M.p. Evans Group Plc · LSE:MPE
M.p. Evans — Investor Presentation (July 2018)
24 slides from M.p. Evans's investor presentation, Jul 24, 2018
Slide 1: Operational Excellence Sustained, Dividend Growth
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 OPERATIONAL EXCELLENCE SUSTAINED DIVIDEND GROWTH
Slide 2: One country, one commodity
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 One country, one commodity 1
Slide 3: … with prospect of substantial growth
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … with prospect of substantial growth Crop of fresh fruit bunches, Group and smallholder co-operatives (Tonnes 000s) Group Co-operatives Source: MP Evans 2
Slide 4: Palm oil has growing share of a growing demand …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 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 3
Slide 5: … in a market that looks set to continue growing
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … in a market that looks set to continue growing Country wealth vs vegetable oil consumption, 2016 50 45 Indonesia 40 35 Kilograms per capita 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 US D
Slide 6: Palm oil is efficient to produce …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 Palm oil is efficient to produce … Vegetable oil yield per hectare, 2017 (Tonnes) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Soybean Cottonseed Sunflower seed Canola/rapeseed Palm Palm (MPEG) Source: Oil World 5
Slide 7: … with fluctuating commodity price below 10-year average
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … 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 Mill gate Palm kernels 1,200
Slide 8: Start at the beginning: plant only suitable land …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 Start at the beginning: plant only suitable land … We pay special attention to • Land cover • Rainfall • Terrain • Soil type 7
Slide 9: … after rigorous evaluation …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … 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 8
Slide 10: Consistent planting has led to enlarged hectarage of young age
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 Consistent planting has led to enlarged hectarage of young age • Planted hectarage up 34,400 hectares to 48,400ha in decade to 2017 Group planted hectarage, 2007-17 50,000 • Acquisition of 8,800 planted hectares at 45,000 PT BMA at end of
Slide 11: The best agronomic practices…
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 The best agronomic practices… Consistency is important: • Timely fertilizer application • Field maintenance • Tight budgetary cost control 10
Slide 12: … produce a distinctive yield curve …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … 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 11
Slide 13: … and the Group achieves high oil extraction rates
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … and the Group achieves 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 Northern Sumatra Bangka Kota Bangun
Slide 14: Zero waste makes good economic sense but takes commitment
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 Zero waste makes good economic sense but takes commitment Empty bunches are turned to compost Methane from mill effluent becomes electricity 13
Slide 15: We build a strong relationship with local communities …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 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 14
Slide 16: … and run our operations with the best experienced staff
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … 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 15
Slide 17: Plantations incur a mix of fixed and variable costs …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 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 16
Slide 18: … resulting in falling production costs as crop grows
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … resulting in falling production costs as crop grows Production cost of palm product, 2012-17 (US Dollars per tonne) 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017 Source: M.P. Evans 17
Slide 19: Returns start with revenue received at “mill gate” …
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 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 M.P
Slide 20: … giving a strong cash margin and very significant cash inflows
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 … 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 very s
Slide 21: Strong cash generation supports strategic objectives
INTERIM M.P. EVANS GROUP PLC RESULTS ONE COUNTRY, ONE COMMODITY: 24 July 2018 Strong cash generation supports strategic objectives Investment Growth Dividends Capital programme on Purchase of 10,000 Board intends to maintain existing plantations hectare project, PT BMA, or increase normal in Decembe
Slide 22: Illustration
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 Illustration 55,000 70,000 mature hectares mature hectares Average 25 tonnes FFB per hectare 1.40 million 1.75 million tonnes FFB tonnes FFB 390,000 tonnes 490,000 tonnes Combined extraction rate 28% palm product palm product US$200 per t
Slide 23: Who we are
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 Who we are • Long history • Culture of operational excellence • Long-term decision making • First class assets • Strong environmental and social credentials 22
Slide 24: A gathering acceleration of crop underpins board commitment to enhanced dividends
M.P. EVANS GROUP PLC ONE COUNTRY, ONE COMMODITY: 24 July 2018 A gathering acceleration of crop underpins board commitment to enhanced dividends Crop of fresh fruit bunches, Group and smallholder co-operatives (Tonnes 000s) Source: MP Evans 23