New Britain Palm Oil revealed it had accelerated forward
selling of its palm oil, and at values well above current levels, as it
acknowledged setbacks to price hopes from reduced El Nino concerns.
The palm oil producer, whose major shareholder is reportedly
auctioning off its 49% stake , said that it was "pleased to have" sold forward
some 81,000 tonnes of the vegetable oil for the remainder of 2014, at an
average price of $908 a tonne.
That compares on volume with the 45,000 tonnes sold forward
at this time last year, while the price is well above current spot values of
some $845 a tonne.
Indeed, "while the outlook for palm oil demand remains
robust, the record supply of alternative vegetable oils has resulted in current
prices trading at their lowest levels so far this year", said Nick Thompson, the
chief executive of New Britain Palm Oil, which operates in Papua New Guinea.
World production of both rapeseed and soybeans, both major
sources of vegetable oils, is expected to hit a record this year.
El Nino downgrade
As an extra setback to prices, the likelihood has receded of
an imminent El Nino weather pattern, which typically causes dryness in much of
South East Asia, curtailing palm oil output in countries including Indonesia
and Malaysia, the top producers.
"It appears less likely that an El Niño event will have a
materially negative impact on global palm oil production, as was previously
predicted by climate models," Mr Thompson said.
The Australian Bureau of Meteorology on Tuesday said that
while the Pacific Ocean, whose temperature is a key indicator of the weather
pattern had been "being primed for an El Niño during much of the first half of
2014, the atmosphere above has largely failed to respond, and hence the ocean
and atmosphere have not reinforced each other.
"The chance of an El Niño in 2014 has clearly eased," the
bureau said, cutting to 50% the likelihood of the weather pattern setting in
longer term pricing'
Still, New Britain Palm Oil added that world palm oil stocks
were "relatively low" and flagged support to the market from moves by Indonesia
and Malaysia to raise the level of biodiesel, made from vegetable oils,
included in transport fuel.
"Increasing local consumption in Malaysia and Indonesia and
a strengthening of the global economy continue to be supportive for longer term
pricing," Mr Thompson said.
The comments came as the group unveiled a doubling in
underlying pre-tax profits to $78.2m for the first half of 2014, on revenues up
9.5% at $337.9m, boosting by record palm production.
Thanks largely to improved weather than a year before, when heavy
rains hampered harvesting, the group collected 1.30m tonnes of palm fruit, an
increase of 12.3% year on year, lifting palm oil production by 14.1% to 290,514
"The group's operational performance for the first half was
very strong," Mr Thompson said.
The group made no reference to the continued speculation of
a sale by Kulim, its top shareholder, of its stake, the Malaysian-based
plantations-to-shipping group, which failed last year in an attempt to buy an
extra 20% of New Britain Palm Oil.
According to Malaysian press, Kulim has begun an auction of
its stake, with Felda Global Ventures, Sime Darby and Wilmar International
shortlisted as potential bidders.
The speculation has prompted a sharp jump in New Britain
Palm Oil's London-listed shares, which have recovered from the 308p reached in February
to stand at 524.9p on Wednesday, up 0.5% on the day.
"Following its recent strong share price performance, New
Britain Palm Oil has now moved into hold territory, given our target price of
500p," Edward Hugo at broker VSA Capital said.
"However, bid rumours in the Malaysian media, concerning a
potential stake sale at about 600p, provide potential upside on this target in
Kuala Lumpur palm oil futures for October stood 3 ringgit lower at 2,262 ringgit a tonne in late deals, amongst their lowest levels in a year.