Final Results

RNS Number : 5845T
M. P. Evans Group PLC
21 March 2023
 

M.P. EVANS GROUP PLC

 

M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), producer of sustainable Indonesian palm oil, announces its results for the year ended 31 December 2022.

 

The Group's 2022 annual report is available on its website at www.mpevans.co.uk .

 

 

Highlights

 

Financial

Gross profit for the year up by 5% to US$109.2 million (2021 US$103.6 million)

Operating profit down by 11%* to US$101.6 million (2021 US$114.6 million)

Average mill-gate price for Group crude palm oil ("CPO") up by 5% to US$854 per tonne (2021 US$810 per tonne)

Sustainability premia increased to US$7.5 million (2021 US$4.3 million)

Operating cash generation up by 21% to US$132.2 million (2021 US$109.2 million)

Net cash at year end US$33.5 million (2021 net debt of US$5.4 million)

Basic EPS down by 7%* to 108.0 pence (2021 - 115.6 pence)

21% increase in normal dividend for the year to 42.5p per share (2021 - 35p per share) with proposed final dividend of 30p per share (2021 final dividend 25p per share)

*2021 results benefited from one-off gain on land sale of US$13.9 million

Operational

Total crop processed up 11% to 1.5 million tonnes

100% of Group and scheme-smallholder crop grown to sustainability standards

64% of total output currently certified sustainable, up from 55% in 2021

Group crops up to 905,000 tonnes, a 12% increase

Planting at youngest estate, Musi Rawas, approaching 10,000-hectare target

Crude-palm-oil production up 9% to 342,000 tonnes

Post year end

Group's sixth palm-oil mill, at Musi Rawas, started production in February 2023

Further 2,100 planted hectares acquired close to Simpang Kiri estate in March 2023

 

 

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans , said: "The Group has produced another set of excellent operational and financial results. Crop and production have increased once again and, as we celebrate our 150-year anniversary, we have also reached the milestone of processing 1.5 million tonnes of fresh fruit bunches. The Group remains focused on long-term and sustainable growth, and has both acquired further planted hectarage and started production at another Group palm-oil mill since the end of the year.

 

Profit and cash generation have remained strong, the Group has eliminated net debt, and now has net funds in place to support continued investment and shareholder returns. The board is recommending a final dividend of 30p per share, bringing total dividends for the year to 42.5p per share, up more than 20% from the 35p normal dividends paid in respect of the previous year, and a further step forward in the Group's long-standing progressive dividend policy."

 

 

 

Enquiries:

 

M.P. Evans Group PLC

+44 (0)20 7796 4133 on 21 March 2023 only


Thereafter +44 (0)1892 516333

Peter Hadsley-Chaplin, Chairman


Matthew Coulson, Chief executive


Luke Shaw, Chief financial officer




Peel Hunt LLP (Nomad and joint broker)

+44 (0)20 7418 8900

Dan Webster, Andrew Clark, Lalit Bose




finnCap (Joint broker)

+44 (0)20 7220 0500

Tim Redfern, Harriet Ward


 


Hudson Sandler (Financial PR)

+44 (0)20 7796 4133

Charlie Jack, Francis Kerrigan, Amelia Craddock


 

An analysts' meeting will be held today at 9.30am at the offices of Hudson Sandler, 25 Charterhouse Square, London EC1M 6AE, 020 7796 4133.

 

Results

 

The Group achieved a gross profit of US$109.2 million, higher than the US$103.6 million recorded in 2021, representing an all-time record. Average palm-oil prices were particularly strong once again in 2022 and these, combined with an increase in production, offset some inflationary cost pressures, most notable in the fertiliser inputs required to maintain healthy and productive palms across our estates. Earnings per share were 108.0p, a little lower than the 115.6p in 2021, which benefited from the one-off profit of US$13.9 million from the sale of non-core land in Malaysia. The Group has continued to be significantly cash generative, with net operating cash generated of US$102.3 million in the year, enabling the Group to continue with capital investment, eliminate net debt, and prioritise progressive shareholder returns.

 

Dividend

 

An interim dividend of 12.5p per share (2021 - 10p per share) was paid on 4 November 2022, and the board is recommending a final dividend of 30p per share (2021 - 25p per share). This represents another year of increasing normal dividends, up by 7.5p from 2021, and a substantial increase of 93% from the amount paid two years ago.

 

Dividends have accelerated in recent years as the Group's operational cash flows have strengthened due to the increasing maturity of the Group's operations. The Group has an unbroken track record, spanning more than thirty years, of maintaining or increasing dividends, and the anticipated trend of increasing crop and production forms a sound basis for further dividend increases.

 

150-year anniversary

 

During 2023 the Group is proud to be marking its 150-year anniversary, having traced its origins back to the early 1870s. The Group is holding several celebratory events, both in Indonesia and in the UK during the year, including an AGM at Mansion House in London followed by a celebratory lunch, to which shareholders are invited. Places for the lunch are limited and registration is required. Further information is included in the investor pages of the Group's website.

 

Palm-oil market

 

CPO prices were at historically high levels in the first half of 2022, reaching a peak of almost US$2,000 per tonne cif Rotterdam following the outbreak of war between Ukraine and Russia, and concern over reductions in sunflower oil supplies from Ukraine. Pricing moderated somewhat in the second half of the year, but palm oil was attractive given the, at times, wide discount to soya oil of up to US$400 per tonne. The Group does not receive the full benefit of the high quoted CPO prices. Its net mill-gate price is received on a tender basis, which is after adjustments to take account of the Indonesian export tax and levy, as well as transport and insurance costs. Over the course of 2022, the average mill-gate price received for the Group's CPO was US$854 per tonne, 5% higher than the US$810 per tonne in 2021.

 

Prices for palm kernels also increased in 2022, particularly in the early part of the year, following a similar pattern to CPO pricing. The Group's palm kernels sold for an average price of US$611 per tonne in the year, 15% higher than the US$533 per tonne in 2021.

 

Strategic developments

 

During 2022, the Group continued to execute its principal activity, being the responsible ownership, management and development of sustainable oil-palm estates in Indonesia. Alongside its own projects, the Group also manages and develops scheme-smallholder areas attached to those estates. The Group's objective is to continue increasing both its own crop and that from its scheme smallholders, whilst also increasing its own milling capacity, thereby increasing its output of certified sustainable palm oil. As Group areas mature, its strategy is to increase the planted hectarage controlled by it. Milling its own crop and that of its scheme smallholders in its own mills enables the Group to deploy its operational expertise to greatest effect with the aim of generating stronger returns, allowing shareholders to receive sustained increases in dividends.

 

Throughout the course of 2022, the Group had five operational palm-oil mills, with a sixth under construction at Musi Rawas. The mill at Musi Rawas opened in February 2023 and will now process all of the crop from that estate and start to take in additional crop from independent suppliers to maximise its utilisation. All the Group's palm-oil mills are accredited as certified sustainable producers as soon as possible after commissioning, although it can take time to complete the necessary independent audit and approval checks. All of the Group's ffb, and that of its scheme smallholders, are grown to the same high standards and in a sustainable way.

 

Following the year end, the Group has been successful in acquiring an additional 2,100 planted hectares close to its estate at Simpang Kiri in Aceh Province in northern Sumatra. This is in line with the Group's strategy of continuing to increase its planted area through the acquisition of further hectarage, initially within the vicinity of its existing projects. It is likely that, in time, the Group will build a further palm-oil mill to process the fruit from this enlarged estate. After the acquisition at Simpang Kiri, the Group remains committed to its growth strategy, and a number of further projects remain under review.

 

Sustainability

 

The Group is committed to the production of certified sustainable palm oil, and sustainability is at the core of its strategic and operational decision-making. All the Group's estates are developed and managed sustainably, but independent certification enabling the sale of the Group's production as sustainable palm oil is awarded to the Group's mills. Certified sustainable sales rose significantly in 2022 to almost two thirds of the total, an increase of approximately 50,000 tonnes from the previous year. As the Group continues to grow, by adding milling capacity, maximising the yield from its existing areas and seeking additional sustainably managed areas to provide further Group crop for those mills, its ambition is to continue elevating its sustainable output towards 100%.

 

The Group received sustainability premia of US$7.5 million (2021 US$4.3 million), another increase reflecting both the demand for certified sustainable production and the Group's ability to deliver more of its own certified output. CPO and palm kernels ("PK") are sold with both RSPO and ISCC certifications depending on demand and where the best premia can be achieved. The average premia for CPO when sold as certified oil was US$16.90 per tonne (2021 US$17.40), whilst demand for sustainable PK was particularly strong in 2022 following high demand for sustainably sourced cosmetic products, with average premia for PK sold as certified up to US$91.80 per tonne (2021 US$55.20).

 

Operational developments

 

The total crop processed by the Group increased in the year to 1,511,700 tonnes (2021 - 1,366,200 tonnes), an overall increase of 11%. This was in line with the Group's growth plans, and a result of both the long-term investment made by the Group in Indonesian oil palm and the commitment to operational excellence by the Group's agronomic management teams.

 

 

 


2022 

Increase/

(decrease)


2021 


Tonnes 

%

Tonnes 

Crop

 

 

 

Own crops




  Kota Bangun

219,400 

13 

194,300 

  Bangka

167,200 

10 

152,300 

  Pangkatan group

192,500 

179,000 

  Bumi Mas

166,700 

165,700 

  Musi Rawas

107,600 

55 

69,400 

  Simpang Kiri

52,000 

49,000 


905,400 

12 

809,700 

Scheme-smallholder crops




  Kota Bangun

91,000 

86,300 

  Bangka

91,200 

13 

80,800 

  Pangkatan group

900 

  Bumi Mas

30,600 

29,900 

  Musi Rawas

52,000 

61 

32,300 


265,700 

16 

229,300 

Independent crop purchased




  Kota Bangun

191,700 

(9)

210,600 

  Bangka

62,800 

(20)

78,200 

  Pangkatan group

39,100 

35,900 

  Bumi Mas

47,000 

1,780 

2,500 


340,600 

327,200 

Total crop

1,511,700 

11 

1,366,200 

 

 

The Group is committed to increasing its CPO and PK production capacity as much as possible. The Group's crops and those of its scheme smallholders are of a high standard, and the Group seeks to maximise the margins available to it by milling that crop and selling the oil and kernels for itself. With the benefit of having five Group mills operational throughout the year, total CPO production increased by 9% to 341,700 tonnes, and PK production was up by 10% to 73,800 tonnes.

 

 

 

 

Increase/

 

 

2022 

(decrease)

2021 


 

 

 

Production

Tonnes 

%

Tonnes 

Crude palm oil




  Kota Bangun

112,800 

(1)

114,400 

  Bangka

75,100 

74,200 

  Pangkatan group

53,300 

10 

48,600 

  Bumi Mas with mill

56,200 

170 

20,800 


297,400 

15 

258,000 

  Bumi Mas pre mill

23,100 

  Musi Rawas

32,600 

57 

20,800 

  Simpang Kiri

11,700 

11,000 

 

44,300 

(19) 

54,900 


341,700 

312,900 

Palm kernels




  Kota Bangun

23,800 

22,700 

  Bangka

18,400 

17,800 

  Pangkatan group

12,200 

11,300 

  Bumi Mas with mill

9,600 

182 

3,400 


64,000 

16 

55,200 

  Bumi Mas pre mill

5,000 

  Musi Rawas

7,500 

60 

4,700 

  Simpang Kiri

2,300 

2,200 


9,800 

(18)

11,900 


73,800 

10 

67,100 





 

 


 

Extraction rates

%

%

%

Crude palm oil

 


 

  Kota Bangun - Bumi Permai

23.2 

(2)

23.8 

  Kota Bangun - Rahayu

21.2 

(6)

22.5 

  Bangka

23.4 

(2)

23.8 

  Pangkatan group

22.9 

22.6 

  Bumi Mas

23.0 

22.8 


22.9 

(2)

23.3 

  Bumi Mas

21.6 

  Musi Rawas

20.4 

20.4 

  Simpang Kiri

22.5 

22.5 

Palm kernels




  Kota Bangun - Bumi Permai

5.1 

4.9 

  Kota Bangun - Rahayu

4.2 

4.2 

  Bangka

5.7 

5.7 

  Pangkatan group

5.2 

(2)

5.3 

  Bumi Mas

3.9 

3.7 


4.9 

(2)

5.0 

  Bumi Mas

4.7 

  Musi Rawas

4.67

4.6 

  Simpang Kiri

4.5 

4.5 

 

At Musi Rawas, planting continued throughout 2022. All planting is performed in compliance with the environmental standards published by the RSPO. The Group planted 585 hectares at Musi Rawas in 2022, bringing the total planted area there to 9,600 hectares, and the Group expects to achieve its initial target of achieving a total planted area of 10,000 hectares during 2023.

 

In North Sumatra and Aceh, the Group has made significant progress during the year on the formation of new co-operative schemes and financing replanting of areas of oil palm for members of those schemes. By the end of 2022, a total of 1,147 hectares had been replanted as part of these schemes, both at Pangkatan and Simpang Kiri. In addition, 64 hectares of the Group's own oil palm were replanted at Pangkatan during the year.

 

At the end of 2022, the Group managed 54,100 hectares of planted oil palm from its own and associated scheme-smallholder areas, 93% of which were mature and in harvest, and the average yield per mature planted hectare had increased to 23 tonnes.

 

Group valuation

 

An independent valuation of the Group's plantations was performed at the end of the year, valuing the Group's planted areas at an average of US$20,700 per hectare. After allowing for other Group assets and liabilities, this equity value per share had increased during the year to £14.98 per share. The Group did benefit, in sterling terms, from a weaker year-end exchange rate when compared to the position at the end of 2021, accounting for £1.58 of the increase.

 

Current trading and prospects

 

The Group has made a positive start to 2023, and total crop processed in the first two months of the year was 213,000 tonnes, 8% higher than in the first two months of 2022. The benefits of the significant investment made by the Group in its Indonesian estates continue to be felt, and, barring any unforeseen circumstances, the long-term trend of increasing crop is expected to continue as the Group moves further into 2023. The new mill at Musi Rawas began processing Group crop in February 2023, and after a short period of stabilisation, will soon start to take in crop from outside suppliers, only adding further to the Group's ability to process crop and increase production.

 

 

2 months ended 

Increase/ 

2 months ended 

 

28 February 2023 

(decrease) 

28 February 2022 

 

Tonnes 

Tonnes 

Own crops

116,300 

(1)

116,900 

Smallholder crop

35,100 

35,000 

Outside crop purchased

61,300 

38 

44,300 


212,700 

196,200 

 

CPO pricing remained stable in the early part of 2023, and the Group enjoyed mill-gate prices in a relatively narrow band around US$750 per tonne, similar to those achieved in the latter part of 2022, although sales prices have increased above US$800 per tonne for recent contracts. Whilst these are lower than the unusually high prices seen in the early part of 2022, the Group remains confident that, at these price levels, it will be able to deliver further significant profits and cash generation.

 

Since the year end, the Group has announced the acquisition of 2,100 planted hectares close to its Simpang Kiri project in Aceh Province, northern Sumatra, bringing the total planted area, including that of associated scheme smallholders, to 4,800 hectares. Although the existing area at Simpang Kiri has been both highly productive and profitable for many years, it has not been worthwhile to construct our own mill there, and Group crop has been sent for outside processing. Whilst some of the newly acquired hectarage will require a certain amount of replanting and rehabilitation, as crop from the combined area increases, this is likely, in time, to warrant the construction of an additional Group mill. At that point all of the Group's estates would have their own mills.

 

Palm oil continues to be, by volume of supply and consumption, the largest of the vegetable oils produced globally and of the major vegetable oils is the most efficient to produce when measured by tonnes of oil per hectare of land. The board is of the belief that sustainably produced palm oil will continue to be in demand for the foreseeable future, and that Group prospects therefore remain positive.

 

 

Peter Hadsley-Chaplin

Chairman

 

 

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2022


2022 

2021 


US$'000 

US$'000 

Continuing operations

 


  Revenue

326,917 

276,592 

  Cost of sales

(217,707)

(172,979)

  Gross profit

109,210 

103,613 

  (Loss)/gain on biological assets

(1,431)

1,771 

  Profit on sale of land

13,946 

  Foreign-exchange loss

(3,444)

(820)

  Other administrative expenses

(4,614)

(5,380)

  Other income

1,865 

1,426 

  Operating profit

101,586 

114,556 

  Finance income

1,395 

645 

  Finance costs

(2,731)

(2,699)

  Profit before tax

100,250 

112,502 

  Tax on profit on ordinary activities

(24,073)

(23,228)

  Profit after tax

76,177 

89,274 

  Share of associated companies' profit after tax

2,184 

2,508 

Profit for the year

78,361 

91,782 

 



Attributable to:



Owners of M.P. Evans Group PLC

73,060 

86,406 

Non-controlling interests

5,301 

5,376 

 

78,361 

91,782 





US cents 

US cents 

Continuing operations



  Basic earnings per 10p share

133.9 

158.4 

  Diluted earnings per 10p share

133.4 

157.9 

 



 

Pence 

Pence 

Basic earnings per 10p share



  Continuing operations

108.0 

115.6 

 

 

CONSOLIDATED BALANCE SHEET

As at 31 December 2022

 

Company number: 1555042

 

 

 

2022 

2021

 

US$'000 

US$'000

Non-current assets



Goodwill

11,767 

11,767 

Other intangible assets

1,167 

1,222 

Property, plant and equipment

411,658 

401,005 

Investments in associates

11,795 

13,242 

Investments

61 

65 

Deferred-tax asset

989 

3,602 

Trade and other receivables

9,146 

16,618 


446,583 

447,521 

Current assets



Biological assets

3,089 

4,520 

Inventories

23,112 

21,754 

Trade and other receivables

32,681 

41,892 

Current-tax asset

2,290 

2,522 

Cash and cash equivalents

82,503 

65,609 

 

143,675 

136,297 

Total assets

590,258 

583,818 

 



Current liabilities



Borrowings

17,364 

20,531 

Trade and other payables

24,410 

31,200 

Current-tax liability

4,455 

12,219 

 

46,229 

63,950 

Net current assets

97,446 

72,347 

Non-current liabilities



Borrowings

31,675 

50,517 

Deferred-tax liability

13,538 

11,417 

Retirement-benefit obligations

9,972 

12,886 

 

55,185 

74,820 

Total liabilities

101,414 

138,770 

Net assets

488,844 

445,048 

 



Equity



Share capital

9,179 

9,232 

Other reserves

54,543 

55,467 

Retained earnings

407,460 

366,825 

Equity attributable to the owners of



  M.P. Evans Group PLC

471,182 

431,524 

Non-controlling interests

17,662 

13,524 

Total equity

488,844 

445,048 

 

 

CONSOLIDATED CASH-FLOW STATEMENT

For the year ended 31 December 2022

 

 

2022 

2021 

 

US$'000 

US$'000 

Net cash generated by operating activities

102,288 

92,272 

 



Investing activities



Purchase of property, plant and equipment

(33,714)

(32,510)

Purchase of intangible assets

(116)

(8)

Interest received

622 

316 

Decrease in bank deposits treated as current-asset



investments

334 

Decrease in receivables from smallholder co-operatives

 

1,714 

 

17,630 

Proceeds on disposal of property, plant and equipment

 

3,055 

 

15,125 

Net cash (used by)/from investing activities

(28,439)

887 

 



Financing activities



Repayment of borrowings

(22,009)

(34,636)

Lease liability payments

(38)

(218)

Dividends paid to Company shareholders

(28,500)

(20,527)

Dividends paid to non-controlling interest

(124)

(164)

Issue of Company shares

191 

827 

Buyback of Company shares

(4,902)

Net cash used by financing activities

(55,382)

(54,718)

 



Net increase in cash and cash equivalents

18,467 

38,441 

 



Net cash and cash equivalents at 1 January

65,609 

27,222 

Effect of foreign-exchange rates on cash and cash



equivalents

(1,573)

(54)

Cash and cash equivalents at 31 December

82,503 

65,609 

 

 

Notes

 

1.  Dividends paid and proposed

 


US$'000 

US$'000 

2022 interim dividend - 12.5p per 10p share (2021 interim dividend 10p)

7,611 

7,377 

2021 special dividend - 5p per 10p share

3,662 

2021 final dividend - 25p per 10p share (2020 final dividend 17p)

17,227 

13,150 


28,500 

20,527 

 

Following the year end, the board has proposed a final dividend for 2022 of 30p per 10p share, amounting to US$19.4 million.


2022 

2021 

Ex-dividend date

27 April 2022

28 April 2022

Record date

28 April 2022

29 April 2022

Dividend payable on or after

16 June 2022

17 June 2022

 

2.  Basic and diluted earnings per share

 

The calculation of earnings per 10p share is based on:-


 

2022 

 

2021 


2022 

Number 

2021 

Number 


US$'000 

of shares 

US$'000 

of shares 

Profit for the year attributable to the owners





  of M.P. Evans Group PLC

73,060 


86,406 


Average number of shares in issue


54,579,591 


54,564,864 

Diluted average number of shares in issue*


54,754,110 


54,710,139 

 

*The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

 

3.  Financial information

 

The financial information has been derived from the Company's audited accounts but does not itself constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for the financial year ended 31 December 2022 have been reported on by the Group's auditors, BDO LLP, and will be filed with the Registrar of Companies. The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

 

4.  International Accounting Standards

 

This announcement is based on the Group's financial statements which were prepared in accordance with UK-adopted International Accounting Standards.

 

5.  Distribution timetable

 

The Group's 2022 annual report is available on the Group's website and will be despatched to shareholders on or before 31 March 2023. Printed copies of the Group's 2022 annual report will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be held on Friday 9 June 2023.

 

 

 

By order of the board

Katya Merrick

Company secretary

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