Dekeloil produces record quarterly palm oil levels as prices spike

Ivory Coast palm oil producer DekelOil Public generated record quarterly revenues up 37% to €9.7m thanks to record monthly production and prices in the first three months of the year.

The AIM-listed company produced a record 16,398 tonnes of crude palm oil in the quarter, 8.3% higher than the first quarter last year.

CPO prices surged in February to around $750m/t, up from around $550 per tonne in June last year, and management took advantage with the average CPO price in the quarter standing at €736m/t.

Palm kernel oil production rose only by 3% to 996 tonnes but the average PKO sales price was 35% higher at $1,008 per tonne.

April has seen CPO prices soften slightly to approximately €700 but production has continued strongly and is well on track to exceed April 2016 production results, Dekel said.

Management said they expect inventory levels to unwind at the beginning of the second half, with new buyers coming to the country on the back of growth in the Ivory Coast's increasing CPO production.

Executive director Lincoln Moore said, "Coinciding with the commencement of Côte d'Ivoire's peak harvesting season and significantly higher year on year palm oil prices, this latest record quarterly performance has come at an opportune time.

"Having recently gained a 100% ownership of Ayenouan, our shareholders stand to benefit fully from the operational progress being made on the ground, starting with the distribution of the maiden dividend. Ayenouan is proving to be the highly cash generative platform we always believed it would be, and we intend to capitalise on this by moving forward with the expansion phase of our strategy."

Unlike most palm oil producers, Dekel generates less than 10% of its output from its own estate, with most coming from local smallholders to whom the company sells small trees from its nursery and then buys the palm kernels and creates CPO via its modern mill equipment, which has been boosted by the addition of an empty fruit press last month.

Broker Optiva Securities, which said the CPO production smashed its estimates of 14,335 tonnes, remained bullish on palm oil prices in the short term, reflecting tight supply, a weaker ringgit and higher biodiesel mandates.

Optiva forecast the empty fruit press could boost underlying profits by at least €0.5m over a full year of operation.

Financial results for 2016, which are expected to be announced before the end of May, are estimated to show total revenues of around €26m, EBIT of €4.8m and underlying profits of €3.7m.

In 2017, analyst Ravi Davdra forecast total revenues of €32m, EBIT of €11m, and underlying profits of around €10m, while the recently announced progressive dividend policy and a maiden dividend of £500,000 will put the company on a dividend yield of around 1.4% based on the current share price.