Release Date: September 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- M P Evans Group PLC (FRA:NYP, Financial) reported a 5% increase in crop production, reaching 759,700 tonnes compared to the previous year.
- Crude palm oil production increased by 6% to 177,000 tonnes, with an improved oil extraction rate of 23.4%.
- Gross profit surged by 82% to $42.1 million, driven by lower costs and higher production.
- Earnings per share rose by 81% to 44.9p, prompting a 20% increase in the interim dividend to 15p.
- The company maintained a strong cash position, generating $60 million from operations in the first half, with a low net gearing of 1%.
Negative Points
- The company faces potential risks from delayed rainfall, which could affect crop yield and push some production into 2025.
- The benefit from reduced fertilizer costs seen in the first half is not expected to continue into the second half.
- Currency fluctuations, particularly the weakening of the rupiah, may not provide the same level of cost benefit in the second half.
- The company is operating with a relatively high number of employees compared to some peers, which could impact cost efficiency.
- There is uncertainty regarding the impact of potential changes in UK tax regulations on AIM-listed companies, which could affect the company's listing strategy.
Q & A Highlights
Q: Many of your peers appear to be larger companies with higher production while they seem to have fewer employees. Can you explain this, if I am correct?
A: Matthew Coulson, CEO: It's challenging to benchmark reliably in this area. We assess the number of employees per hectare we manage and compare it to industry norms. Employee costs are a significant part of our overall cost base, impacting our cost per tonne of palm product. We believe we are efficiently managing our operations while maintaining quality standards.
Q: How far are we from having a growth strategy limited by the rules on the amount of planted land we can own as a foreign investor?
A: Peter Hadsley-Chaplin, Chairman: Currently, a foreign company cannot own more than 100,000 hectares. Our owned land is just over 50,000 hectares, so we have ample room for growth. This limit does not apply to smallholder cooperative areas.
Q: With the net gearing of just 1% and an increase in cash flow from operations, what are the group's capital allocation priorities for the next 12 to 18 months? Will we see further acquisitions or more aggressive share buybacks?
A: Matthew Coulson, CEO: Our low gearing and strong cash generation position us well for strategic priorities. We aim for a balanced approach to capital allocation, investing in existing assets and exploring acquisition opportunities. We do not plan to be more aggressive with share buybacks, preferring a steady, ongoing approach.
Q: Fertilizer is a major cost; would there be any merits in bringing fertilizer production in-house?
A: Matthew Coulson, CEO: We already produce our own organic compost, which supplements inorganic fertilizers. Producing inorganic fertilizers like potassium and phosphate is complex and specialized, making it impractical for us to do in-house.
Q: There is speculation that in the forthcoming UK budget, the IHT relief on AIM-listed business could be withdrawn. If this was to materialize, would you consider listing on another index or possibly delisting?
A: Peter Hadsley-Chaplin, Chairman: We are aware of the speculation, but we are not listed on AIM primarily for IHT benefits. We will review our options based on the budget outcome, but AIM remains a suitable platform for us.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
