Mr. Ravi Sood reports

FERONIA INC. REPORTS Q2 2014 RESULTS

Feronia Inc. has released its unaudited financial results for the three and six months ended June 30, 2014. All amounts in this release are expressed in U.S. dollars unless otherwise indicated.

Second-quarter 2014 highlights:

• Produced a company record 3,660 tonnes of crude palm oil (second quarter of 2013: 2,913 tonnes) from 20,083 tonnes of fruit (second quarter of 2013: 15,544 tonnes), a year-over-year increase of 26 per cent;
• Company record revenue of $4.0-million (second quarter of 2013: $2.2-million) including from the sale of:
  • 4,368 tonnes of CPO at an average price of $787 per tonne (second quarter of 2013: 2,236 tonnes at $778 per tonne);
  • 289 tonnes of palm kernel oil at an average price of $897 per tonne (second quarter of 2013: nil);
• Replanted 1,561 hectares of oil palm (second quarter of 2013: 2,030 hectares);
• Oil extraction rate (excluding Yaligimba) of 18.435 per cent (second quarter of 2013: 18.74 per cent);
• Fresh fruit bunch yield (excluding Yaligimba) of 2.5 tonnes per hectare (second quarter of 2013: 2.6 tonnes per hectare);
• FFB yield of 1.4 tonnes per hectare at Yaligimba;
• Production levels at Yaligimba increasing as planted hectare rehabilitation (including extensive weeding program) progresses;
• Harvested 238 tonnes of paddy rice planted in March/April, 2014, and achieved yields of 1.26 tonnes per hectare;
• Net loss attributable to Feronia was $3.6-million or seven cents per share, compared with a loss of $2.2-million or eight cents per share in second quarter of 2013

Subsequent events:

• 3,150 hectares of oil palm replanted in the year to date as at Aug. 23, 2014.

Discussion

For the six months ended June 30, 2014, the company produced 35,489 tonnes of FFB and 6,511 tonnes of CPO, representing increases on the corresponding period in 2013 of 41 per cent and 39 per cent, respectively. The majority of the increase relates to contribution from Yaligimba plantation where there was no production until the fourth quarter of 2013.

The rehabilitation of Yaligimba, which includes extensive weeding of mature hectares, and the reconfiguration of staffing to reflect the plantation's return to production, continues. Production levels at Yaligimba are currently below those at Lokutu, however, the company expects operating results at both plantations to be similar over time.

The company realized lower FFB yields for the six months ended June 30, 2014 (3.69 tonnes per hectare), than during the six months ended June 30, 2013 (4.22 tonnes per hectare). Several factors contributed to this decline:

1. Continuing access issues related to the rehabilitation of Yaligimba plantation prevented the harvest of all fruit resulting in a very low FFB yield at Yaligimba, not representative of the actual agronomic yield or the long-term potential yield. Additional resources have been allocated to the rehabilitation of Yaligimba and substantial performance improvements have been observed and are expected to continue.
2. Worsening nutrient deficiencies at Boteka plantation continued to negatively impact yields. Fertilizer, ground limestone and guano are being applied to correct the deficiencies and, combined with a normal course fertilizer and soil maintenance regime, the company anticipates a substantial improvement in yields commencing in the quarter ending Sept. 30, 2015.
3. Approximately 10.7 per cent of the palms harvested in the six months ended June 30, 2014, were in their first year of production and therefore low yielding. Since minimal fertilizer application was made to immature areas, these palms are contributing relatively little production and lowering the average on a per-hectare basis. Management believes that its continuing fertilizer regime will result in a substantial improvement in yields from young palms.
4. Downtime and capacity limitations at the Lokutu mill constrained harvest and therefore realized FFB yields.

Replanting of oil palms commenced in March, 2014, in line with rainfall patterns, with 1,561 hectares planted in the second quarter of 2014 (second quarter of 2013: 2,030 hectares) and 1,859 hectares replanted as at June 30, 2014 (June 30, 2013: 2,452 hectares). As at Aug. 23, 2014, the company had replanted 3,150 hectares in the current year and in excess of 14,000 hectares since it acquired PHC in 2009. As at Aug. 23, 2014, Feronia's oil palm nurseries contained 579,465 seedlings and were sufficiently stocked to complete the 5,000-hectare replanting program for 2014.

Ravi Sood, chairman of Feronia, commented: "We have experienced a variety of challenges related to the rehabilitation of Yaligimba plantation and at the same time, faced normal course issues related to operations at our other two plantations, Lokutu and Boteka. Management has taken action to improve the performance at Yaligimba in the short term and is continuing to move forward with various initiatives designed at improving the long-term profitability and sustainability of the company.

"During the second quarter the company appointed an environmental and social governance director to manage the implementation of its environmental and social action plan. The ESAP is a short-term action plan, funded via a dedicated debt facility, designed to make material improvements and implement processes and procedures that will be ongoing and a vital part of guaranteeing the company's sustainability.

"The company has engaged Versa Partners Ltd., a Malaysia-based leading agri-business consultancy, to assist in the identification and implementation of operational and technical efficiency improvements. Versa has extensive experience in plantation management with a particular expertise on performance improvement. A key objective of the company's engagement with Versa is to augment long-term training programs to ensure the ongoing implementation of global best practices."

Mr. Sood concluded: "We continue to grow and drive value through our replanting program and ongoing performance improvement initiatives. We expect to complete 2014 with approximately 25,000 hectares planted of which approximately 16,000 hectares will be immature. While this is not an optimal portfolio from an age perspective for current production, it speaks to the tremendous latent value in our operation and the clear path forward to production and revenue growth. In the short-term we remain focused on delivering performance improvement and making investments in our infrastructure, people and communities that will have substantial long-term returns."

We seek Safe Harbor.