MP Evans: Palming profits, green growth and dividends
This month, our screen unearthed a different company to any we have looked at before. MP Evans is a prominent player in sustainable palm oil production and has demonstrated financial strength, consistent dividend performance, and a commitment to environmentally responsible practices, and for us, a compelling investment choice.
Financial Strength and Dividend Growth
MP Evans boasts an impressive 30-year record of maintaining or growing its dividend. This exceptional track record of stability is supported by solid financials. In 2024, MP Evans is expected to achieve net cash-positive status, enhancing its ability to fund both dividend payouts and strategic investments. With a dividend yield of 5.4% and a reliable share buyback program, MP Evans shows dedication to rewarding its shareholders.
The company’s recent interim financial results underline its robust performance. For the first half of 2024, MP Evans reported an 80% increase in pretax profit to £40.2 million, along with a 22% rise in revenue to £163.7 million. Thanks to lower production costs and increased production, earnings per share rose by 81% year-over-year. This strong performance led the board to approve an interim dividend of 15.00 pence per share, up 20% from the previous year.
Strategic Growth through Efficient Operations
MP Evans continues to enhance its production efficiency and overall profitability. Its crude palm oil (CPO) production rose by 10% in early 2024, with 96% of this processed through company-owned mills. To further boost its operational capabilities, MP Evans expanded its milling capacity and optimized its extraction processes, achieving an extraction rate of 23.4% at a mill-gate price of £770 per tonne.
In 2023, the company expanded its footprint with over 10,000 hectares of additional planted area in Sumatra and East Kalimantan, Indonesia. This acquisition has already started to yield results, with a significant crop harvested in the first quarter of 2024. Additionally, MP Evans acquired an 8,300-hectare estate in Kota Bangun toward the end of 2023, anticipating further yield improvements in the coming years. This careful expansion and enhancement of estate management practices point to long-term growth potential.
Commitment to Sustainable Practices
One of the defining aspects of MP Evans’ business model is its dedication to sustainable palm oil production. The company’s approach is both responsible and forward-looking, addressing growing concerns about environmental impact. As of 2023, 64% of MP Evans’ production is certified sustainable, and all six of its mills hold International Sustainability and Carbon Certification (ISCC), which carries a premium in the marketplace. This not only supports pricing but also appeals to ethically conscious investors.
Furthermore, the company has received an 86.7% score from the Zoological Society of London for environmental, social, and governance (ESG) transparency—a 6.5% improvement from the prior year. Such scores reflect MP Evans' commitment to responsible environmental practices, which enhance its reputation and resilience in the market.
Capitalising on Rising Palm Oil Demand
MP Evans is well-positioned to benefit from increasing global demand for palm oil. With limited land for expansion worldwide, palm oil prices have risen by 17% since June 2023. As a certified sustainable producer, MP Evans enjoys a premium on its products. Its strategy to expand planted areas and optimise production will likely keep the company competitive in a growing market.
The Bottom Line
With its consistent dividend policy, impressive financial performance, sustainable practices, and strategic growth, MP Evans Group PLC offers a strong combination of stability and growth potential. The company’s commitment to responsible palm oil production and cash generation supports its strong dividend yield and attractive long-term prospects.
We will be adding it to our portfolio on Monday.
