Oil palm plantations operator MP Evans (LON: MPE) continues its strong first half performance into the second half as a higher crude palm oil price and improved gross margins meant that profit jumped in 2024.
The AIM-quoted company reported revenues increasing from $307.4m to $352.8m, while pre-tax profit jumped from $73.5m to $111.7m. The dividend was raised from 45p/share to 52.5p/share.
There was a 13% increase is crude palm oil sales prices to $823/tonne, and they are currently $870/tonne.
The company’s own production rose, but crop processed was slightly lower at 1.61 million tonnes because less third-party crop was bought in and processed at the six mills. That change in mix helped gross margin to rise. The relatively immature plants provide scope for further increases in MP Evans’ own production.
Cavendish does not expect MP Evans to maintain its profit in 2025, but this is based on a crude palm oil price of $750/tonne, which is the assumed price for 2026 and 2027 as well.
In Indonesia, there is a B40 biodiesel mandate that makes a 40% mix with palm oil-based fuel mandatory. That could increase demand by two million tonnes. However, the crop levels should improve this year because of better weather conditions. Even so, it appears that the palm oil price could remain strong, and the realised prices might beat the forecast.
The share price rose 6% to 1015p. Cavendish has a sum of the parts share price valuation of 1545p.
A 2025 pre-tax profit of $93.3m is forecast, rising to $97.3m in 2027. This will allow steady increases in dividends to continue, while cash is likely to rise. Net cash could increase from $46.3m to $77.7m the end of 2025. That provides firepower to add more land.