Sign up Australia
Proactive Investors - Run By Investors For Investors

Dekeloil boosts palm oil output but shares slip

DekelOil sees underlying first-half earnings materially higher than the €2.2m at the same time last year
Crude palm oil
The decision to increase its stake in the Ayenouan project looks to be paying off

Dekeloil Public Ltd (LON:DKL) reported higher first-half crude palm oil production at its Ayenouan palm oil project in Côte d'Ivoire.

But shares in the group fell as it acknowledged that CPO prices were depressed in the first half of 2016, partly as a result of the recent currency crisis in Nigeria, which is a big importer of refined CPO products.

The company said the first half of the year saw output of CPO rise 30.75% from the year before to 28,550 tonnes.

The plant has the capacity to produce 70,000 tonnes of CPO a year, so there is still room for further growth.

CPO sales rose 31.5% to 25,225 tonnes from 19,184 tonnes in the first half of 2015.

Despite the news, shares in Dekeloil fell 0.88p, or 6.7%, to 12.12p.

Cantor Fitzgerald noted that pricing was slightly muted by the temporary impact of the currency crisis in Nigeria.

But it added: "This now seems over and we think this is offset by lower fresh fruit bunch costs and by better volumes.

"We remain happy with our forecasts as a result. DekelOil now owns 85.75% of the mill. Underlying production continues to grow and the kernel crushing plant is delivering. We reiterate our 'buy' recommendation and target price of 23.6p."

Production of palm kernel oil (PKO) and palm kernel cake (PKC) at the company’s new kernel crushing plant was, respectively, 1,998 tonnes and 2,360 tonnes in the first six months of 2016. The plant only came on stream in November of last year.

As a result of the strong operational performance, the company expects underlying earnings (EBITDA) for the first half of 2016 to be materially higher than the €2.2m earned in the corresponding period of last year. In addition, the recent strengthening of the euro against sterling is expected to have a positive impact on DekelOil's results which are reported in euros.

Prices of fresh fruit bunches (FFB), the raw materials used to produce CPO, also fell.

Following the decision to let the Nigerian currency find its own level on the foreign exchange markets, DekelOil expects prices to normalise somewhat.

Meanwhile, with the company now selling PKO and PKC in meaningful quantities, the company’s gross margin should receive a significant lift.

"The significant increase in production at the Ayenouan palm oil project demonstrates exactly why we made the decision to increase our stake to 85.75% in this profitable asset,” said Lincoln Moore, DekelOil’s executive director.

"The close partnerships with local palm planters that provide feedstock for the mill are key drivers in our strategy and continue to produce mutually beneficial results,” Moore added.

“The current results support our view that the availability of FFB in our region is growing and we continue to benefit from this growth moving towards full utilisation of our mill. In addition, our effort towards maximising production of FFB at our own 1,900 hectare plantation is also paying off as plants mature. We are confident that we can realise significant value for shareholders from the project and look forward to advancing our development strategy as swiftly as possible," Moore said.

View full DKL profile View Profile

Dekeloil Public Ltd Timeline

January 17 2017
January 17 2017

Related Articles

Timber operations
July 10 2018
"Don't get fixated on hurdles in Mozambique," is the message; it's a decreasing part of the business. Far more important is securing the trade finance that would enable the company to scale-up
cannabis crop
The cannabis company invests in income-producing property and agricultural equipment to service the blossoming marijuana crop industry

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use