1. The producing hectares at the Yaligimba plantation are not currently being harvested and as a result are not contributing to FFB or CPO production.2. During the years ended December 31, 2010 and 2011, the Company classified palms aged 4 to 30 years as mature and producing. Going forward, management has elected to classify palms aged 4 to 25 years as mature and producing, resulting in a reduction in the number of producing hectares.3. FFB Yield/Ha basis excludes Yaligimba production for 2011 and 2010.4. "FFA" means Free Fatty Acid.
Recent developments in the oil palm operations
As at December 31, 2012, Plantations et Huileries du Congo (PHC), being the main operating unit of Feronia, had concessions of 107,892 ha located in the provinces of Equateur and Orientale in the DRC. In 2012, PHC accounted for 100% of Feronia's revenues.
As at December 31, 2012, the assets and operations of PHC consisted of the following:
-- 10,213 ha of producing palms (6,310 ha of producing palms excluding 3,903 ha of producing palms at the Yaligimba plantation that are not currently being harvested);-- 7,774 ha of immature oil palms;-- 49,078 ha of surveyed plantable reserves;-- two oil palm mills, one which produces crude palm oil ("CPO") only and the other which produces both CPO and palm kernel oil ("PKO");-- a workforce of 3,541 employees including 38 managers;-- supporting infrastructure of 1,579 km of currently operational roads, 3,875 houses for employees and managers, 60 schools, four hospitals, six dispensaries and 13 health centres;-- three oil palm nurseries totaling 48.5 ha and containing an aggregate of 998,637 palm seedlings, sufficient to plant at least 4,993 hectares; and-- the Yaligimba Seed Research Station, one of Africa's pre-eminent oil palm seed research and breeding operations.
As previously noted, in the first quarter of 2012 the Company ceased transporting fruit by barge from Yaligimba to the palm oil mill at Lokutu due to escalating costs and the deterioration in quality resulting from transportation. The total number of producing hectares consequently decreased by 38.2% to 6,310 ha and the total tonnage of fruit production decreased by 17.2% year-on-year. On a like for like basis, excluding Yaligimba, fruit production decreased by 9.93% and 6.75% for the three and 12 months ended December 31, 2012, respectively, compared to the corresponding periods in 2011.
This reduction is primarily a result of the following factors:
1. A reduction of producing hectares at Boteka and Lokutu from 8,410 ha to 6,310 ha following the Company's previously disclosed reclassification of palms aged 4 to 25 years as mature and producing, the clearance of palms older than 25 years for replanting and the cessation of harvesting fruit from palms older than 25 years which have lower fruit yields, lower extraction ratios and require more time to harvest. This has resulted in an improvement in FFB yield per hectare.2. Adoption of best practice harvesting procedures including fruit quality checks, in-field supervision, training and field transport improvements to ensure only sufficiently ripe fruit is harvested. These practices have resulted in an improvement in CPO extraction rates with an extraction rate of 18.8% achieved in December 2012.
Management believes that these improved practices are in the long-term interest of better profitability but have affected gross margin in the short term.