Shareholder Newsletter September 2012 Quarter

Dear Shareholder,

We are pleased to provide you with an update on the business activities and progress of Australian Renewable Fuels Limited (ARfuels) for the quarter ending 30 September 2012. In the September quarter, we have continued our positive progress from this year’s June and March quarters, with sales running consistently across the quarter and the highlight being the unaudited management accounts recording a net profit after tax in August and September.

Highlights

  • At 30 September 2012, ARfuels had a net cash overdraft position of $4,610K reflecting a net decrease in our cash position of $729K for the quarter. The negative movement in cash for the quarter was attributable to building inventories for an export shipment which completed on 28 October 2012. The receipt of the cash from that transaction more than offsets the cash usage for the September 2012 quarter.
  • The unaudited management accounts for the quarter ended 30 September 2012 have recorded a small net loss of $23K (after depreciation and amortisation of $831K), and a positive EBITDA of $1,311K. This is a substantial improvement from the same quarter last year, which recorded a net loss of $2,245K and EBITDA loss of $2,009K.
  • As mentioned above, we completed another export shipment on 28 October 2012 with approximately 2,500 tonnes being shipped to the USA, bringing our total exports over the past 12 months to more than 10,500 tonnes.
  • The rebuild program of the Largs Bay plant is almost complete, and commissioning is scheduled for the first half of November. The insurance policy is expected to fully cover the cost of the rebuild. The business interruption/loss of profits claim continues in progress and is expected to be finalised over the next few months.

Sales

Sales are becoming more consistent with the majors providing a base line level of sales for the business.

The chart below demonstrates the increase in sales volumes to the oil majors with the opening of the new Shell Victorian biodiesel facility a highlight. Shell is selling both B5 and B20 products from this terminal – the B20 product is a world first for Shell and represents a real step forward for the industry and ARfuels.

We continue to work on a range of domestic sales opportunities for the Picton and Largs Bay plants. We are working on the implementation of biodiesel infrastructure in WA and SA to provide the facilities for biodiesel to be included in mainstream diesel distribution. This is progressing and will provide the impetus for sales into both of those markets.
Biodiesel Sales Litres September 2012

We expect to be able to provide a further update on this progress in the December quarter.

Biodiesel generates some favourable outcomes to industry faced with a carbon cost and ARfuels have recognised a number of opportunities to work with mining and transport companies to lessen their carbon footprint and any resulting carbon tax.

As stated, we expect to see the Largs Bay plant come back on line in November 2012 – our sales capacity will be restricted until then. The financial consequences of this are the subject of a claim under our insurance policy, which is currently in progress.

Production

Barnawartha production was reduced in September, due to the annual maintenance shutdown. The plants are currently running below their name plate capacities – this is an ongoing focus to increase sales orders from both export and domestic customers. We expect this to translate into improved production volumes over the next six months.
Plant production June 2012

Feedstock

Feedstock prices for tallow and used cooking oils were stable during the September quarter with average prices between A$750 to A$850 per tonne. We expect these levels to generally continue.

We continue to work on procuring alternative feedstocks, including higher quality RMO which can be processed at the existing plant at Barnawartha. This is progressing and we will provide a further update when a supply contract is firm.

Financial Position

An update of the company’s cash position was provided in the Appendix 4C cashflow report for the September quarter. As stated above, the business is recording improved results with an EBITDA for the quarter of $1,311K and a small year to date net loss of $23K (unaudited management accounts).

The 30 June 2012 financial statements were released on 7 September 2012 and the annual report was released on 29 October 2012.

The Annual General Meeting (AGM) will be held on 29 November 2012 – the Notice of AGM has been released this week.


If there are any queries in relation to the business of the company or the matters outlined above, please do not hesitate to contact Andrew White on 03 9981 0010 or .

Yours Sincerely,
andrew-white-sgn
ANDREW WHITE
Managing Director and Chief Executive Officer
31 July 2012

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