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DekelOil Q3 Production and Sales Update

Côte d'Ivoire palm oil producer DekelOil Public Limited (LON:DKL)# has announced a production and sales update for Q3 2018.

  • FFB Collected: 24,938t, +15.3% YoY (Q3 2017: 21,626t)
  • CPO Production: 5,371t, +13.5% YoY (Q3 2017: 4,734t)
  • CPO Sales: 5,471t, -24.2% YoY (Q3 2017: 7,217t)
  • Average CPO Selling Price: €544/t, -16.9% YoY (€655/t)

VSA Comment

Having reported signs of stabilisation in regional fruit availability when it released its H1 2018 results last month, DKL has confirmed this morning that FFB crops have started to recover, recording an increase of more than 15% YoY in Q3. However, this was still below the levels recorded in Q3 2015 and Q3 2016, suggesting further recovery is likely.

DKL entered Q3 with little inventory on hand so was unable to smooth out its CPO sales for one of its quieter quarters (as it has done in previous years). We look forward to its Q4 production figures to confirm further evidence of a recovery in regional cropping levels, prior to its high season early next year.

In terms of palm oil pricing, we are hopeful that the current level of cUS$530/t in Rotterdam represents a bottom in the current cycle, due to an improved crude oil price making palm-based biodiesel more economic, more positive US soybean oil pricing over the last month and much stronger palm oil exports in South East Asia in recent weeks (Malaysian exports increased almost 50% MoM in September). However, we would also highlight that we have now entered the peak production season for South East Asian palm oil production, which may moderate some of these factors.   

DKL has now collected 121,133t of FFB and produced 27,613t of CPO YTD. Assuming the company manages to achieve at least the levels reached in Q4 2017, the company remains on track to reach our forecasts of 147,525t FFB and 33,341t CPO production for FY 2018.

We are currently assuming an average achieved CPO sales price for the year of €523/t. DKL has achieved €548/t YTD (due to achieving a premium over the European benchmark price), so this may provide slight upside to our FY forecasts (depending on Q4 pricing).

We are currently forecasting revenues of €20.2m and net loss of €2.8m for FY 2018. We maintain our BUY recommendation and target price of 12p.


Risers and Fallers (Last Close)

Risers

Market Cap (£m)

Last Close (£p)

Price Movement (£p)

% Chg

Eden Research

23.31

11.25

0.25

+2.3%

Zambeef Products

33.82

11.25

0.20

+1.8%

Devro

341.28

204.50

1.00

+0.5%

 

Fallers

Market Cap (£m)

Last Close (£p)

Price Movement (£p)

% Chg

Anpario

103.02

445.00

(25.00)

-5.3%

Sirius Minerals

1,196.14

25.44

(1.00)

-3.8%

Produce Investments

48.40

178.50

(6.50)

-3.5%

 

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