Join our community of smart investors

Strong palm oil prices allow MP Evans to increase payout

Company to offer 5p special dividend on top of 30p full-year payout
Strong palm oil prices allow MP Evans to increase payout
  • Palm oil production increased by 15 per cent to 312,900 tonnes last year
  • Average mill gate prices rose by 37 per cent to $810 per tonne

Palm oil producer MP Evans (MPE) will pay a special dividend of 5p per share on top of its planned 30p per share payout for 2021 on the back of its previously-announced land disposal in Malaysia and improved crop production in Indonesia.

The company said the crop of fresh oil palms it handled last year increased by 13 per cent to nearly 1.37m bunches, of which 809,000 were its own – the rest were either produced by smallholders on its estate or by independent smallholders.

Crude palm oil production at its mills increased by 15 per cent to 312,900 tonnes. Average mill gate prices rose by 37 per cent to $810 (£400) per tonne. Prices have continued to rise and currently stand at more than $1,000 per tonne, the company said.

MP Evans now produces all of its palm oil in Indonesia. The last 70 hectares of land it owned in Malaysia at the Bertam Estate was sold to joint venture partner Bertam Properties (in which it has a 40 per cent shareholding) for about $24m in October.

The 30p full-year dividend already flagged by the company represents a 36 per cent increase on the prior year.

With the company having cut debt last year from $78.1m to under $10m it could soon move into a net cash position, broker Peel Hunt noted.

This gives it the firepower not only to invest in new plantations and milling capacity but also to further increase its dividend. It is also looking at acquisitions, the broker added.

It expects the company to achieve earnings of 82.9 US cents per share this year. MP Evans shares currently trade at 14 times this level, having gained in value by about 24 per cent over the past six months. However, this is still below both its five-year average and its peers, according to FactSet, and given its growth prospects we maintain our buy recommendation.