Shares in MP Evans jumped above £10 for the first time after the palm oil producer unveiled a quadrupling in profits, backed by soaring prices of the vegetable oil, and hiked its dividend.
Shares in the London-listed group, which manages more than 50,000 hectares of planted oil palm plantations in Indonesia, soared 6.0% to 1020p in early trading, an all-time high, and taking their headway for 2022 to 23%.
The gain followed the group’s announcement of earnings of $91.78m for calendar 2021, up from $21.75m the year before.
MP Evans raised its final dividend by 8p to 25p taking the total payout for the year to 35p, up from 22p for 2020.
The group’s revenues for last year soared by 58% at $276.5m, backed by a 15% increase to 313,000 tonnes in palm oil production, backed by the opening of a new mill in August, as well as by booming prices of the vegetable oil.
“The CPO [crude palm oil] price followed an upward pattern for the majority of the year, ending at $1,305 per tonne cif Rotterdam in response to recovering demand for palm oil combined with some continuing restrictions on supply,” the group said.
These constraints had related “particularly… to labour controls in Malaysia”, where measures to curtail the spread of Covid limited the availability of foreign staff, on which the country’s plantations rely for most of their workforce.
‘From strength to strength’
The comments came even as palm oil futures rose by 3.2% to 5,957 ringgit a tonne in the benchmark Kuala Lumpur market – a price up 49% year on year, albeit below the record of 7,268 ringgit a tonne set two weeks ago.
“The palm oil market has gone from strength to strength,” said Peter Hadsley-Chaplin, the MP Evans executive chairman.
Besides the curbs on Malaysian palm oil output, the group acknowledged that recent price strength in had been “partly attributable to restricted vegetable oil supply due to tragic events in Ukraine… and the consequent pressure on global vegetable oil supplies”.
Ukraine is the top producer and exporter of sunflower oil, a major rival vegetable oil to palm oil.
The ability of Indonesian palm oil producers to exploit the booming market has been limited by the country’s export levy, for which the government last week raised to $375 per tonne, from $175 per tonne, the maximum take.
“Nonetheless, strong mill-gate prices of over $1,050 are still being achieved by the group,” MP Evans said.
Benchmark Rotterdam prices, which early this month topped $1,900 per tonne for the first time, stand at roughly $1,800 per tonne.
MP Evans also said that the total amount of palm fruit it had processed over the first two months of 2022 fallen by 9.5% to 196,200 tonnes, “mainly due to crop seasonality”, with the decline in the main down to a dip in bought-in crop rather than own-grown supplies.
“However, the group expects the long-term trend of increasing crop to reassert itself as the year progresses,” the company said.