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Surging palm-oil price handy for MP Evans

Higher prices and volumes produced record results, with more growth plans afoot
Surging palm-oil price handy for MP Evans
  • Production at sixth mill to start this year
  • Dividend up by more than 50 per cent 

MP Evans (MPE) has taken advantage of a swelling palm-oil price. The Indonesia-focused producer recorded an average mill-gate price of $810 (£614) per tonne for its financial year and $1,050 post-period – the latter impacted by denuded vegetable oil supplies from Ukraine – up from $591 last time around. Combined with an increase in volumes, this drove revenue and profit forward and allowed the company to raise the full-year dividend by more than a half.

Total crops processed rose by 13 per cent to 1.4mn tonnes, as expected from January’s trading update. Production rate growth also jumped, with crude palm oil surging by 22 per cent to 258,000 tonnes. With young palms and management keen to buy more land – with a focus on “complimentary or incremental land” in the words of chairman Peter Hadsley-Chaplin– the growth path looks steady.  

Chief executive Matthew Coulson told Investors’ Chronicle that the new mill at Bumi Mas in Kalimantan, which started production in August and posted an extraction rate of 22.8 per cent against an average of 23.3 per cent across all mills, is “a big milestone, just as Musi Rawas will be an engine of growth going forwards”. This, a sixth mill, is forecast to begin production by the end of this year.

Encouragingly, the company’s debt burden plummeted via robust cash generation. Net cash from operating activities of $92mn helped trim the debt, and the company pivoted into a net cash position after the year-end.

Analysts from finnCap said that the company is “well placed for further dividend expansion and investment in growth”. The broker has the shares trading on 10 times forward 2022 earnings, which looks undemanding given these results and growth prospects. Buy.

Last IC View: Buy, 844p, 17 Jan 2022

MP EVANS (MPE)   
ORD PRICE:996pMARKET VALUE:£545mn
TOUCH:994-996p12-MONTH HIGH:1,020pLOW: 616p
DIVIDEND YIELD:2.7%PE RATIO:8
NET ASSET VALUE:789¢NET DEBT:1%
Year to 31 DecTurnover ($mn)Pre-tax profit ($mn)Earnings per share (¢)Dividend per share (p)
201711735.141.817.75
201810918.39.9017.75
201911912.711.617.75
202017528.437.422.00
202127711315835.00
% change+58+296+322+59
Ex-div:28 Apr   
Payment:17 Jun   
£1=$1.32