MARKET DEVELOPMENT
MP Evans Upbeat on Palm Oil Industry Prospects
MP Evans Upbeat on Palm Oil Industry Prospects
15/04/2015 (AgriMoney.com) - Plantations and cattle group MP Evans reassured over prospects for palm oil groups, despite prices remaining among their lower levels since 2007, flagging the potential for demand to support profitability.
The group, which harvested 385,400 tonnes of palm fruit bunches last year, acknowledged weakness in palm oil prices, which closed at 2,148 ringgit a tonne in Kuala Lumpur on Tuesday, down some 19% year on year.
Futures hit a record 4,486 ringgit a tonne in March 2008.
However, prospects were promising nonetheless for palm oil groups, MP Evans said, citing factors including Indonesia's drive to lift to 10% the proportion of biodiesel, made from the vegetable oil, in domestic diesel.
Long-term hopes
"Healthy profit margins are still achievable, and the board believes growth in Indonesian domestic and global demand makes the long-term outlook for palm oil positive," MP Evans said, restating its own ambitions to "expand its oil palm areas in Indonesia".
The company, which has 24,100 hectares of planted area in Indonesia, has some 9,000 hectares awaiting to be planted, and is seeking further land too.
"It is the board's aim for the group's own areas to planted at as rapid a pace as of the availability of suitable land permits," MP Evans said.
The company also "seeks to acquire further pieces of land suitable for sustainable palm oil development" located, if possible, near the group's existing states," in Sumatra.
Profits, revenues up
The comments came as the group unveiled all-2014 profits up 62% at $37.1m, with revenues up 10.6% to $90.9m.
The profitability of MP Evans' Indonesian palm oil plantation holdings rose 44%, to $35.8m, thanks to larger production, with the oil-palm crop up 12% on 2013.
The growth in production was driven by maturing tree stock on the Kalimantan and Banka estates, while dry weather saw production on mature estates fall lower.
MP Evans was upbeat on production in 2015, saying that, "crops are expected to continue to rise substantially both in 2015 and in subsequent years".
Group eyes Australian sales
MP Evans was able to turn around its Australian cattle holdings, Woodland and NAPCo, moving both operations into profit last year. MPE's Malaysian property holdings also delivered a profit, though below previous levels.
MPE is open to divesting itself of these holdings, in order to raise capital for further development of its Indonesian palm operation. The group remains on course to exit entirely from Malaysia in the long term, while stressing its willingness to consider bids on the Australian cattle operations.
The group said that part of its strategy was "to capitalise on the value of its Australian and Malaysian operations, using any sale proceeds to fund the continuing Indonesian development".
Broker 'muted' on palm
Broker VSA struck a more cautious note. "We are more muted on the prospects for palm oil companies this year, given the low palm oil price, and seemingly little prospects for near-term improvement," it said today.
"If yields begin to normalise on its Sumatran estates, MPE's rapid growth could offset some of this impact, however this will be a harder proposition than in 2014, given current pricing"
MPE's shares were up 1.6% at 400.36p on the news.
The group, which harvested 385,400 tonnes of palm fruit bunches last year, acknowledged weakness in palm oil prices, which closed at 2,148 ringgit a tonne in Kuala Lumpur on Tuesday, down some 19% year on year.
Futures hit a record 4,486 ringgit a tonne in March 2008.
However, prospects were promising nonetheless for palm oil groups, MP Evans said, citing factors including Indonesia's drive to lift to 10% the proportion of biodiesel, made from the vegetable oil, in domestic diesel.
Long-term hopes
"Healthy profit margins are still achievable, and the board believes growth in Indonesian domestic and global demand makes the long-term outlook for palm oil positive," MP Evans said, restating its own ambitions to "expand its oil palm areas in Indonesia".
The company, which has 24,100 hectares of planted area in Indonesia, has some 9,000 hectares awaiting to be planted, and is seeking further land too.
"It is the board's aim for the group's own areas to planted at as rapid a pace as of the availability of suitable land permits," MP Evans said.
The company also "seeks to acquire further pieces of land suitable for sustainable palm oil development" located, if possible, near the group's existing states," in Sumatra.
Profits, revenues up
The comments came as the group unveiled all-2014 profits up 62% at $37.1m, with revenues up 10.6% to $90.9m.
The profitability of MP Evans' Indonesian palm oil plantation holdings rose 44%, to $35.8m, thanks to larger production, with the oil-palm crop up 12% on 2013.
The growth in production was driven by maturing tree stock on the Kalimantan and Banka estates, while dry weather saw production on mature estates fall lower.
MP Evans was upbeat on production in 2015, saying that, "crops are expected to continue to rise substantially both in 2015 and in subsequent years".
Group eyes Australian sales
MP Evans was able to turn around its Australian cattle holdings, Woodland and NAPCo, moving both operations into profit last year. MPE's Malaysian property holdings also delivered a profit, though below previous levels.
MPE is open to divesting itself of these holdings, in order to raise capital for further development of its Indonesian palm operation. The group remains on course to exit entirely from Malaysia in the long term, while stressing its willingness to consider bids on the Australian cattle operations.
The group said that part of its strategy was "to capitalise on the value of its Australian and Malaysian operations, using any sale proceeds to fund the continuing Indonesian development".
Broker 'muted' on palm
Broker VSA struck a more cautious note. "We are more muted on the prospects for palm oil companies this year, given the low palm oil price, and seemingly little prospects for near-term improvement," it said today.
"If yields begin to normalise on its Sumatran estates, MPE's rapid growth could offset some of this impact, however this will be a harder proposition than in 2014, given current pricing"
MPE's shares were up 1.6% at 400.36p on the news.