Sustainable palm oil supplier NBPO reports profit hike on back of elevated prices

New Britain, which is listed in London but is headquartered in Papua New Guinea, reported a pre-tax profit hike of 138% to $209.6m (€156m) in the first nine months of 2011, on revenues up 67% at $593.7m.

It said performance was boosted by the acquisition of Kula Palm Oil, higher production at its estates and elevated prices.

NBPO said its output, for the first nine months of 2011, was a record 452,125 tonnes of crude palm oil and palm kernel oil PKO. “Oil production is more than 35% ahead of the same period last year and achieved prices that are 38% higher,”​ added the company.

The palm oil supplier said that demand for fully traceable and certified sustainable palm oil together with speciality fats and margarines is growing as food manufacturers continue to bring forward their commitments to using traceable and certified sustainable palm oil products.

“We remain well positioned to satisfy this growing market both in the UK and Continental Europe,”​ it said, adding that its palm oil refinery in Liverpool continues to meet its expectations with record volumes being delivered in the past quarter.

“Construction of our bakery products plant in Liverpool continues on schedule with the majority of equipment now on site and on schedule for commissioning in early 2012,”​ said the group.

Wilmar deal ​

May this year saw NBPO announced a deal with Wilmar International to process and jointly market palm oil in Europe, with the ingredient to be available from Wilmar’s refinery in Brake, Germany in a whole range of products - including stearin - in 100 per cent segregated sustainable format from mid-2012.

Palm oil is used in 1 in 10 products in the supermarket including bread, crackers, chips, confectionery, margarine and cereals, as well as personal care and beauty products such as soap and lipstick.

The European market uses five million mt of the ingredient per annum.

Palm oil prices ​

September saw CPO prices drop below $1,000/tonne for the first time in 2011 on continuing concerns over the European sovereign debt crisis and the uncertain global economy. However, these have subsequently returned to around the $1,050/tonne mark.

NBPO said it shipped 367,500 tonnes of CPO in the first nine months of 2011 at an average price of $1,115/tonne.

As at the end of September, it had approximately 101,000 tonnes of all oils sold or priced into the fourth quarter of 2011 at an average of $1,061/tonne and a further 131,500 tonnes sold or priced into 2012 at an average price of $1,027/tonne.

Capacity constraints ​

UK based food industry analysts, Shore Capital, notes the company’s crude palm oil extraction rate has come back to 22.73%, from the 23.00% reported at the interim stage.

“We believe this is due to some capacity constraints, as the company is awaiting the commissioning of its 12th mill, which is expected in early 2012. However, this does still represent an improvement on the prior year level of 22.13%, which was impacted by particularly wet weather,”​ notes equity analyst at Shore, Phil Carroll.

The UK analysts said they remain positive on the medium-term prospects for palm oil, especially sustainable palm oil and the companies that produce it such as NBPO.

Expecting the CPO price to remain relatively robust, Carroll said, however, he does expect the 2012 average price achieved to fall to $1,025/Mt, which would represent a decrease of around 5%.

“Therefore, any production growth is going to be partly mitigated by the average price fall, thus holding back any upgrade potential. That said, we will be keeping an eye on CPO demand ahead of Chinese New Year in early 2012,”​ added the equity analyst.