Mr. Ravi Sood reports

FERONIA INC. REPORTS 2014 RESULTS

Feronia Inc. has released its audited financial results for the year ended Dec. 31, 2014. All amounts in this release are expressed in United States dollars unless otherwise indicated.

Highlights in 2014:

• Produced 70,887 tonnes of fruit (2013: 45,015 tonnes), a year-over-year increase of 57 per cent;
• Produced 13,010 tonnes of crude palm oil (2013: 8,269 tonnes), a year-over-year increase of 57 per cent;
• Increase in revenue of 61 per cent to $10.8-million (2013: $6.7-million), including from the sale of:
  • 11,535 tonnes of crude palm oil at an average price of $799 per tonne (2013: 7,404 tonnes at $844 per tonne);
  • Palm kernel oil sales of $870,000 (2013: $274,000);
• Fresh fruit bunch yield of 7.4 tonnes per hectare (2013: 7.1 tonnes per hectare);
• Oil extraction rate of 18.4 per cent (2013: 18.4 per cent);
• Environmental and social assessment of palm oil operations commenced;
• Signed new collective agreement with the six unions which represent the company's 3,600-plus employees;
• Replanted 4,639 hectares (2013: 5,007 hectares);
• Appointed new chief executive officer, Xavier de Carniere;
• Net loss for the year excluding the gain/loss on biological assets of $18.6-million, an increase of $2.2-million or 13 per cent compared with $16.4-million in 2013;
• Net loss attributable to Feronia including the gain/loss on biological assets was $15.6-million or 28 cents per share, compared with a loss of $10.1-million or 33 cents per share in 2013.

Subsequent events

• Entered into subscription agreements for private placement of up to $16,325,000 of secured convertible debentures led by CDC Group PLC, the British government's development finance institution, and including Ravi Sood, executive chairman of Feronia. On Jan. 22, 2015, a first tranche of $7.15-million has closed, and subsequent tranches of the offering will close at the option of the majority holders of the debentures and upon the meeting of certain conditions.

Gross loss for the year ended Dec. 31, 2014, was $4.78-million, an increase of $1,885,000 or 65 per cent compared with the prior year (2013: $2,895,000). This is largely due to a one-off adjustment relating to the impairment of arable land fair value of $497,000, additional fertilizer costs of $606,000 and additional costs relating to the use of heavy fuel in the boiler at Yaligimba of $500,000.

Net loss for the year ended Dec. 31, 2014, of $20,267,000 was $7,402,000 higher than in 2013 (2013: $12,865,000). Of this, $5,202,000 was due to the movement on the gain/loss on the biological assets, which in turn was largely driven by the fall in the three-year average price of crude palm oil used in the valuation model. The remainder was mainly due to an increased cost of sale of $6,027,000, offset by a $4,142,000 increase in revenues, both driven by a 59-per-cent increase in the amount of crude palm oil sold in the year and the arable land impairment of $497,000.

The higher production levels in 2014 were largely due to the commissioning of the Yaligimba mill and resumption of production at the Yaligimba plantation.

Since 2010, the company has replanted 16,707 hectares of new trees, of which 1,027 hectares or 6 per cent were producing in 2014. As a result of the high percentage of immature and young palms in the company's plantation, the average yield per hectare is low. This impacts all key operating metrics, including cost of goods sold and gross margin. The portfolio of immature and young palms is the company's core asset. Young plants have a negative contribution to operating results and are a key factor in current gross losses. These losses, which are in line with company expectations, are expected to reverse as the trees mature and more hectares come into production.

Fresh fruit bunch yield per hectare for the year ended Dec. 31, 2014, was 7.4 tonnes per hectare, compared with 7.1 tonnes per hectare in 2013. Rehabilitation work undertaken at Yaligimba, which included extensive weeding of mature hectares, began to be reflected in an improvement in operational performance in fourth quarter 2014. Fresh fruit bunch yields per hectare at Yaligimba are now broadly in line with those at Lokutu.

The following three factors currently have an impact on overall performance of the plantations:

1. Young age profile of plantation: The large percentage of immature palms in the company's plantations will continue to negatively impact its average yield for the next several years. Normal course maturation of the company's plantations will result in substantially improving yields over time;
2. Processing capacity limitations at the Lokutu mill: The installation of a new boiler at Lokutu in 2015 will facilitate greater throughput at the mill due to higher steam pressure reducing sterilization times;
3. Nutrient deficiencies at Boteka plantation: Fertilizer, ground limestone and guano have been applied to correct the deficiencies which, combined with a normal course fertilizer and soil maintenance regime, the company anticipates will result in yield improvements in 2016.

The company realized an oil extraction rate for the year ended Dec. 31, 2014, of 18.4 per cent (year ended Dec. 31, 2013: 18.4 per cent), but believes that the installation of the new boiler at Lokutu in 2015 and continuing improvements in its operational practices will be reflected in an increase in oil extraction rate over the next few years. The company remains confident that an oil extraction rate similar to those achieved in Southeast Asia is realistic in the medium term.

Over time, the company's cost of production on a per-tonne basis is expected to decline substantially. This remains a key objective of the company.

Mr. Sood, chairman of Feronia, commented: "Two thousand fourteen was another year of great progress across all key metrics. Although we continue to experience normal course challenges typical of our industry, and some challenges unique to the rehabilitation of a 104-year-old business in the Democratic Republic of the Congo, we are increasingly seeing the substantial investment in the rehabilitation of our palm oil business reflected in increased production, efficiencies and economies of scale. We expect this trend to continue in the coming years, as our large portfolio of young palms matures, and increasingly contributes to improving volumes and reducing production costs per tonne.

"In addition to the operational progress we have made this year, the progressive implementation of our environmental and social action plan (ESAP) represents considerable achievement for the company. The ESAP is a road map for Feronia to implement environmental and social best practice, improve its social infrastructure, and reach and maintain the highest standards in sustainability and community inclusion. We continue to invest the substantial time, capital and management attention required to elevate our business to the highest global standards, and the results achieved to date are tangible and will benefit all stakeholders in the long term."

Mr. de Carniere, CEO of Feronia, added: "Since the beginning of 2014, global palm oil prices have dropped by more than 20 per cent. This situation is having a material impact on all producers, Feronia included. However, having assessed the state of the business in my first 100 days as CEO, and seen what has been achieved since Feronia acquired the business in 2009, I am confident that these low prices will not prevent us from achieving our goals in a measured and pragmatic fashion.

"Despite the low global palm oil prices, the DRC has seen several new commercial palm oil processors commence operations during the last year. We believe this is a result of the large and growing demand for crude palm oil products in the DRC, and represents a positive development which is now being reflected in stronger pricing; this is a trend we expect to continue."

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