Feronia ups oil production by 90% in Q3

Africa-focused farming and oil palm plantation company Feronia (CVE:FRN) narrowed its third-quarter losses as revenue grew four percent on a 90 percent improvement in crude palm oil production, and higher prices.

For the period that ended September 30, revenues grew to $1.35 million from $1.29 million a year earlier, with net loss narrowing to $607,533 from a loss of $1.29 million a year earlier.

On a year-over-year basis, Feronia said palm oil production was up 90 percent to 1,917 tonnes in the third quarter, and a total of 1,768 hectares of new oil palms were planted in the nine months that ended September 30.

Realized average sales price for CPO was $991 per tonne in the quarter, compared to $742 per tonne a year earlier.

Feronia CEO Bill Dry said: "Feronia continues to make significant progress at its oil palm division as measured by our two key operational drivers: increased crude palm oil (CPO) production and new plantings.

"The arable farming operations have also continued to progress according to our development plan with land preparation, including the application of lime  completed during the third quarter. This will allow us to sow the company’s first commercial crop of rice during the fourth quarter."

Feronia said it achieved gross margin of 50 percent for the quarter and 45 percent for the nine months ending September 30, compared to -6 percent and 8 percent for the respective comparable periods in 2010.

As at September 30, the company had $19.4 million in cash and no debt.

During the third quarter of 2011, the company’s major CPO customer engaged in normal course maintenance at its plant which resulted in temporary closures and reduced operating capacity. As a result, crude palm oil sold during the latest quarter was approximately 1,200 tonnes, versus the 1,917 tonnes produced.

However, Feronia said it expects it will sell more CPO than it will produce in the fourth quarter and the CPO held in inventory will be reduced.

Operating costs for the third quarter were $2.1 million, an increase of 33 percent due to higher professional fees, and general and operating expenses which were partially offset by a decrease in share-based payments, the company said.

Looking ahead, Feronia's chairman, Ravi Sood, said: "The key drivers for the success of Feronia are new plantings and increasing production volumes. The short and medium-term objectives reflect the focus on these key metrics."

In the fourth quarter, key objectives for Feronia are the completion of the 2,000 hectare oil palm replanting program, production of 2,000 tonnes of CPO, and the completion of the sowing of the first commercial crop of rice on at least 1,000 hectares.

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.