MP Evans’ profits have been boosted by record palm oil prices – but his earnings spell more bad inflation news for consumers
- Palm oil prices hit a record high of nearly $2,000 a ton in March
- MP Evans increased its selling prices by 43% in the first half
- Palm oil is in almost half of all UK packaged products, says WWF
Soaring palm oil prices helped a UK-listed producer Congressman Evans post record first-half profits.
But since palm oil is used in a wide range of products, from margarine to soap and shampoo, rising prices portend more bad news for consumers.
MP Evans, a producer with plantations in Indonesia, said it sold palm oil at $1,035 a ton in the six months to June 30, a 43% increase from $724 in the first semester 2021.
Skyrocketing prices: Palm oil prices hit record highs of nearly $2,000 a tonne in March
Crude palm oil prices have hit historic highs in recent months as the war in Ukraine sent prices for all vegetable oils soaring, amid concerns about global shortages.
Average palm oil prices, including freight and insurance, hit a record high of nearly $2,000 a ton in early March, shortly after Russia invaded Ukraine.
But prices had already soared to nearly $1,500 before the war due to production problems in Malaysia, which, along with Indonesia, is the world’s largest producer of palm oil.
The surge in palm oil prices will likely eventually lead to higher prices for many products in supermarkets. The WWF estimates that vegetable oil is found in almost half of all UK packaged products.
However, current market conditions are good news for MP Evans shareholders, who expect a 25% increase in dividend payouts.
The company said that although production costs increased due to bad weather and the higher cost of fertilizers, these were offset by soaring prices, thereby boosting margins.
He added that the “sales environment” was further complicated by the introduction of a temporary palm oil export ban by the Indonesian government in April and May.
Palm oil is used in a wide range of products, including Flora margarine
Despite this, it managed to increase its revenue by a third to $170.3 million in the first half.
Operating profit jumped 49% to $61.7 million, while gross profit jumped more than 50% to a “record” $64.8 million.
Given the strong performance, the group raised its interim dividend to 12.5p from 10p.
MP Evans has already returned $22.1million to shareholders in dividends this year, with more rewards to come as he launched a share buyback program in June 2022.
Chairman Peter Hadsley-Chaplin said: “The Group delivered excellent results for the first half of 2022, supported by the strong CPO pricing environment, but once again demonstrating the benefits of the Group’s commitment to long-term responsible management and development of its domains.
“We are delighted to offer an increase in the interim dividend to 12.5 pence per share, in line with our step dividend policy.”
Palm oil producers have a reputation for destroying rainforests and killing orangutans, although MP Evans prides himself on sustainable production.
MP Evans shares, which are listed on AIM, jumped 0.7% to 818p in morning trade on Monday. They are about 4% higher than a year ago.