M.P. Evans Group (LSE:MPE) — Final Results

0:01 Good afternoon and welcome to the MPEvans Group PLC final results investor presentation. Throughout this recorded presentation, will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to take the following poll. And I'd now like to hand you over

0:32 to Peter Hasley Chaplin, Chairman. Good afternoon to you, sir. Good afternoon, ladies and gentlemen. Thank you very much, Alessandro, and thank you all very much for joining us for this presentation following the results of our 2022 results that we announced yesterday to the stock market. A number of you will be familiar with us and with us personally. I'm Peter Hudson, the chaplain chairman, Matthew Coulson, who's chief executive. Then we have Chandra Sikharan, who is currently in Malaysia but runs our Indonesian operations. And Luke Shaw, some of you may not have met Luke who joined us in July, who is our chief financial officer.

1:21 So thank you for joining us. This is a rather special year, which we are, where we're celebrating a hundred and fifty years of our of our history going back to the early, eighteen seventies when Matthew Pennyfather Evans, started trading in tea. And as they say, the rest is history. We've been involved in tropical agriculture ever since then, in tea, in rubber, and more recently, the focus has been on palm oil and sustainable Indonesian palm oil. We've also, over that period, been involved in in Australian agriculture of various sorts, but today's focus and in recent years is on Indonesian sustainable palm oil.

2:15 And for those shareholders amongst you, we look forward to welcoming you to our AGM, which is on the June 9. And this year, we're choosing to hold it at Mansion House. We'll have the usual meeting an hour earlier than usual. It's 11AM, followed by the usual drinks and canapes. And then, shareholders may still register to attend the lunch, which will then follow at 01:00. Places are limited in number, but, please do, register if you'd like to attend the lunch. So let us take you through our results. I'll start off with a with a brief overview, and then I'll hand over to my colleagues to take take us through the rest of the presentation.

3:09 So we're we're, as I mentioned, a 150 year old company, following the decision taken in 2005 to sell our small but valuable Malaysian estates and to concentrate on, expansion into sustainable Indonesian palm oil, we've grown substantially, not least in the number of our employees. We now employ over 11,000 people in, Indonesia. We accommodate, I think, some 16,000, on our on our estates. So, that all feeds into the theme of responsibility that will come to shortly. We've invested over $500,000,000 into, in the last, fifteen to twenty years into our expansionary program into Indonesia.

3:59 We now either own ourselves as a group or manage on behalf of our smallholders, our scheme smallholders, 56,200, of which some 42,000 is our own. That follows the 2,000 hectare recent purchase of land near Simpangiri, adjoining Simpangiri. Simpangiri, as you can see, is in the northern part of the the the the most northerly of our Sumatran estates on the top left part of the map. This increases the size of, Simpangir. It almost doubles it, to close to 5,000 hectares, which makes it a more economic size unit, and, it's likely that we will build a mill there in due course.

4:47 It's the only estate at the moment where we don't have our own mill. The other red dots are where we have our other, operations throughout Indonesia, And the blue dots are where our associated ventures are. A small joint venture with CPEF, is the dot on, the island of Sumatra below Sinbangkiri. And the dot in Malaysia is our joint venture property development project, Bertam Properties, in which we have a 40% share, which has a value of some 40,000,000 to $50,000,000 which has been developed from a plantation into a new township over the last almost thirty years, actually, in a in a more mature stages with another 200 or 300 acres still to be developed.

5:36 We'll talk about our commitment to excellence and RSPO in the next slide so perhaps we can move forward. These are our four, if you like, values, our four strategic pillars, responsibility, excellence, growth, and yield. And they all link in flow on one from one to the other. We've been members of the RSPO, strange enough, since the time when we went for the big new strategic initiative to sell the Malaysian estates and to expand into sustain sustainable

6:11 Indonesian palm oil in a bigger way, and that was around the time that the RSPO was formed in around 2005. I mean, it's absolutely one of our core tenets that we do not deforest. There's no burning, and we adhere to all environmental guidelines and considerations, principles of the RSBO. But, also, beyond our environmental responsibilities, we're responsible owners of the plantations in terms of the social responsibilities. We provide housing, medical centers, schools, which I think Matthew will talk a little bit more about in a moment. But, you know, we have increasing responsibility as the employer of, more and more people.

7:07 The responsibility theme feeds into that of excellence by being responsible by be building best quality houses, the best high quality schools, proper, health care, etcetera. We attract the best people, people who want to stay with us. And and that, in turn, leads to better and higher standards because we're employing the best people, best managers, the best harvesters, the best, workers in our fields, which impacts on on our yields, on our on our on our crops, on our production. That's one source of growth. Another is purely the fact that because our plantations as an average are a young age, the crops are growing. The the volumes are increasing and will continue to grow from what is actually already in the ground and continuing to grow and produce.

8:01 But in addition, we do plan further acquisitions. We're in a very, as you will hear later, a very strong position financially, very strong balance sheet. And we do plan further acquisitions over and above that, which we recently announced of the land near St. Bankeria State. And the increasing growth in turn feeds into, yield where and and by yield here, we principally mean shareholder returns and indeed dividends to shareholders. And, again, you'll see more of that on our track record and our plans for the future, on a later slide.

8:48 In terms of the results themselves, you can see that once again, it's been about increases, increased crop processed. We actually rather pleasingly in the year when we're celebrating a hundred and fifty years of our history, we have processed in excess of one point one point five million tons of fresh fresh fruit bunches, which is, you know, a target we've been aiming for for some time, but we would, of course, continue to grow beyond this, for the foreseeable future.

9:24 The, both the crop and the the production that the crude palm oil produced from it has also grown. There's only a decrease in terms of the operating profit because we're not comparing like with like in terms of the two years. Last year included a one off gain of some $13,000,000 from the sale of our final piece of land that we still owned a 100% on Burton State to Burton Properties, the the joint venture property project I was referring to earlier, but an 18% increase in in revenue to well over 300,000,000, a 5% increase in the average crude palm oil at the Millgate, the ex Millgate price, which is actually the critical thing. That's that's what we receive in our pockets.

10:11 Decrease in the basic earnings per share, but it would have been an increase had it not been for last year's one off sale. We've chosen given that we've now turned around as per the final point from net cash, from a net debt position to a net cash surplus, and because of the increases in gross profit, and the fact that we're in such a strong position, we've chosen to increase our dividend once again, a 21% increase from last year's normal dividend of 35p per share to this year's total dividend, of 42.5p, of which the final dividend, that the dividend is still to be paid in June, will be, 30p per share.

10:58 So let me now pass over to, Matthew, who's gonna talk initially about the the market. Great. Thank you, Peter. So, I mean, I I think it's important, as Peter says, to spend a little bit of time talking about the palm oil market itself before we get into some more detail on on our own operations. So the graph really tells the story here the palm oil market in in 2022. We came into the year already in a high price environment for palm oil, so prices well in excess of $1,000 per tonne. And here, I'm talking about pricing in SIF Rotterdam terms, so not Milgate pricing to us, but the quoted Rotterdam price for for palm oil. So a very high price environment.

11:48 But then you can see what happened early in 2022. Prices really shot up. And and and why did they go up so much? Well, really, that was a response to the outbreak of the Ukraine war and concerns, not not about palm oil, but concerns about wider vegetable oil supplies, particularly concerns about what would happen to the availability of sunflower oil, Ukraine being a very big producer of sunflower oil. So looking at the wider vegetable oil market, prices went up across the board, and you can see there on the graph what happened to two palm oil prices. They very nearly hit $2,000 per tonne, unprecedented levels. Now with those changes taking place, the Indonesian government

12:37 decided it was necessary to update the export tax and levy environment associated with palm oil in that country. Indonesia is, of course, the largest producer of palm oil in the world. It produces almost 60% of the world's palm oil. So they increased the levels of export taxes and levies that applied at those higher prices. The other thing that they did, which which slightly took everybody by surprise, was in in the latter part of April and moving into May, they they actually introduced an export ban on palm oil. It it was something of a surprise given that, as I say, Indonesia produces 60% of the world's palm oil. It's a it's a very large consumer of palm oil, but it it only consumes, by comparison, 20% of the world's palm oil. So a big imbalance, which clearly, therefore, an export ban couldn't survive for very long, or else Indonesia was gonna end up with with all of its storage capacity absolutely overflowing.

13:46 So the export ban only lasted for between three or four weeks before they realized that that wasn't something that was sustainable. It did mean, however, that once the export ban was lifted, prices came down as, people released a lot of stock into the market. And you can see, therefore, again, on the graph, what happened as a result of that. The good news is that we've then seen a lot of stability in the market since those changes took place. And over the second half of twenty twenty two and moving into the early part of twenty twenty three, we've seen a lot settled and stable positions in market overall. Overall, across 2022, we received, to us, our mill gate price, the amount of revenue that we received for selling our oil, we received a Millgate price of $854 per ton, up what was already a higher price of $810 on average in 2021.

14:45 And as we move into 2023, we're seeing Millgate pricing initially around $750 per ton, but we've seen some recent increases up above $800 per ton. So an encouraging sign as we move into the as we move into the current year. A word on sustainable palm oil, extremely important for us, something that we are absolutely to. As he says on the slide, we believe absolutely that palm oil, when produced sustainably, provides both a high yield and low cost supply of vegetable oil to what is absolutely a growing global market. All of our areas are developed and managed sustainably.

15:33 And to be clear, that that includes, as Peter's already mentioned, no deforestation and no burning. We've worked very hard this year to do an assessment of of our our carbon footprint and our carbon balance. First step for us to making sure that as we measure exactly where we stand on carbon, we can then take steps to reducing

16:00 carbon footprint. We have a sustainability team based across all of our estates in Indonesia. One of their key priorities is establishing and maintaining observation areas across all of those estates. Our output that qualifies as certified sustainable output, our certified sustainable sales went up again this year. So now almost two thirds of our output qualifies as certified sustainable output. The certification itself, which is given by the RSPO, the roundtable on sustainable palm oil, attaches to mills rather than to estate areas. It's just the way the RSPO works.

16:49 So as we continue to increase our milling capacity, so that output percentage continues to increase. And you can see one of the benefits on the final point on the slide is we get sustainability premium income from selling our certified and indeed our certified sustainable palm kernels, the other product that we sell.

17:13 And our our income went up to $7,400,000 just from selling sustained the extra piece we get for selling certified sustainable output, so $7,400,000 of additional income in 2022.

17:33 Coming back to the first of our our strategic pillars that Peter was talking about, our focus on on on responsibility and what that looks like in practice. When you think about our estates, they're they're not just for us units of production. They're they're they're not just crop milling production. They are communities. A very large number of people live on our estates with their families. So we we have, you know, more than 16,000 people who live on our estates, and it's important for us to make sure that there are community facilities available for those people living on our estates. And, you know, the the pictures do a better job of illustrating that than the words, frankly, on this slide. So you get a sense of the fact we're committed to make sure there's good quality housing available.

18:23 And then there are other facilities that you would expect to have amongst a good sized community. So there are schools. There are sporting facilities.

18:35 There are medical facilities. There there there are places of worship available. There are there are medical facilities, and then there are there are community halls and community clubhouses, places where people can gather together as a community. It's extremely important that these are all part of a rounded estate development.

18:58 So at that stage, I'm gonna pass across to Chandra and ask Chandra to talk through a little bit more detail on the operations in 2022. Yeah. Good afternoon. Thank you, Matthew. I will take you through the next three slides, and my focus will be on group operations. Basically, this slide is on crop growth or crop development. The slide shows the total crop that has been processed in our five mills worth 2022. The green bar chart shows of the total crop produced in in the year 2022, and the orange one indicates total crop processed in the year 2021.

19:49 When you when you talk about total crop processed, it's made out of three categories. One is our own crops. That is a crops that are housed in our own estates. Then the scheme smallholder crops, these are schemes, smallholder schemes that that we develop, we manage, and the crop comes to our mills. And lastly, is the independent crops purchased from outside vendors to improve our milling utilization. For total crop process, there was 11% increase. We processed in our five mills 1,500,000 tons, a little bit in excess of 1,500,000 tonnes in 2022 in comparison to 1,360,000 tonnes in 2021.

20:44 Where all crops are concerned, there was a very significant increase of 12%. This is because of farms reaching reaching their prime, young farms coming into hours, etcetera, etcetera. We we managed to process 100 905,000 tons of our own crop in comparison to 809,000 tons in 2021. It was a 12% increase. Scheme smallholder crops too showed an increase of 16%.

21:17 For independent crops, we managed to buy 340,000 tonnes in comparison to 327 in 2021. So overall, there has been an improvement in the total amount of crop process in the year 2022. Next slide, please.

21:42 This slide is about increasing milling capacity. If you look at the slide on the right hand side, this slide has also been presented last year. It basically shows MPE events growth in the last twelve years from 02/10 to 02/23. The dark green

22:05 bar charts show crop our own crop being processed.

22:11 The lighter green shows scheme smallholder crop that's being processed in our mills and the orange bars reflect on the outside crop that has been purchased to improve our mill utilization. The linear graph shows our increase in milling capacity. In 2010, we had only one mill. Last year, when I presented to you, we were very proud to say in 02/22, had five mills. But today, I'm more proud to say that in 02/23, we have commissioned our six mill in February in Musi Ravas, and altogether, we have already got six mills functioning in MPE.

22:56 CPO production was 341,700 tonnes in 2022. 2021, we produced we processed 312,900 tonnes.

23:10 Production cost is, of course, lowest when milling our own crop in our group mills. Production cost from own crop comes up to US 402 ton $402 per ton. The total production cost, which includes schemes, smallholder scheme crop as well as outside crop,

23:33 will cost us US 500 or costed us costed us US $527 per ton. There was some inflationary pressure in 2022 because of the Ukraine war, notably on fertilizer inputs.

23:52 And 2022 also saw the benefits of having five group meals functioning throughout the year. In 2021, be it the Bunuang mill was only commissioned in August. So in 2022, we had five full mills operating. The group's sixth mill at Musirawas was commissioned early in February and is in full operation. Margin of course increases as more of our own crop is milled in our own mills. Simpang Kiri now is the only remaining location without a whole mill. This will be reviewed following the latest or recent purchase of additional acreage around Simpankeeri.

24:44 Next slide, please.

24:49 Continuing our investment. Planting is continuing at Musirawas. We're just 200 hectares short of 10,000 hectares. We hope to achieve a little bit higher than 10,000 hectares. We look for suitable land that that qualifies in a sustainable manner. Six mill, as I said earlier, was commissioned in February, is up and running.

25:16 Further 2,100 hectares was acquired next to Simpan Kiri increasing the total hectare in the Simpan Kiri region to be 4,800 hectares. Of course, we'll review the potential for the seventh mill at Simpankere. We have to calculate the volume of crop available in the surrounding areas and also for extra land that may come in to add on to this acreage.

25:47 The group continues to review other potential acquisition opportunities also. With that, I end my operations presentation. I hand hand over to Luke for the financials. Thanks, Chandra. So if we take a look at the 2020 results in a little bit more detail. So our our revenue grew by 18% in 2022, up approximately 50,000,000 from 2021, really driven by a higher price environment that Matthew discussed earlier, but also due to the increase in production from from the group. We also saw a rise in our sustainability premium in 2022, and that was predominantly driven by increase in palm kernels.

26:38 And that was really as a result of some strong end market demand in in the products that partner will go into. That higher revenue number dropped through to the gross profit, and we had our record gross profit in absolute terms of a 109,200,000 in 2022. However, we did see a slight squeeze on our margins compared to 2021 where we dropped from 37% to 33%. This is this is pretty much all to do with an increase in fertilizer costs. So the same factors around the war in the Ukraine that drove the CPO price higher, though those factors also put pressure on the fertilizer market. Lots of fertilizers produced at Russia and Belarus, and those people diverted their purchasing to other suppliers, that put pressure on those markets and in turn increased the price. So we did see an increase, substantial increase in some of the fertilizer costs that we purchased.

27:38 We actually purchased our fertilizer in advance, so we were a little bit protected from those higher prices at the start of 2022, but we did see that fertilizer cost hit the p and l significantly in the second half.

27:54 As a result, though, we still ended up with a gross margin of 33%, which compared to historical levels is still a fantastic result. The other area of cost increase, has driven the total cost of production up from 465 to $527 per ton, is linked to the purchase of the fresh fruit punches that we purchase into our mills. Now there's a formulaic

28:19 price for the FFB that's linked to the CPO price. So as CPO price increases, so too does the purchases of the FFB. Subscribe if it was to go down CPO price, so too would the FFB purchases as well. So they were the two main contributors to that total cost of production increasing from $46.05 to $52.07. Nonetheless, it was still a fantastic year from a profit perspective and dropping down to, ultimately, our earnings per share that was a 108p for 2022. That's slightly down on last year, but if you do announce to And we're delighted to announce that that we'll we're be putting the dividend up for the year by 21% to 42.5 p from 30 p in 2021.

29:21 And I think that really is a, you know, a pervert demonstration of management's commitment to our progressive dividend policy and either increasing dividends or maintaining it, something that the group is very proud of. So just next slide, please, Matthew. So just if we turn that p and l performance into cash, there was really strong cash generation through 2022, over a 100130% cash conversion, which led us to an operating cash before interest and tax of 132,000,000.

29:55 We then use some of that cash to continue with our capital investment program, most notably in constructing the Mussi Rauwass Mill. And we then also use that cash to give back to shareholders through dividends, and we did embark halfway through the year on a share buyback program as well. So as a result of that strong cash generation, we've moved from a net debt position of just just over 5,000,000 to a net cash surplus of $33,500,000 at the end of the year. And we're continuing to pay down our borrowings. So our borrowings at the end of twenty twenty two were 49,000,000. We continue to pay that down, and we'll continue to do that through 2023. But we are significantly increasing our cash balances through that operational performance at the moment.

30:45 That leaves us with a particularly strong balance sheet, so an increase in our net assets for to 488,000,000. And that really strong balance sheet gives us the optionality to move forward with looking at potential acquisitions, which we're very keen to do to enable the growth of the business, but also look at how we can return money back to investors as well. We've touched on the fact that we purchased some additional hectare at the Sydney or near the Sin Pancurie estate in March early this month, and that was all funded through the cash that was on the balance sheet. And finally, every year, the group does have a independent valuation of its equity and, in particular, its land.

31:34 So that sort of increase in the year from 4 02/1498 from £12.65 at the end of twenty twenty one. And most of that was really linked to some beneficial foreign exchange movement, and we have dollar assets that converted into pounds and now worth more with a stronger dollar versus the pound. But there also was a reflection in that equity value as we move from a net debt position to a net cash position. So that was also the main contributory factor to that increase in the valuation. So I'll hand over to Matthew now who'll take you through, a little bit of the outlook for the rest of the year. Fantastic. Thank you, Luke. So very briefly on outlook. I think we've covered a lot of this in what we've discussed already.

32:24 As we've moved into the first couple of months of 2023, total crop processed is up on the same period last year by 8%. A lot of that increase is supported by being able to secure further income. Ladies and gentlemen, I believe we've just lost Peter, Matthew, and Luke. We'll get them to reconnect momentarily, and please do bear with us. Continue.

33:15 So we've seen an increase of 8% of our processed crop in 2023 in the first two months. As I was saying, a significant part of that increase is securing more independent crop for processing in the first two months of of the year. And we've already talked about pricing. So current pricing above $800 per ton, which is great to see. And then I think we discussed both the new mill and indeed the further planted hectare. We're continuing to plant at Mishirawas, our project in South Sumatra where we've opened our new mill. So that bodes well for further supply of crop to that mill. So we expect to exceed our targeted 10,000 hectares planted at Musirawas during the course of this year.

34:05 And of course, as we continue to plant there, we're not going to stop when we get to 10,000 planted hectares. If we can continue beyond 10,000 planted hectares, that would, of course, be fantastic. And then as we move further into this year, we very much hope that CPO prices remain strong by historic standards. There's no reason to think that they won't. We continue to expect further growth in total crop processed. And as we've already discussed, further acquisition opportunities are being reviewed by management. Luke's mentioned our dividend for this year already. So normal dividend for 2022 up to 42.5 p.

34:52 And, again, this is a chart that you've seen before as well, but it's one we we we're we're not ashamed of showing again. We're very proud of our long term track record of increasing dividends, and you get a sense of that over that long time series in the chart at the bottom of this slide. So really just to summarize, to remind you of our strategy pillars, how we're delivering in operations. You've seen the outstanding results, revenue up, a very healthy gross margin and cash generative earnings per share, 108p, and we consider it to be exciting prospects for the future. Now I know as we've been talking, a number of questions have been coming in, so I'll stop at that stage so we've got sufficient time to respond to the questions that have been coming in.

35:47 But what I will do at this stage is just hand back over for a moment to Alessandro at IMC. Thank you very much. Perfect. Peter, Matthew, Luke, Chandra, thank you very much for your presentation. I'll just bring your cameras back up now. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the right hand corner of your screen. But just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we received a number of questions at today's presentation. And, Peter, if I may, if I could just ask you to read out those questions and delegate them to team where it's appropriate to do so, I'll pick up from you at the end. Yes. Thank you very much, Alessandro.

36:32 Thank you so much. There have been quite a few questions that we've received. Thank you so much for your for your interest and some some good stimulating questions there. We'll do our best to to answer them. I think we will have a sort of a clean-cut off time at at 01:00. I think an hour is probably long enough for for all of you, but we'll do our best to get through the questions in the remaining twenty minutes plus or so. I I don't think I need to read the question specifically, but there is one on the long term impact of potential impact of climate change, which I'll let Matthew consider whilst I answer one which is regarding the potential risk risk or riskiness of being involved in one single country and arguably one single commodity in one single country.

37:29 And as as a number of you may know, we have been involved historically in two or three different countries, in two or three different commodities over the years. But we did increasingly form the, judgment to reach the decision that sustainable Indonesian palm oil was the way to go. I mean, there were really only two countries where palm oil is produced on a significant commercial scale. That's Indonesia and Malaysia. And Indonesia has a significant competitive comparative advantage over Malaysia in terms of the extent of labor that's available, very often the quality of its soils, which tend to be richer, the volcanic soils, the fact that, not only is there a greater abundance of labor, generally, the costs are lower in operating in Indonesia than in, Malaysia. And for us as a foreign, owner, we are allowed, actually, as of recently, up to a 100% ownership of our plantations, albeit on a long term lease basis, not on a freehold basis.

38:46 But, really, over the years, palm oil, year after year and a year after year, has knocked spots off all the other commodities that we've been invested in in terms of the consistent yield, the consistent profitability that has afforded us. So although there is arguably a risk, we it's a calculated risk, one we're very comfortable with. So I might pass over to Matthew. I'm gonna be a tiny bit of notice on that. I'm trying not to do something terrible with a mouse again and lose everything. But I'll I'll pass over to Matthew for this for the client related one. Absolutely. And it's clearly an extremely important topic. I mean, it's an area we're paying extremely close attention to.

39:34 I mean, I I think what I would say on it at this stage is at the current time, whilst we monitor it very carefully, we've not observed any significant long term climate pass changes on the group's estates. However, you know, this is something I'd say we're we're far from complacent about, and we continue to monitor extremely closely. And perhaps as evidence of our lack of complacency, Perhaps I can offer a little a little trail, a little advert for the fact that we will be producing a separate report in addition to disclosures that you can already find in this year's annual report, a separate standalone sustainability report coming up later this year, and that will deal with, amongst other things, climate risks in a lot more detail. So some some more reading material to look forward to coming up soon.

40:34 Fine. Thank you, Matthew. Perhaps we'll, given that fertilizer is, you know, a significant cost, perhaps, Luke, can answer this question. What proportion of operating cost is represented by fertilizer costs? Sure. So I think on fertilizer costs, first thing I would say is that the good news is that we're starting to see a decline in fertilizer costs from a peak in sort of Q2, Q3 last year. So we are seeing fertilizer costs come back down, which is encouraging because, hopefully, that should provide some impact, some benefit to our to our p and l later on in 2023. In terms of proportion, fertilizer cost was was about 10% of the operating cost in 2021, and that jumped up to 17% in 2022.

41:29 So that gives you some indication of just the significant increase that we saw in those prices. But as I say, you know, we're we're tracking it very carefully, but I'd to say that it is starting to come back down now, which which is kind of more in line with the reduction in the CPO price. We're starting to see that kind of matching starting to happen. Thank you, Luke. Chandra, don't know whether you would like to answer this one. Could you elaborate on the group's ownership tenure, the period of ownership for the leases of its estates and whether that differs across the estate portfolio? Generally, our leases are for a thirty year term.

42:15 Is that consistent across our our portfolio of of estates? And, of course, perhaps comments on the fact that we have leases coming up at different times. Yes. It is consistent. It is consistent because VPN, the land authority, is controlled by by the central government. And unless there is something oh, sorry. Yeah. Unless there is some development or some government project going on in our area, So far, we had no problem continuing the lease on our properties today.

43:02 We we just renewed the Sumatra Utara leases, and the rest of the leases come in late into 2030 and 2040. And and, generally, they are thirty years, aren't they, Chandra? Yes. Yes. Thirty year term. Yeah. They come up at different times, so that's consistent. And they're always renewed with with no with no difficulty. Yeah. Usually, the problems will be, you know, the old the old certificates are measured by compasses and the new new ones measuring tools are there'll be slight differences in accuracy. That's all. Right. Thank you, Chandra. There's quite a long question which incorporates a few questions, but I'll perhaps ask Luke to answer one part of it, which is, can you add any information about the long term palm oil price used and the discount rate used to compute the DCF, the discounted cash flow valuation of £14.98 per share, which incidentally compares with £12.65 last year.

44:13 How do you account for the difference between the market price of the shares and this value? Do you want to have a crack at that? Well, I'll certainly explain the the price assumptions and the discount rate. So so so we the discounted cash flows that are used to generate those valuations are long term cash and and projection. So there is a, you know, historical considerations taken into those cash flows, and we're not just looking at kind of today's prices. So for the projections that provided the valuation at the end of twenty two, a future price of CPO was around $650, which is the mill gate price for CPO.

45:01 And there was a discount rate used of about 16%. So they were the two factors that went into that discounted cash flow calculation. In in in terms of the gap from the current share price to the $14.98, I'm not sure I have time to fully go into that in in this in this session, but I I think there is clearly the underlying we have management very happy with the underlying value of the assets that we have in the group, and, you know, we we supply the the the valuation that we've put into the accounts, and we would like to see that gap close at some point in the future, most certainly.

45:48 Thanks, Luke. Chandra, there's a question, which is how many group owned, so group hectares as a result of extension plant and planting of immature oil palms, do you expect to have by the end of twenty twenty three, how many group owned subsidiary hectares? We So let let let's just make sure we're completely clear about that question. I'm trying to find the question. How is how do we How we make sure we're both clear about that? Yes. I mean, to just just perhaps to pick up on that briefly. So if we if we look at the position at the end of twenty twenty two, first of all Yeah. We we had group owned hectares.

46:42 So if we exclude those related to our associated schemes for holders, we had 40,200 at the end of twenty twenty two. Obviously, just after the end of the year, we were able to add a further 2,100 by the acquisition we made close to Supan Kiri, so that took us to 42,300. In terms of further planting that's currently going on, the key area where we are continuing to plant is in South Sumatra at our at our Mbusiwawas project. Now as I said at the end of twenty twenty two, we're not far shy of our 10,000 hectare target. We've only got about 400 hectares to go to get to that 10,000 hectare target.

47:34 So to the 42,300, you could add another 400 to get to the to 42,700, then it becomes a question of how much beyond 10,000 hectare target might we get. And that's something, frankly, I think we would like to wait and see. We're not we're not we're not expressing a certain view on whether we'll get to 10,100, 10,500, 10,900 or or or whatever. So I I wouldn't want to give us a sort of firm position to to to have sort of, you know, been thrown back at us at the end of twenty twenty three. But, hopefully, that gives you a flavor of of the of the position. Thank you. Sorry. Sorry, Chandra. I think I I just make sure we were clear about the question. Yeah. Okay. Presently, I think by end of twenty twenty three, we'll we'll be having less than 5,000 hectares in mature because 80% of Musserawas is already mature.

48:32 Thank you. Okay. Very helpful. And then we have about 600 hectares of replanting in Sumatrau. That's that's about it. Yes. Thanks, Trevor. There's a question. Can you comment on corporate activity in the broader palm oil market and the implications you draw? Do you expect more or less activity in 2023 versus 2022. I mean, a comment that we often make is that there are actually generally rather few transactions because good quality palm oil land very rarely changes hands. And another comment is that certainly in our own experience, as we now seek to expand our portfolio by investing in more land, specifically, we'd like to acquire more hectare around the Kotabangan project to bring that 16,000 odd hectares up to 20,000 hectares.

49:32 We are in discussion with a couple of parties who have land in that area. We feel, we hope, that there's a greater likelihood of reaching some agreement now that the price has come back from the stratospherically high levels that we saw last year when perhaps sellers formed rather unrealistic expectations about the value of their land. And now I think we are perhaps back in more realistic territory when it comes to negotiations. So perhaps for that reason, we'll we will see a little bit more activity taking place in 2023 than in 2022. Let's move on to another one.

50:23 Luke, would you like to take this one? What is the margin percent impact of produced processed versus purchased crop? Yeah. So, I mean, I I will say that that, you know, that that can vary mill by mill, and it depends on the purchasing price that we are able to achieve of the independent stock. But, you know, sometimes you can see as as much as sort of two to three times an improvement in margin when you're processing your own crop versus buying it in from independent and, to that extent, skews moreholders. Thank you. Matthew, do you want to comment on export tax levies, changes expectations, maybe linked in to also well, best you can answer this anyway. No.

51:17 Yeah. With the recent tightening of domestic market order in in view of the upcoming Ramadan month, is there any impact to the MPE's inventory level? What is the storage level like at the moment? Yes. Absolutely. So taking the first one around export taxes and and levies and latest news. The the good news there on on latest news is that there is no latest news. Yeah. Things have been very stable for for some time now. There was a period in 2022. There there were quite a number of changes in in relatively short order, particularly where the price was fluctuating quite quite substantially. What we've seen, if you reflect back back on on the chart we were looking at of pricing, as pricing has become somewhat somewhat more stable, So we've seen very little or, in fact, no change to the export tax and and levy environment, which is extremely welcome because it gives people a lot more certainty as to what's going on in part of our marketplace from a pricing perspective.

52:28 The the other question was asking about the fact that there had been a small change made to what's called the domestic market obligation, which is how how the ratio between what gets exported versus what gets retained in the local market works. And given how that's changed, what what that means for producers, for refiners, and just the the the local market, whether that, you know, that has any impact on us, particularly on our inventory levels. Again, from our perspective, we're fine. We are continuing to we are continuing to produce, to sell, to to to work very, you know, closely with the refiners we sell to and and our inventory levels or what we would classify as sort of normal levels. We are very comfortable with where we stand inventory wise at the moment.

53:26 Fine. There's another, another question, I suppose, linked to whether we, want to we will stick with our Indonesian palm oil as our core focus. So that is our position for now. Is soya the main competitor oil? Yes. And is the volume of soya being produced rising sharply? I think the the answer there is that with palm oil, palm oil is much easier to forecast, predict because once planted, it's there for the next twenty five odd years.

54:15 Whereas with soya, it's the decision of an individual farmer as to whether to plant soya or whether to plant an alternative crop that gives potentially a more attractive return. So it's very hard to predict what the the respective volumes are going to be. But generally, over the last ten to twenty years, palm oil's share of the market has increased. I think palm oil coupled with palm kernels accounts for between 40% and even with palm kernels closer to 45% of the total vegetable oil market, whereas soya is probably closer to 25 now? It's something of that order. Something of that order. So palm oil generally has increased, and soya has generally reduced.

55:10 Let me just there's a question about are the shares eligible for business property relief and potential exemption from IHT? I mean, we don't advise on this other than to say, if you like, informally that we've never known it not to be eligible, but one would have to take individual advice on this. So let me just see what else. And we've got that. Yes. Perhaps we'll just talk about pricing, about the markets and about expectations for prices.

56:03 And as commodity producing, I'm presumably a price taker looking at the last ten years of palm oil pricing. The trend prior to 2020 seemed to be between five hundred and eight hundred. We saw price treble, fallen halved. Other commodities like natural gas have collapsed back to below their pre pandemic lows. What risk of palm oil returning to 500 or less are there? Are they likely to remain elevated? Do you undertake any hedging or forward sales to mitigate these risks? But I'll just answer very quickly the the last part of it. We we generally don't sell forward because we produce palm oil effectively every day of the year, and we sell as we produce. And we think, in fact, there's a greater risk by selling forward than by selling as we produce and maximizing the price with the premier that we secure for sustainability premier, etcetera, than trying to take a view of what the market may or may not do in the future.

57:12 I don't know if you'd like to look at the other the remaining part of the question there. About about the Full price. I'll place the the price as as we look forward. Yes. Exactly. Just taking your view, which I I think is very hard to do. That's exactly when I think that's I don't know. I think you've left me with the difficult bit of a question, which is which is yeah. We can see that for again, I I refer back to the chart we're looking at at the market. Of course, we didn't really project it forward. But if you look at where we've been over the second half of twenty twenty two and moving into the early part of twenty twenty two, 'twenty three, we have seen a degree of stability in the market, which is very encouraging.

57:57 And we would like to think that we've that stability may continue for some time to come. We can't guarantee that. Of course, we can't. But it's very encouraging that we've seen that some time to come. We do our best to keep our our ears to the ground on this and our our expert marketing team in Jakarta to to to listen very carefully to to commentators within the market on this, And there certainly doesn't seem to be a consensus view that it's it's sort of heading in one direction or or the other. So it may well be that that we're we're looking at a period of stability for some some time to come. Then two very quick final questions. Do you have a target share price at which you would not buy back shares? I mean, at the moment, we're seeing the market trading at around £8.40, pounds or so, certainly well beneath the valuation as implied by the independent valuation, the figure quoted earlier, 14.98.

58:59 We wouldn't specify a particular price, which we would not. But all we would say is that as of now, we are at a very significant discount to what we believe to be a fairer reflection of the value, and we're happy to continue to buy shares at these levels. Are you able to comment on that? Well, I wondered if perhaps a final question to focus on. There was a question asking what the profit impact will be of opening the new mill that we've opened in early twenty twenty three in South Sumatra. And it's a very fair question to ask. Yeah. And, obviously, we open mills partly for very good strategic reasons, but partly because it's the right thing to do financially as well. And I think the easiest way to illustrate the the profit benefits of opening a new mill is to look at the extraction rate analysis that we provide.

59:54 Yeah. We believe with good reason, and we can demonstrate it in all of our other locations with the extraction rates, we our estates produce very high quality fruit, and therefore, we expect to get a very good extraction rate when we put our own crops through our own mills. However, despite the our very best efforts when we send fruit to a third party mill, sometimes we don't get the best of extraction rates. Up to now in South Sumatra, we've been getting an assumed extraction rate when we send it to a third party, then of about 20%. We expect that will jump up by several percent when we start or when we are now processing it in our in our own mill. And so that will all be additional profit for us because we are getting that rather than the third party that are enjoying it instead of us.

1:00:46 Lovely. Well, I'm sorry we haven't quite managed to answer all the questions, but we we will happily send our well, guys, do there any remaining ones? Absolutely. What we will do is obviously review all of the questions and make sure that they get the answers all get published either by reference to what we've discussed now or in written form on the IMC website. Perfect. Thank you very much for that. For every question you answered and another one came in. So as you said, we we will post those written responses on the investor meet company platform, and you'll be notified when they're ready. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Peter, can I just ask you for a few closing comments? Well, I'd just like to say thank you so much for for tuning in, and thank you so much too for such an interesting selection of of of questions.

1:01:41 As I say, I'm sorry we didn't get through all of them. And we certainly hope to see many of you at our AGM on the June 9. So thank you very much once again. Peter, Matthew, Luke, and Chandra, could I thank you very much for today. I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few minutes to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of MPEmmons Group PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.