MP Evans flagged an "encouraging" outlook for the palm oil
industry, despite foreseeing "some pressure" on prices ahead from a recovery in
South East Asian output, which was evident at its own plantations.
The London-listed palm oil producer - which last year fought
off a takeover from sector giant Kuala Lumpur Kepong - said that a rebound in industry
output in top producing country Indonesia and second-ranked Malaysia from last
year's drought-affected levels was "likely to exert downward pressure" on
prices of the vegetable oil.
"Production in Indonesia began a recovery during the last
quarter of 2016, and a similar turnaround was expected in Malaysia during the
first quarter of 2017," Peter Hadsley-Chaplin, the MP Evans chairman, said.
The group's own crude palm oil output, at 99,900 tonnes in the
January-to-March period, at its was up 15.0% year on year, after its
plantations, which are in Indonesia, "benefited from the increase in rainfall
that accompanied the end of the dry weather occasioned by the El Nino weather
Official data next week on Malaysia's total palm oil
production in March are expected to show output of 1.39m tonnes, a rise of
14.0% year on year.
MP Evans forecast pressure on palm oil prices hitting home "especially
during the second half of" this year, as the impact of improved supplies
builds, with prices for now remaining affected by the fall in stocks prompted
by the production downturn.
"Low levels of physical supply in the first part of the year
 could lead to some price volatility," Mr Hadsley-Chaplin said.
"Stocks of crude palm oil began 2016 at record-high levels,
but were drawn down during the year in response to low production and finished
the year at a multi-year low level of less than 10m tonnes."
Nonetheless, the group remained upbeat over prospects for
palm oil, which "because of its high yield and low cost of production, is well
placed to continue to benefit from increasing demand for vegetable oil.
"The outlook, therefore, remains encouraging."
The comments came as MP Evans reported a 39% jump to $35.3m
in earnings for 2016, on revenues up 15.6% at $83.9m.
Earnings excluding assets sold last year, including stakes
in Australian cattle business Napco and palm oil producer Agro Muko, more than
doubled to $16.4m, helped by rising value, which saw the group raise by 19.0%
to $595 a tonne its average mill-gate sales price for crude palm oil.
The group achieved a 61% jump to $514 a tonne in prices of
palm kernel oil, the market for which received an extra boost from a squeeze on
supplies of rival coconut oil.
MP Evans confirmed a final dividend of 12.75p per share for
2016, taking the total for the year to 20p per share, including the interim
payment, and a special dividend paid in August.
And it underlined the prospect of increased payouts ahead,
flagging an "intention to maintain or increase its dividend in future years,
starting with a dividend of at least 15p per share in respect of both 2016 and
The increase will come despite plans to invest in extra palm
oil land, with MP Evans revealing it was in "active negotiation for substantial
new hectarage", seen lifting the size of its East Kalimantan operation by 5,000
hectares to 20,000 hectares.
The statement was welcomed by analyst at Peel Hunt as
showing "strong results and good start to the year", with the broker restating
a "buy" rating on MP Evans shares, with a price target of 880p.
FinnCap, restating a "buy" recommendation on the shares with
an 835p price target, said: "We see these as a good set of results, especially
in a post-El Nino environment when [oil palm] yields were under a lot of
And VSA Capital analyst Ed Hugo said that "given the torrid
time experienced by many palm oil producers during 2016, MP Evans needs to be
commended for its full year results".
Mr Hugo also flagged that Kuala Lumpur Kepong (KLK) has been
building its stake in MP Evans though open market purchases, and "is free to
try again in nine months" to buy the London-listed group.
However, he said that the shares, while appearing "well
supported at the current level", were "unlikely to see much upside from here,
except in the case of a stronger bid from KLK.
"We would remain holders of MPE having been strong buyers
MP Evans shares stood 0.3% higher at 745.72p in lunchtime