Palm oil producer offers sustainable increase in return

MIDAS has been a long-term fan of MP Evans, an Indonesian palm oil producer that it first tipped in 2011.

Palm oil is used in everything from biscuits to shampoo and is the world’s most versatile vegetable oil. Demand for palm oil is increasing faster than that of any other vegetable oil, despite concerns over deforestation and the loss of orangutan habitats when palm oil plantations are introduced.

MP Evans chairman Peter HadsleyChaplin continues to walk the tightrope between producing as much sustainable palm oil as possible and keeping investors happy. The price of palm oil fluctuates – particularly since the invasion of Ukraine – which also has a material effect on results.

As the company hit its 150th anniversary this year, results looked rosy. Evans is now producing 1.5million tons a year, and the business has no net debt. An increasing percentage of its product is certified sustainable, 64 per cent up from last year’s 55 per cent. This proportion is forecast to rise.

The cost-of-living crisis may mean we buy fewer discretionary items containing palm oil. Nonetheless, the price of the oil is holding up well. The company is increasing production too, having recently bought land with an expectation that it will increase crop processed to 1.8million tons by 2025.

While the Ukraine war rages, the amount of sunflower oil produced is likely to stay low, with palm oil demand and prices remaining high.