DekelOil plc (LSE:DKL) Executive Director Lincoln Moore caught up with DirectorsTalk for an exclusive interview to discuss their plans for 2015, their year of growth.
Q1: You had an announcement last week so we just wanted to catch up with you on that. From my understanding, 2015 was always going to be a pretty exciting year for your company in terms of production and possible profitability. How are you on that schedule at the moment?
A1: That’s right. 2014 was the year we had the mill constructed and commenced production so it was the year of fine-tuning and improving logistics. In 2015, we wanted to see as a real growth year and 2016 should also be a very big growth year. We started the year well, we finished last year with around 14,300 tonnes of CPO for the year and in January, we’ve exceeded 2000 tons of CPO for the month so compared to December, November and October, that result is over double what we were achieving so well on track to deliver the growth we promise.
Q2: So possibly 25,000 crude palm oil (CPO) units by the end of this year? Would that be a fair estimate?
A2: I think we could go higher. The January month of 2000 tonnes, it’s a low season month and we have some months ahead of us, March, April, May and June where we should materially exceed that number in January. A number around 30-35,000 tonnes is our goal, certainly 25,000 would be a good result but the 30-35,000 is where we’re aiming.
Q3: In terms of revenues, obviously that ramps up revenues, how does that put you on the timeline in terms of profitability?
A3: The 2014 year end results looks like a break-even year for us which is a good result given we didn’t start producing until March/April. This year, certainly, the interims we’re expecting to post a material EBITDA number for the 6 month period. For the year, we’re forecasting EBITDA of 5 million euros so the half year, we’re looking to achieve around 2.5-3 million euros, anything more would obviously be a terrific result.
Q4: You’re producing the stuff, what’s the demand like? Is the landscape there looking to be what you were expecting?
A4: Yes, the position hasn’t changed in that there is still a shortage in CPO in the country which therefore means we have a number of groups, predominantly refineries in country and 1 export partner fighting over, not fighting but there’s certainly significant demand for the product. What this is allowing us to do is sell the product at slight premiums to the world price which is obviously an advantage if the price is worldwide, it’s softened at the moment.
Q5: The other factor is obviously the crude oil prices have halved over the last 3-6 months. Is that helping you in terms of margins or cutting costs of transport etc?
A5: Some of the exchange rate move is interestingly working in our favour. We sell our products, CPO, in US dollar denominated product so effectively it’s based on the US dollar and a lot of that cost, or some of that cost is in euros so that is helping us with our margin. We are fortunate in that the amount we pay for the raw product is linked to what we sell it for so if the palm oil price has dropped a little bit we also pay less for our import so we have fairly sticky gross margins so we’re still achieving gross margins of around 30%.
Q6: So basically, we’re looking at a slightly ahead of schedule timeline in terms of what you’re doing at the moment. In terms of investors and the market, do you think the market has actually picked up on the story that you have here? Is the share price reflecting that?
A6: Yes, you’re spot on. What I saw this announcement as was a message to our shareholders that we have now built a viable business which will be operating for 50 years plus with this mill which at the moment we’re still at around 30-40% capacity, we have all of this natural growth ahead of us. January was pivotal and we obviously want to see February and March and see that continuation of the trend, of the significant uplift but yes, it was a big change moment for this business and I don’t think quite looking at the trade has yet sunk into shareholders but I imagine as we keep putting out good production results over the next couple of months, that message will get through and we’ll see some buoyant share price.
