Maple Energy (MPLE) has revealed that the steady ramp-up in ethanol production from its vertically-integrated sugar-cane operation in Peru hasn't gone to plan. That's the main risk with emerging production plays like Maple and, although 2013 should see significant operational improvements, we feel compelled to downgrade the shares to a 'hold' before the release of results next month.
Maple harvested 579,000 tonnes of sugar cane in 2012, well short of its original 900,000 tonne target. Moreover, harvesting during January and February 2013 yielded just 140,000 tonnes, so Maple will need to speed things along if it is to harvest 1m tonnes in 2013, as forecast by broker Cenkos. Lower-than-expected sugar cane yields and poor plant availability caused by unplanned maintenance will ultimately result in higher costs and lower earnings than previously expected for the year.
However, Maple's bosses still hope that the company can reach optimal production levels. The company has increased the number of mechanical harvesters to eight from six, has started planting more cane to increase the overall plantation size, and continues to tweak the processing plant in order to boost efficiency.
