MP Evans trading well as prices come down from 2022 highs

The AIM-traded firm, which was holding its annual general meeting, said that during the early part of the year, it faced seasonal variations in crop production from its majority-owned areas and associated scheme smallholders.

However, that was compensated by purchasing more crop from independent suppliers to process in its own mills.

The breakdown of crop sources for the period consisted of majority-owned areas contributing 329,000 tonnes, associated scheme smallholders contributing 101,200 tonnes, and independent suppliers contributing 154,600 tonnes.

Although the group experienced a relatively lower cropping period in the early part of the year, the board said a review of crop trends and development on its estates indicated anticipated higher cropping levels in the coming months.

In terms of production, the Group produced the equivalent of 134,400 tonnes of crude palm oil (CPO) during the first five months of 2023, representing a 3% increase compared to the same period in 2022.

Of that, 128,600 tonnes were processed through the group's own mills, with the remaining oil content of fresh fruit bunches sold to third-party mills.

Production from the group's own mills increased 9% from 2022, primarily due to the start of production at the new mill in Musi Rawas in February.

The group said it maintained a good oil-extraction rate, especially in relation to CPO produced from its own crop, with an average extraction rate of 23.0% during the first five months of the year, slightly lower than the 23.1% achieved in the same period in 2022.

Regarding sales and prices, the average price of CPO during the first five months of the year was US$1,001 per tonne, representing a 39% decrease compared to the equivalent period in 2022.

However, that price was still 13% higher than the five-year average, and 23% higher than the 10-year average.

MP Evans noted that sales prices were exceptionally high in the first half of 2022 due to Russia’s invasion of Ukraine, which impacted commodity markets.

In the period up to the end of May, the group realized an average price at the mill gate of $779 per tonne, a decrease of 28% compared to $1,079 per tonne in 2022.

Palm kernel prices also experienced a decline, with an average of $415 per tonne for the first five months of 2023, down 61% from the unusually high average of $899 per tonne in the early part of last year.

“The group has four key strategic pillars - it is a responsible producer of sustainable Indonesian palm oil, striving for excellence in all its operations, with a focus on continuing growth and offering an increasing yield,” the board said in its statement.

“An increased total dividend of 42.5p per share has been proposed in respect of 2022, and it remains the board's intention to continue the group's long-term trend of at least maintaining, or increasing, dividends for shareholders.”

At 1017 BST, shares in MP Evans were flat at 780p.

Reporting by Josh White for Sharecast.com.