Africa-focused farming and oil palm plantation company Feronia (CVE:FRN) narrowed first-quarter losses as revenue grew 31 percent as the company reported a pick-up in yields.
Feronia's focus is on its arable farming operations and oil palm operations in the Democratic Republic of Congo, Africa. It employs Brazilian and US-style agriculture systems at its arable operations for the greatest efficiency and economies of scale.
The company's mission is to deliver shareholder value by growing, processing and selling high quality and high value food products to local markets.
For the quarter ended March 31, revenue was up 31 percent to $1.9 million from $1.5 million last year.
The company achieved a fresh fruit bunch (FFB) yield of 1.74 tonnes per hectare for the quarter compared to 0.94 tonnes per hectare a year earlier. Feronia said that net loss for the quarter narrowed to $2.4 million, or 2 cents per share, from a loss of $7.2 million or 7 cents per share a year earlier.
"In the first quarter of 2012 Feronia continued to invest in creating long-term value at its oil palm plantations while focusing on maximizing yields and cash flow from existing plantings," Feronia's CEO Bill Dry said.
"We resumed our re-planting initiative on schedule in March and have planted 1,370 hectares of oil palms year-to-date as of May 27, 2012.
"The focus at our arable farming operations continues to be on proving compelling commercial yields for rice and edible beans.
"During the first quarter, we planted 305 hectares of rice and 60 hectares of edible beans with an additional 140 hectares of edible beans planted in April. We expect to harvest both of these crops in June of this year"
A gross margin of 40 percent was achieved at Feronia's palm oil operations compared to 35 percent in the same period in 2011. As at March 31, the company had a cash balance of $9.3 million.
Total producing hectares was 10,213 compared to 12,753 a year earlier. The reduction in the total number of producing hectares was due to the reclassification of the ages of palm crops.
Palm oil extraction rate improved to 18.31 percent from 17.27 percent a year earlier.
In March, the company said that 60 hectares of edible beans were sown and in April, a further 140 hectares of edible beans were sown for a total of 200 hectares as part of the company's strategy of smaller scale, proof-of-yield plantings.
These will build on the company's knowledge of local conditions in preparation for future large-scale planting.
Looking ahead, Feronia's strategy for its oil palm plantations business continues to be to maximize returns from existing plantings while investing in new plantings and the required processing capacity.
In the first quarter of 2012, the company applied fertiliser to 508 hectares of palms aged between 4 and 16 years, re-planted 264 hectares of oil palms (1,370 hectares year-to-date as of May 27, 2012) and made further progress towards the completion of the new palm oil mill at Yaligimba.
In the coming quarters, Feronia said it will remain focused on increasing yields through improved harvesting and collection practices and the application of fertiliser, replanting oil palms, and completing the Yaligimba mill.
Commissioning of the new palm oil mill at Yaligimba is expected to provide the company with immediate access to an additional 3,903 hectares of mature oil palms for the production of crude palm oil, an increase of 62.1 percent from the area currently accessible.
The company's primary objective with respect to its arable farming business for the remainder of 2012 is to prove commercial yields for rice and beans at its operation in Bas Congo.
Feronia has the infrastructure in place for drying, storing, and processing crops produced on 4,000 to 6,000 hectares, depending on yields achieved.
The company added that it does not intend to expand the arable farming operation until commercially compelling yields have been achieved on a scale of up to 2,000 hectares. Once such yields have been achieved, the company will consider expanding the scale of the planting programme.
With excess processing capacity in place, such an expansion can occur relatively quickly and with minimal capital expenditure outside of costs associated to land clearing and preparation.
Feronia's executive chairman Ravi Sood added: "In the coming quarters Feronia expects to complete several key investments."
"In the second quarter the company expects to complete the construction and commissioning of the processing facilities for its arable farming operation. In the fourth quarter, the company expects to complete the construction and commissioning of the new palm oil mill at the Yaligimba plantation.
"Completion of each of these facilities will constitute a major milestone for the company. It is well positioned to leverage this significant capital investment to grow for the next many years."