M.p. Evans Group Plc · LSE:MPE
M.p. Evans — Investor Presentation (November 2017)
30 slides from M.p. Evans's investor presentation, Nov 7, 2017
Slide 1: Operational Excellence Sustained, Dividend Growth
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 OPERATIONAL EXCELLENCE SUSTAINED DIVIDEND GROWTH
Slide 2: One country, one commodity
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 One country, one commodity 1
Slide 3: … with prospect of substantial growth
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … with prospect of substantial growth Crop of fresh fruit bunches, Group and smallholder co-operatives (Tonnes 000s) 1,600 Group Co-operatives 1,400 1,200 1,000 800 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2020p 2025p Source:
Slide 4: An introduction to the sector
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 An introduction to the sector 3
Slide 5: Palm oil has growing share of a growing demand …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Palm oil has growing share of a growing demand … World vegetable oil production (Tonnes million) 250 Palm Rapeseed Others Soybean Sunflower 200 150 100 50 0 Source Oil World 4
Slide 6: … in a market that looks set to continue growing
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … in a market that looks set to continue growing Country wealth vs vegetable oil consumption, 2016 50 45 Indonesia 40 35 Kilograms3per3capita 30 China World 25 20 India Nigeria 15 10 5 0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 U
Slide 7: Palm oil is efficient to produce …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Palm oil is efficient to produce … Vegetable oil yield per hectare, 2016 (Tonnes) 6 5 4 3 2 1 0 Soybean oil Cottonseed Sunflower seed Canola/rapeseed Palm oil Palm oil (MPEG) Source: Oil World 6
Slide 8: … with fluctuating commodity price below 10-year average
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … with fluctuating commodity price below 10-year average in a market with stable regulation and sustainability premia Crude palm oil and kernel prices (US$ per tonne) 1,400 Rotterdam Rotterdam 10 year average 1,200 Mill gate Palm kern
Slide 9: M.P. Evans is a premium operator
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 M.P. Evans is a premium operator 8
Slide 10: Start at the beginning: plant only suitable land …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Start at the beginning: plant only suitable land … We pay special attention to • Land cover • Rainfall • Terrain • Soil type 9
Slide 11: … after rigorous evaluation …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … after rigorous evaluation … We carry out environmental and social impact studies • High conservation value areas are retained and preserved • Thorough legal due diligence to ensure compliance with Indonesian and UK law 10
Slide 12: … and plant only the best seeds
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … and plant only the best seeds x = Dura Pisifera Tenera 11
Slide 13: Maximum yields follow from the best agronomic practices
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Maximum yields follow from the best agronomic practices Consistency is important: • Timely fertilizer application • Field maintenance • Tight budgetary cost control 12
Slide 14: Harvesting is key …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Harvesting is key … 13
Slide 15: … to achieving high oil extraction rates
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … to achieving high oil extraction rates We aim for, and consistently achieve: • High extraction rates • High quality: low free fatty acid content Oil extraction rate (%) 28 24 20 16 12 8 4 0 North Sumatra Bangka Kota Bangun 14
Slide 16: Zero waste makes good economic sense but takes commitment
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Zero waste makes good economic sense but takes commitment Empty bunches are turned to compost Methane from mill effluent becomes electricity 15
Slide 17: Replanting gives access to improved yields but a short term loss of crop
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Replanting gives access to improved yields but a short term loss of crop 16
Slide 18: We build a strong relationship with local communities …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 We build a strong relationship with local communities … Our smallholder schemes have won awards and contribute to earnings of local villagers, who may separately choose to work on our estates for a wage 17
Slide 19: … and run our operations with the best experienced staff
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … and run our operations with the best experienced staff Chandra Sekaran President Director Markian Gunawan Satish Menon Guna Uthiradam Siva Subbiah Head of Finance Head of Engineering Head of Agronomy Head of Agronomy 18
Slide 20: Top agronomic practices produce a distinctive yield curve
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Top agronomic practices produce a distinctive yield curve Fresh fruit bunches yield by age of palm (Tonnes per year) 35 30 25 20 15 10 5 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Source: M.P. Evans 19
Slide 21: Consistent planting has led to enlarged hectarage of young age
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Consistent planting has led to enlarged hectarage of young age • Planted hectarage up 23,800 hectares Group planted hectarage, 2006-16 to 36,300ha in decade to 2016 50,000 • Further 8,700 planted hectares being 45,000 acquired at PT B
Slide 22: Plantations incur a mix of fixed and variable costs …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Plantations incur a mix of fixed and variable costs … Composition of cost per tonne of palm product, 2017 Other 20% Labour 40% Management fee 4% Depreciation 22% Fertilizer 14% Source: M.P. Evans 21
Slide 23: … resulting in falling production costs as crop grows
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … resulting in falling production costs as crop grows Production cost of palm product, 2012-16 (US Dollars per tonne) 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 Source: M.P. Evans 22
Slide 24: Returns start with revenue received at “mill gate” …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Returns start with revenue received at “mill gate” … Revenue at “mill gate” about US$110 per tonne less than delivered Rotterdam US$ Local transport 25 International freight and insurance 55 Export levy 45 Offset RSPO premium (15) 110
Slide 25: … giving a strong cash margin and very significant cash inflows
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 … giving a strong cash margin and very significant cash inflows Mill gate price US$600 Based on commodity price below 10-year average Production cost US$400 Has been falling as crops increase Cash production costs US$300 Results in ve
Slide 26: Strong cash generation supports strategic objectives
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Strong cash generation supports strategic objectives Investment Growth Dividends Capital programme on Purchase of new 10,000 Board committed to existing plantations hectare project, PT BMA normal dividend of at least 15 pence in respec
Slide 27: Illustration
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Illustration 55,000 70,000 mature hectares mature hectares 1.40 million 1.75 million Average 25 tonnes FFB per hectare tonnes FFB tonnes FFB 390,000 tonnes 490,000 tonnes Combined extraction rate 28% palm product palm product US$58.5 m
Slide 28: Who we are
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 Who we are • Long history • Culture of operational excellence • Long-term decision making • First class assets • Strong environmental and social credentials 27
Slide 29: A gathering acceleration of crop underpins board commitment to enhanced dividends
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 A gathering acceleration of crop underpins board commitment to enhanced dividends Crop of fresh fruit bunches, Group and smallholder co-operatives (Tonnes 000s) 1,600 Group Co-operatives 1,400 1,200 1,000 800 600 400 200 0 2010 2011
Slide 30: Operational Excellence Sustained, Dividend Growth
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 7 November 2017 OPERATIONAL EXCELLENCE SUSTAINED DIVIDEND GROWTH
M.P. Evans Group — Investor Presentation (November 2017) on 6ix