New Britain's shares crashed after the palm oil producer revealed a collapse in half-year pre-tax profits and, although that leaves our buy tip well underwater, we'd nevertheless be inclined to cut our losses.
Although a soggy palm oil price and weather-related disruption to production meant that investors were braced for a fall, the 60 per cent drop in underlying pre-tax profit to $63.6m (£40m) was worse than expected. Some 30 per cent of that fall reflected a 4 per cent drop in the palm oil price so far this year, which is strange given vegetable oil inventories are at 20-year lows and drought has pushed the prices of substitutes such as soy higher in recent months. The appreciation of the local currency, the kina, versus the US dollar accounted for another 30 per cent, with weather the remainder. Higher rainfall meant a 6 per cent dip in the harvest of fresh fruit bunches and extraction rates fell, too, meaning oil volumes were 8 per cent lower.
Broker Liberum is reviewing its forecasts in light of the poor results, but expects full-year consensus earnings estimates to fall to 46¢, rising to 65¢ in 2013, assuming that palm oil prices remain flat.
NEW BRITAIN PALM OIL (NBPO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 598p | MARKET VALUE: | £897m | |
| TOUCH: | 585-605p | 12-MONTH HIGH: | 912p | LOW: 565p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 703¢* | NET DEBT: | 26% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 404 | 122 | 61.9 | 15.0 |
| 2012 | 366 | 66.4 | 30.8 | 15.0 |
| % change | -9 | -46 | -50 | - |
Ex-div: 3 Oct Payment: 2 Nov *Includes biological assets of $449m, or 299¢ a share £1=$1.58 | ||||
