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December 2022 Report

I trust you all enjoyed a splendid Christmas and our best wishes for a wonderful 2023!

It’s time to look back on the year and consider.  And what better place to start than with our budget.

On the expenses side, we were well within budget, even achieving the targeted 15,000 new vines with a reduced cost.  However, the lack of investment arriving as promised meant that we did not achieve all our targets.

Let me explain.

At the beginning of the year, a new investor proposed that we limit the number of shares sold to a further 5,000 which would be more than enough to see us through until first harvest, and promised to sell the majority of these shares.  Foolishly, we agreed and cancelled our new marketing plan.  Of course, only some 2,000 shares were actually sold, many by ourselves, which has caused a belt tightening exercise and prevented us from buying green beans as planned.  We have revoked this idea now, and gone back to normal but the new marketing plan won’t kick in until 2023.

This should be the first year, 2023, in which we have a decent harvest.  However, La Nina meant we didn’t have a dry season, essential to create the flower buds, and so we had a tiny percentage flower, maybe 10% of forecast.  This combined with the lack of share sales caused not just belt tightening, but angst as to whether we were doing the right thing.  At this point, the investor introduced us to the person who tried to buy us over a year ago, and sure enough he came in with another derisory offer which we don’t consider.

We have another person, claiming to front a new green fund using IT money from California.  We are awaiting their offer, but there are plenty of concerns, although on the bright side it is all the money we could wish and they propose to be hands off – as long as we hit targets.  Against that, we have an offer from Spain which is enough to carry us through the year with very reasonable terms and an Indonesian investor wanting shares – lots of them, no quibbling.

So, next year looks to be sorted financially, although nothing is signed to date and these things have a way of dragging on.  And on.

Targets for 2022 and how we did:

With 26,000 plants in 2021, we aimed to plant 15,000 vines in 2022.  Basically, we did, although Gardens 22 and 24 are still awaiting vanilla vines and 20 and 23 are part planted.

Add composting to future gardens.  Done.  Balinese are very keen on this now. In fact, we have 3 cows to provide extra manure to enrich the compost.

Review stocktaking to forecast yields per square metre.  We can’t do this yet, because the yields are insufficient to be relevant.  We have a number of issues to consider, not least is the difference in spacing of the vines in different gardens.  We may have to forecast by garden, rather than by number of vines or by length of rows (per metre).

Further, we were trialling lobsters, which we have decided to go ahead with, although there are still challenges to overcome.  We are producing fabulous lobsters, very much in demand, but the mortality rate is too high and we don’t have enough!  We are confident we can overcome these.

So, targets for 2023.

Our first challenge is the budget.  This is so dependent on the funds that we bring in, that we rather need several!  Budget 1 is current costs, assuming no increase and limited investment, $200,000.  Budget 2 is slow increase, slightly greater investment, $300,000.  Budget 3 is moderate, enabling us to buy green vanilla by March, $600,000, Budget 4 is full speed ahead, developing our new projects and getting into Agarwood at last, $1 million.

Target 1, vanilla.  Achieve 60% of vines in gardens 1 – 14 with a minimum of 5 hanging dead end branches (where the flowers arise).   This target to be achieved by July and will dictate the size of the crop.  Note – split gardens to achieve 60% only in the older parts, eg Garden 5.

Target 2.  Achieve a further 10,000 vines planted.  Reduced target to allow us to focus on maintenance and ensure a good crop in 2024.

Target 3, Lobsters.  Producing 2,000 lobsters over 100g per month by June.

Target 4, refine Black Soldier Fly production where we have a written SOP.

Target 5, BSF production increased to 50% of lobster diet by May.

Target 6, our own sales force in operation by March.

Target 7, new offices in the warehouse with call centre to take orders (this depends on being Budget 2…)

Currently, our monthly expenses are around Rp 150 million, or $10,000.  We expected to start offsetting those with lobster sales this January, but we discovered that temperature fluctuations killed lobsters, which has put us back.  We have reduced the problem by increasing pond depth, but really need to roof the ponds before next rainy season.  We did try to buy in large lobsters from Javanese breeders, but they also lost their stock to the rainy season.  So we are still 6 months away from selling large lobsters and we are considering whether or not to start selling smaller ones.


Further Activities, Lobster spin offs.

The first of these may seem weird, but it stems from the fact that the hardest thing in farming is getting your protein.  BSF gives us a tremendous advantage in doing this, if we have a simple and repeatable method.  We do, which I shall cover in depth on the website soon, but basically, we are collecting vegetable refuse FOC from the markets, and turning this into maggots within 2 weeks in simple containers.  Very much a good old military KISS method:  Keep It Simple, Stupid.  When a method is basic, it is very hard to get it wrong.

So, with this endless supply of free protein, what else could we produce?   Pigs?  Chickens?  Hmm, lots of competition.  Ah, turkeys!  High value, and we can make turkey ham which is halal!  A turkey chick costs us Rp 50,000 including delivery from the hatchery.  After 14 weeks, a dressed turkey should weigh in excess of 5 kg when cleaned, and sells at Rp 85,000 per kg to the wholesalers, Rp 200,000 per kg retail if organic.  Cost of feed is 4kg per kg of weight, Rp 200,000 per bird.  So, a potential profit of between Rp 150,000 and 750,000 per bird, more if they are fattened on BSF.  Trials are ongoing in two locations, at Garden 1 and in the warehouse.  Also experimenting with buying fertile eggs and incubating them.  This is before we look at making ham from the meat.

I wanted snails in the lobster ponds, so the lobsters could eat them.  Dolar got bored picking wild snails from his fishponds and bought 4 edible golden snails from the market for Rp10,000.  About 2cm in diameter, these have ballooned to nearly 10cm in diameter and are producing babies right left and centre.  The lobsters aren’t eating them all, and we’re seeing huge snails in the ponds, which immediately makes me think, escargot!  A free by-product that I am sure we can develop.

Garden 24 has a waterfall.  Still need to measure the flow, but we think we can get at least 10mw per hour.  The Raja is speaking to PLN to get us licences to sell the electricity.  Even if we don’t get that, this would power a freezer unit for us which we will need in 2024.  This, of course, isn’t a priority.

Other products.

We did look closely at ginger, for which the international market appears large.  The same for coconut products.  All of these have issues that keep them on the backburner, mainly with sales where we need our other products to open the door.

Agarwood is still our next big project, and we have an opportunity to open a factory in the Mentawai islands, working with the original islanders.  This is something close to our heart, developing business for the traditional people who are so often side-lined.

All in all, we are looking forward to a year where the end of ENSO and the solar minimum will see the vanilla flower beautifully, we start to sell lobsters and turkeys will bring in a small amount. Each of these projects will see us create cooperatives to work with the local farmers - we cannot do it alone!

We are not expecting to pay a dividend in 2023, but we should break even on a monthly basis.  2024, we expect to have a vanilla crop, but of course no dividends will be ready before 2025 as previously forecast.

Rex Sumner
Chairman at PT Royal Spice Gardens

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