
| Other investments | 3 778 | 532 | 4 310 | |
| Receivables > 1 year | ||||
| Other receivables | 1 820 | 1 820 | ||
| Total non-current financial assets | 3 778 | 2 352 | 0 | 6 130 |
| Trade and other receivables | ||||
| Trade receivables | 18 674 | 18 674 | ||
| Investments | ||||
| Other investments and deposits | 10 315 | 10 315 | ||
| Cash and cash equivalents | 42 122 | 42 122 | ||
| Other current assets | 936 | 936 | ||
| Total current financial assets | 0 | 72 047 | 0 | 72 047 |
| Total financial assets | 3 778 | 74 399 | 0 | 78 177 |
| Derivatives | Other liabilities |
Total carrying amount |
|
|---|---|---|---|
| (2) | |||
| Trade and other obligations > 1 year | 144 | 144 | |
| Financial obligations > 1 year (incl. derivatives) | 8 847 | 8 847 | |
| Total non-current financial liabilities | 0 | 8 991 | 8 991 |
| Trade & other obligations < 1 year | |||
| Trade payables | 9 525 | 9 525 | |
| Advances received | 314 | 314 | |
| Financial obligations < 1 year | |||
| Current portion of amounts payable after one year | 5 645 | 5 645 | |
| Financial obligations | 1 837 | 1 837 | |
| Derivatives | 798 | 798 | |
| Other current liabilities | 4 667 | 4 667 |
| Total current financial liabilities | 798 | 21 988 | 22 786 |
|---|---|---|---|
| Total financial liabilities | 798 | 30 979 | 31 777 |
(1) is technically considered as held for trading under IAS 39 (2) at amortized cost
The contribution to the net result of the financial insturments per category is presented as follows:
| Assets available | Loans and | |||||
|---|---|---|---|---|---|---|
| 2010 - KUSD | for sale | receivables | Cash | Derivatives | Amortized cost | Total |
| Revenue | 0 | |||||
| Selling, general and administrative expenses |
0 | |||||
| Other operating income/(charges) | 0 | |||||
| 0 | 0 | 0 | 0 | 0 | 0 | |
| Financial income | 129 | 848 | 977 | |||
| Financial charges | - 208 | - 923 | -1 131 | |||
| Derivatives held for economical purposes |
630 | 630 | ||||
| 0 | - 79 | 848 | 630 | - 923 | 476 | |
| 2009 - KUSD | Assets available for sale |
Loans and receivables |
Cash | Derivatives | Amortized cost | Total |
| Revenue | 2 | 2 | ||||
| Selling, general and administrative expenses |
0 | |||||
| Other operating income/(charges) | 0 | |||||
| 2 | 0 | 0 | 0 | 0 | 2 | |
| Financial income | 215 | 325 | 540 | |||
| Financial charges | - 1 | - 239 | -1 290 | -1 530 | ||
| Derivatives held for economical purposes |
215 | 215 | ||||
| - 1 | - 24 | 325 | 215 | -1 290 | - 775 |
PT Agro Muko in Indonesia is managed according to the principles of a joint venture (joint control) and is
accounted for according to the proportional consolidation method.
In 2010 the share of the group has changed from 40.475% to 47.2919%.
The related goodwill is explained in note 30.
Key figures related to the joint venture (at the group's share) are (in KUSD):
| Statement of financial position | 2010 | 2009 |
|---|---|---|
| Non-current assets | 42 399 | 30 060 |
| Current assets | 15 368 | 13 356 |
| Non-current liabilities | -6 390 | -4 831 |
| Current liabilities | -2 013 | -1 692 |
| Total equity | 49 364 | 36 893 |
| Income statement | 2010 | 2009 |
|---|---|---|
| Operating result | 18 561 | 7 939 |
| Financial result | 152 | 319 |
| Tax expense | -4 286 | -1 608 |
| Result from continuing operations | 14 427 | 6 650 |
The group leases office space, office equipment and vehicles under a number of operating lease agreements. Future lease payments under these non-cancelable operating leases are due as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| 1 year | 313 | 336 |
| 2 years | 58 | 331 |
| 3 years | 24 | 62 |
| 4 years | 5 | 26 |
| 5 years | 0 | 6 |
| 400 | 761 |
During the year an amount of KUSD 324 (against KUSD 358 in 2009) has been charged in the income statement.
In 2010 in the light of further restructuring of the groups' financing the current financial leasing contracts have been terminated.
Payments under these non-cancelable finance leases are due as follows:
| KUSD | 2010 | 2009 |
|---|---|---|
| 1 year | 0 | 445 |
| 2 years | 0 | 501 |
| 3 years | 0 | 547 |
| 4 years | 0 | 0 |
| 0 | 1 493 |
During the year an amount of KUSD 107 has been charged to the income statement. (including costs for termination leasing contract).
In 2010, the group acquired, through its 95% subsidiary PT Tolan Tiga, an additional 6.82% in the shareholding of PT Agro Muko and the Brazilian companies Bonal SA and Senor Ltd were sold.
In 2009 all the shares in Sipef Guinée SA were sold.
These transactions had the following segment impact on the balance sheet, income statement and cash flow:
| 2009 | ||||
|---|---|---|---|---|
| KUSD | Indonesia | Brazil | Total | |
| Intangible assets - Other | 38 | 38 | ||
| Intangible assets - Goodwill | 0 | - 62 | ||
| Biological assets | 3 468 | 3 468 | ||
| Property, plant & equipment | 1 556 | 1 556 | - 30 | |
| Current assets/liabilities (excl. cash and cash equivalents) | 916 | - 751 | 165 | 545 |
| Provisions | - 164 | - 164 | ||
| Deferred taxes | - 650 | - 650 | ||
| Cash and cash equivalents | 1 049 | 1 049 | - 25 | |
| Translation differences | 545 | 545 | ||
| Non-controlling interests | 9 | 9 | ||
| Purchased/sold shareholders' equity | 6 213 | - 197 | 6 016 | 428 |
| Purchase price(+)/selling price(-) | -9 384 | 1 547 | -7 837 | 268 |
| Goodwill | 3 171 | 3 171 | ||
| Result | 0 | 1 350 | 1 350 | 696 |
| Purchase price(+)/selling price(-) | -9 384 | 1 547 | -7 837 | 268 |
| Cash and cash equivalents | 1 049 | 0 | 1 049 | - 25 |
| Net cash in/outflows | -8 335 | 1 547 | -6 788 | 243 |
An amount of KUSD 80 has been guaranteed by third parties as security for the Company's account and for KUSD 306 for the account of subsidiaries.
The company has established securities for an amount of KUSD 1 674 as a guarantee for debt repayment.
The various rights and commitments are comprised of call-options (KUSD -77) and put-options (KUSD 73) on the assets of the insurance sector.
Nihil
The commitments for the delivery of goods (palm products, rubber, tea and tropical fruits) after the year end fall within the normal delivery period of about 3 months from date of sale. Those sales are not considered as forward sales. As of 31 December 2010 the group has made some forward sales for palm oil with the goal of securing the cash flow necessary to finance the expansion plans.
These concern the following deliveries:
| Tonnes | Price (USD/tonne FOB) | |
|---|---|---|
| 2011 | 30 000 | 813 |
| 2012 | 16 000 | 783 |
| Total | 46 000 |
Key management personnel are defined as the directors and the group's management committee. The table below shows an overview of total remuneration received:
| KUSD | 2010 | 2009 |
|---|---|---|
| Directors' fees | ||
| fixed fees | 202 | 213 |
| Short-term employee benefits | 2 358 | 2 695 |
| Post-employment benefits | 587 | 769 |
| Total | 3 147 | 3 677 |
The amounts are paid in EUR. The decrease is mainly the result of the retirement of a director. The amount paid in 2010 is KEUR 2 640 (KEUR 2 304 in 2009). Starting from the financial year 2007 fixed fees shall be paid to the members of the board of directors, the audit committee and the remuneration committee.
Related party transactions are considered immaterial, except for the rental agreement since 1985 between Cabra NV and SA SIPEF NV covering the offices and ancillary parking space at Castle Calesberg in Schoten. The annual rent, adjusted for inflation, amounts to KUSD 194 (KEUR 147) and KUSD 78 is invoiced for SA SIPEF NV's share of maintenance of the buildings, parking space and park area.
Relations with board members and management committee members are covered in detail in the "Corporate Governance" section.
| 2010 | 2009 | |
|---|---|---|
| Basic earnings per share Basic earnings per share - calculation (USD) |
9.48 | 6.72 |
| Basic earnings per share is calculated as follows: | ||
| Numerator: net result for the period attributable to ordinary shareholders (KUSD) | 84 843 | 60 174 |
| Denominator: the weighted average number of ordinary shares outstanding | 8 951 740 | 8 951 740 |
| The weighted average number of ordinary shares outstanding is calculated as follows: | ||
| Number of ordinary shares outstanding at January 1 | 8 951 740 | 8 951 740 |
| Effect of capital increase | 0 | 0 |
| The weighted average number of ordinary shares outstanding at December 31 | 8 951 740 | 8 951 740 |
| Diluted earnings per share | ||
| Diluted earnings per share - calculation (USD) | 9.48 | 6.72 |
| The diluted earnings per share is calculated as follows: | ||
| Numerator: net result for the period attributable to ordinary shareholders (KUSD) | 84 843 | 60 174 |
| Denominator: the weighted average number of dilutive ordinary shares outstanding | 8 951 740 | 8 951 740 |
| The weighted average number of dilutive ordinary shares outstanding is calculated as follows: | ||
| The weighted average number of ordinary shares outstanding at December 31 | 8 951 740 | 8 951 740 |
| Effect of stock options on issue | 0 | 0 |
| The weighted average number of dilutive ordinary shares outstanding at December 31 | 8 951 740 | 8 951 740 |
| 2010 | 2009 | |
|---|---|---|
| Basic earnings per share | ||
| Basic earnings per share - calculation (USD) | 9.48 | 6.72 |
| Basic earnings per share is calculated as follows: | ||
| Numerator: net result for the period attributable to ordinary shareholders (KUSD) | 84 843 | 60 174 |
| Denominator: the weighted average number of ordinary shares outstanding | 8 951 740 | 8 951 740 |
| The weighted average number of ordinary shares outstanding is calculated as follows: | ||
| Number of ordinary shares outstanding at January 1 | 8 951 740 | 8 951 740 |
| Effect of capital increase | 0 | 0 |
| The weighted average number of ordinary shares outstanding at December 31 | 8 951 740 | 8 951 740 |
| Diluted earnings per share | ||
| Diluted earnings per share - calculation (USD) | 9.48 | 6.72 |
| The diluted earnings per share is calculated as follows: | ||
| Numerator: net result for the period attributable to ordinary shareholders (KUSD) | 84 843 | 60 174 |
| Denominator: the weighted average number of dilutive ordinary shares outstanding | 8 951 740 | 8 951 740 |
| The weighted average number of dilutive ordinary shares outstanding is calculated as follows: | ||
| The weighted average number of ordinary shares outstanding at December 31 | 8 951 740 | 8 951 740 |
| Effect of stock options on issue | 0 | 0 |
| The weighted average number of dilutive ordinary shares outstanding at December 31 | 8 951 740 | 8 951 740 |
The board of directors decided on the 23rd February 2011 to make a voluntary public offer for the shares of Jabelmalux SA. This public offer that took place as from 15 March 2011 covers the 6 166 shares (representing 22.6% of the share capital) not yet held by SA SIPEF NV. The price per share offered amounts to EUR 2 250 per share.
There are no standards or interpretations issued by the IASB which have a significant impact on SIPEF's financial statements.
To the best of our actual knowledge, there are no circumstances or developments, which would have a major impact on the further development of the group. The board of directors proposes a gross dividend of EUR 1.50 per share payable on Wednesday 6th July 2011, an increase with 36.4% on previous year and corresponding to a payout ratio of 25.1% on the net profit, share of the group, before IAS 41.
The statutory auditor of the group is Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA represented by Philip Maeyaert. The fees for the annual report of SA SIPEF NV were approved by the general meeting after review and approval of the audit committée and by the board of directors. These fees correspond to an amount of KUSD 89 (against KUSD 91 last year). This decrease is due to the exchange variation of the EUR against the USD. For the group, Deloitte has provided services for KUSD 412 in 2010 (against KUSD 393 the year before), of which KUSD 78 (2009: KUSD 78) are for non audit services.
The annual accounts of SA SIPEF NV are given below in summarized form. In accordance with the Belgian Code on Companies, the annual accounts of SA SIPEF NV, together with the management report and the auditor's report will be deposited with the National Bank of Belgium. These documents may also be obtained on request from:
SA SIPEF NV, Entrepotkaai 5, 2000 Antwerpen
Only the consolidated annual financial statements as set forth in the preceding pages present a true and fair view of the financial position and performance of the SIPEF group.
The statutory auditor's report is unqualified and certifies that the non-consolidated financial statements of SA SIPEF NV for the year ended December 31, 2010 give a true and fair view of the financial position and results of the company in accordance with all legal and regulatory requirements.
| KEUR | 2010 | 2009 | 2008 |
|---|---|---|---|
| Assets | |||
| Fixed assets | 45 588 | 56 102 | 59 383 |
| Formation expenses | 0 | 0 | 0 |
| Goodwill and other intangible assets | 399 | 478 | 499 |
| Tangible assets | 160 | 165 | 156 |
| Financial assets | 45 029 | 55 459 | 58 728 |
| Current assets | 85 133 | 59 884 | 66 604 |
| Amounts receivable after more than one year | 0 | 1 162 | 4 048 |
| Stocks and contracts in progress | 528 | 535 | 7 183 |
| Amounts receivable within one year | 51 108 | 31 071 | 35 190 |
| Investments | 31 274 | 23 851 | 16 109 |
| Cash at bank and in hand | 2 096 | 3 205 | 3 945 |
| Other current assets | 127 | 60 | 129 |
| Total assets | 130 721 | 115 986 | 125 987 |
| Liabilities | |||
| Equity | 75 220 | 80 825 | 88 111 |
| Capital | 34 768 | 34 768 | 34 768 |
| Share premium account | 16 285 | 16 285 | 16 285 |
| Reserves | 3 990 | 3 990 | 3 990 |
| Profit/ (loss) carried forward | 20 177 | 25 782 | 33 068 |
| Provisions and deferred taxation | 153 | 163 | 96 |
| Provisions for liabilities and charges | 153 | 163 | 96 |
| Creditors | 55 348 | 34 998 | 37 780 |
| Amounts payable after more than one year | 1 942 | 5 415 | 9 341 |
| Amounts payable within one year | 52 534 | 28 471 | 28 118 |
| Accrued charges and deferred income | 872 | 1 112 | 321 |
| Total liabilities | 130 721 | 115 986 | 125 987 |
| Result for the period | 7 823 | 2 561 | 38 494 | |
|---|---|---|---|---|
| Income taxes | -4 | 0 | 0 | |
| Result for the period before taxes | 7 827 | 2 561 | 38 494 | |
| Extraordinary result | 3 715 | 1 054 | 29 196 | |
| Extraordinary charges | -8 | -9 | -156 | |
| Extraordinary income | 3 723 | 1 063 | 29 352 | |
| Result on ordinary activities | 4 112 | 1 507 | 9 298 | |
| Financial result | 2 686 | -639 | 9 140 | |
| Financial charges | -709 | -20 072 | -11 913 | |
| Financial income | 3 395 | 19 433 | 21 053 | |
| Operating result | 1 426 | 2 146 | 158 | |
| Operating charges | -175 264 | -148 616 | -167 104 | |
| Operating income | 176 690 | 150 762 | 167 262 | |
| KEUR | 2010 | 2009 | 2008 | |
| KEUR | 2010 | 2009 | 2008 |
|---|---|---|---|
| Profit/ (loss) to be appropriated | 33 605 | 35 629 | 40 662 |
| Profit/ (loss) for the period available for appropriation | 7 823 | 2 561 | 38 494 |
| Profit/ (loss) brought forward | 25 782 | 33 068 | 2 168 |
| Appropriation account | 33 605 | 35 629 | 40 662 |
| Transfers to legal reserve | 0 | 0 | 433 |
| Result to be carried forward | 20 177 | 25 782 | 33 068 |
| Dividends | 13 428 | 9 847 | 7 161 |
| Remuneration to directors | 0 | 0 | 0 |
Entrepotkaai 5 2000 Antwerpen
Kasteel Calesberg Calesbergdreef 5 B-2900 Schoten
Tel: 32 (0) 3 641 97 00 Fax: 32 (0) 3 646 57 05 [email protected] www.sipef.com
Drukkerij Lannoo nv www.lannooprint.com 103055
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