Crop grows profits

THE vast majority of vegetable oil comes from three crops – palm, soy and sunflower. Ukraine produces almost half the world’s sunflower oil and the Russian invasion has sent prices rocketing, amid expectations that this year’s harvest will be horribly disrupted, if not destroyed.

Vegetable oils are not entirely interchangeable, but substitutions can be made and, when the price of one rises, the others tend to follow. So it has proved today.

The long-term average price of palm oil is around $750 (£570) per ton. Production problems in Malaysia and other factors had already sent the price to nearly $1,500 a ton before the Ukrainian war. Now it is hovering above $1,800 a ton and traders believe that prices are likely to remain high for some time.

As palm oil is used in a huge range of products – Flora margarine, Jordans cereal, Maryland cookies, even toothpaste, soap and shampoo – rising prices suggest more bad news for consumers. For MP Evans shareholders, however, current conditions bode well for the future.

The 150-year-old palm oil producer will be announcing 2021 results on Tuesday and they are expected to be good with rising sales and profits and a dividend of at least 35p, up from 22p last year. Looking ahead, prospects are even brighter.

Palm oil producers have a poor – and often undeserved – reputation for destroying rainforests and killing orangutans. MP Evans oil is certified as sustainable. The company is paid a premium for its produce and takes its responsibilities seriously.

Analysts had been forecasting a dip in profits for 2022 and 2023, accompanied by static dividends. These predictions are likely to be upgraded in the next few days.

Traded on: AIM Ticker: MPE

Contact: mpevans.co.uk or 01892 676146