Sipef NV

AvH: 27.65%

(USD 1,000) 2014 2015
Turnover 285,899 225,936
EBITDA 82,307 50,131
EBIT 60,819 21,992
Net result 48,967 19,226
Shareholders' equity (group share) 410,946 413,862
Net financial position -24,617 -50,521
Balance sheet total 571,383 577,108

Key figures





Beneficial interest AvH: 27.65%
AvH Contact: Tom Bamelis

Sipef, a listed agro-industrial group, is active in tropical agriculture, primarily the production of sustainable crude palm oil in Southeast Asia.

Information from the 2015 annual report

The group’s core activities are historically situated on the island of Sumatra in Indonesia, where a total of 44,762 hectares have been planted with oil palms and 6,248 hectares with rubber trees over a period of more than 90 years. In the hills near Bandung, on the island of Java, lies Cibuni, a high-quality tea plantation of 1,777 hectares. The Indonesian operations are the most important for the group, representing 64% of the gross oper­ating profit.

A second growth centre has been developed in Papua New Guinea since the 1970s. Especially in recent years this location has grown into an oper­ation with 13,558 hectares of oil palms and 3,283 hectares of rubber trees. These activities, com­bined with harvests purchased from neighbouring farmers, generate 24% of the gross operating profit.

The historically more important interests in African agricultural businesses have been gradually re­duced over the years due to a lack of recurrent contribution, and are now confined to the prof­itable production of bananas and tropical flowers for the European export market on a total area of 672 planted hectares, which in 2015 represented 9% of the gross operating profit.


Financial overview 2015

Sipef had a good year in operational terms, with increasing production volumes on most of its oil palm plantations and stable costs, but was con­fronted with considerably lower world market prices for palm oil and rubber. As a result, the turnover decreased by 21% and the gross oper­ating profit by 44% compared to 2014. Despite the improvement in the group’s general expenses, the operating result amounted to 22.0 million USD compared with 60.8 million USD in 2014.

As the long-term investments in the agricultural sector are financed entirely from the company’s equity, the financial costs are very limited. After an effective tax rate of 29.7%, Sipef realized a net result (group share) of 19.2 million USD, which is 61% down on 2014. The net result was also af­fected by a 2.6 million USD charge as a result of an unexpected change in the export tax system in Indonesia, which now also imposes a flat tax of USD 50/tonne on all exports of crude palm oil. Due to the early implementation of the new IAS41 reg­ulations for biological assets, the annual restate­ments no longer apply. The figures for 2014 were restated on the basis of this new standard, which has been applied since January 1, 2015.


Operational overview 2015

Productie ENDespite relatively low palm oil production volumes at the beginning of the year due to the delayed effects of the drought in early 2014, sub­stantial production increases were recorded in the second half of 2015, so that overall annual production increased by 8.4% to 290,907 tonnes of palm oil. In the mature plantations in North Sumatra, the relatively new mature areas in partictic­ular saw increasing yields by hectare (+5.2%). In the Agro Muko plantations in Bengkulu province, total production volumes remained the same as a result of the intensive replanting programme that started two years ago and will only come into full production in a few years. The biggest increase in production volumes (+54.9%) was reported in the young plantations of the UWM/TUM group, where the growth-promoting measures produced higher yields in the more mature plantations. The difficult start to the year in Papua New Guinea due to heavy rainfall in the first quarter was more than compensated for in the second half of the year, allowing the year to end with a production growth of around 13% in Sipef’s own plantations. As a result of an additional support programme, palm oil volumes from harvests purchased from neigh­bouring farmers were 7.2% higher than in 2014. Despite the annual increase in labour costs im­posed by the local government, production costs in USD terms remained well under control. The general decrease in fertilizer and fuel prices, and especially the weakening of the local currencies in relation to the USD, entirely compensated for the inflation-driven increases in local labour costs.

World market prices of palm oil decreased very strongly in 2015. In the first quarter, market prices still remained fairly stable due to the relatively low production volumes in the two main production countries, Malaysia and Indonesia; nevertheless, as soon as production recovered, combined with very good soya bean and rapeseed harvests, sales prices were recorded in the second half of the year that have not been seen in years. Weak demand from a volatile China and low crude oil prices did little to bolster export, and resulted in large stocks in all producing countries in the fourth quarter, while world market prices kept fluctuating below the threshold of USD 600/tonne CIF Rotterdam.

Despite increasing production volumes (+4.8%) in therubberplantations in Indonesia, the contribu­tion of rubber to the gross profit turned negative. The low world market prices for natural rubber were driven by a temporary decrease in demand from China and an additional supply from young plantations in Vietnam and the African continent. For most production countries, the prices applied since the second half of the year are below their production costs and mainly prompted the small rubber producers to suspend their activities.

The black tea which Sipef grows in Indonesia is similar in quality to Kenyan tea, of which sales were considerably lower from the second quarter of 2015 onwards because of the drought. This meant that markedly better prices were offered, and that the gross profit contribution of the Cibuni plantation could recover in 2015. Thebananasgrown by Sipef are supplied from Ivory Coast at contractually fixed prices and volumes to mainly British and French customers, thereby lim­iting the impact of the volatile banana markets, driven by fluctuating volumes from Central and South America.

In view of the generally lower sales prices and margins in palm oil and rubber, the oil palm ex­pansion programmes were already adjusted dur­ing the 2015 financial year. In that respect, the proposed planting plan in Papua New Guinea was reduced to 593 hectares. In South Sumatra (Indonesia), more than 7,800 hectares have been compensated, and more than 3,300 hectares have already been planted or prepared for planting, of which 1,592 hectares in 2015. The total expansion for the group came to 2,369 hectares, putting the current total planted area at 70,358 hectares, of which 19% has yet to reach the production stage. In this expansion of operations, the sustainability aspects under the Roundtable on Sustainable Palm Oil (RSPO) certification remain paramount.


Outlook 2016

Despite relatively lowpalm oilproduction volumes at the beginning of the year due to the delayed effects of the drought in early 2014, sub­stantial production increases were recorded in the second half of 2015, so that overall annual production increased by 8.4% to 290,907 tonnes of palm oil. In the mature plantations in North Sumatra, the relatively new mature areas in Despite the generally lower palm oil production volumes in Indonesia and Malaysia at the be­ginning of 2016, the volume projections for the group are positive in view of the organic growth related to the increasing yields of the young plant­ations in UMW/TUM in North Sumatra and in Papua New Guinea. The large world stocks that depressed market prices towards the end of 2015 have now shrunk sufficiently to give a fresh boost to palm oil prices, despite a lack of demand from the biodiesel industry and a projected production increase of soya beans in South America. The constant growth in world palm oil consumption, driven by the food industry and the energy mar­kets, and the production cost advantage over the main competitors mean that the long-term future of palm oil as the main carrier of the vegetable oil markets remains positive. 

Because of the slight oversupply of natural rubber in relation to the temporary stagnation in demand from the Chinese tyre industry, Sipef expects fairly low world market prices in 2016.  

Sipef has already sold part of its anticipated palm oil production volumes at prices above 800 USD per tonne. If prices for the main products of palm oil, rubber and tea are maintained at current market levels, Sipef expects results for 2015 to be lower than last year. The final result will to a large extent depend on the attainment of the projected output volumes, the strength of market prices in the second half of the year, the maintenance of the current export tax on palm oil in Indonesia, and the evolution of local costs.


Press releases

16/02/2017 Sipef: Annual results 2016
06/12/2016 Sipef increases its interest in PT Agro Muko up to 95%.
20/10/2016 Sipef: Interim statement