Shareholder Newsletter September 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 2013.

Highlights

  • First export shipment for 2013/2014 successfully fulfilled, second cargo on the water
  • Cash flow positive for the quarter
  • 100:1 Share consolidation completed
  • Unmarketable share parcel program underway

Export Program

The first 5,000 tonne shipment arrived in the US Gulf during the first week of August 2013 with settlement occurring soon thereafter. The second shipment of 4,000 tonnes is expected to unload in the US Gulf during the last week of November 2013. We are in the process of building for the next export shipment and we expect our export program to continue into calendar year 2014.

Cash Flow Positive for September 2013 Quarter

Positive cash flow of $1.4m was recorded for the September 2013 Quarter, driven by funds received from the final Business Interruption (BI) Insurance settlement and the sale of the first export shipment.

Included in the overall cash balance are payments of approximately $9.5m for raw materials and processing costs to satisfy the second export shipment that is currently in transit, additional inventory to cover the planned Barnawartha plant shutdown and for the ongoing export program.

100:1 Share Consolidation

At a General Meeting of Shareholders on 26 August 2013, 96% of shareholder votes cast agreed to consolidate the shares of ARfuels on a 100:1 basis.

The share consolidation was successfully completed on 10 September 2013. Following the consolidation, ARfuels has 41,956,145 ordinary shares on issue with an adjusted share price at a level more attractive to a broader range of investors.

Unmarketable Share Parcel Program

On 19 September 2013, we announced the implementation of an unmarketable parcel share sale facility. This facility will provide a means to allow shareholders with share parcels of less than $500 to sell their respective parcels without incurring brokerage or handling fees. The program is available to over 1,500 shareholders. The program closes on 8 November 2013 with eligible parcels to be sold after that date. On completion, the program should rationalise our shareholder base and provide cost and administration efficiencies.

Sales and production

During the September 2013 Quarter sales were negatively affected by mechanical and logistical issues at some of our key distribution terminals. These issues reduced sales demand across July, August and into September 2013 and consequently turnover was not at anticipated levels.

As noted in earlier updates, the plan to increase our domestic sales base requires the installation of biodiesel storage and blending infrastructure at the mainstream diesel terminals in SA and WA. We are still working towards establishing these facilities. Progression of this remains slow but we believe the right solution is being developed for both plants.

Until the infrastructure solutions have been finalised and are in place, export sales, although at lower margins than domestic sales, will underpin production activity at Largs Bay and Picton.

A planned plant maintenance shutdown at Barnawartha in September 2013 affected output levels for that month. Output from the Largs Bay and Picton plants continues to improve and is largely driven by sales demand.

ARfuels — Biodiesel Sales Litres ‘000

ARfuels — Production Litres ‘000

Feedstock

Delivered feedstock prices throughout the quarter increased due to continued strong activity in the feedstock markets by offshore buyers particularly via Singapore and China. The increase in feedstock prices is partly being offset by increases in our domestic sales price of biodiesel. Feedstock prices have reduced since the end of the September 2013 Quarter with the benefit of these reductions to flow through into the December 2013 Quarter.

Financial position

Material items relating to our financial position for the September 2013 Quarter are:

  • Receipts totalled $26.6m, including $3.9m in BI Insurance proceeds and receipt of US$7.0m for the first export shipment.
  • The second export shipment was despatched early September 2013 with negotiations to finalise further shipments underway. Receipts by 30 November 2013 of approximately $6m are expected from the second shipment. Cash payments for the quarter include payments for raw materials and processing in relation to the export order currently in transit.

The first half of FY2014 will be negatively affected by slower domestic sales and the deferral of the third export shipment to January/February 2014. This coupled with the cost of fully resourcing the plants will mean the first half year will be a loss. We expect to recoup that loss in the second half with a year end NPAT target of $0-$2m.

General Meeting

The Annual General Meeting of Shareholders has been called for 1 November 2013. The Notice of Meeting, Explanatory Memorandum and Proxy Forms with our Annual Report to Shareholders were despatched on 27 September 2013.

Dispute with GBTI

The statement of claim issued by Global Biofuels Trading Inc (GBTI) against ARfuels remains in progress. The claim is being vigorously defended and further announcements regarding this matter will be made as appropriate.

New Branding

We refreshed our marketing with a new logo and branding. The new logo and branding was introduced in conjunction with the release of the 2013 Annual Report to Shareholders to expand and enhance all aspects of our marketing and sales. Our new look is consistent with our intention to ‘create a sustainable future with biodiesel’.


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 [email protected] If you would like to receive the Quarterly Newsletter via email please forward your name and email address to [email protected]

Yours Sincerely,
andrew-white-sgn
ANDREW WHITE
Managing Director and Chief Executive Officer
31 Oct 2013

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