DekelOil Public Ltd (LON:DKL) is the operator and 51% owner of the vertically integrated Ayenouan palm oil project in Côte d’Ivoire and on 6th January 2016 provided a production update for the year ended 31 December 2015. Crude palm oil (CPO) production increased by 151% to 35,770 tonnes at the Company’s 60 t/hr CPO extraction Mill, one of West Africa’s largest. DekelOil also commenced first production and sales of Palm Kernel Oil (PKO) and Palm Kernel Cake (PKC) at the recently commissioned kernel crushing plant (the KCP).
| FY 2015 | FY 2014 | % Increase | |
| CPO production (tonnes) | 35,770 | 14,242 | 151% |
| CPO Sales (tonnes) | 35,573 | 13,900 | 156% |
| Average CPO price per tonne | € 604 | € 647 | -7% |
| Kernel production (tonnes) | 6,221 | 2,504 | 148% |
| Kernel Sales (tonnes)* | 4,806 | 2,444 | 97% |
| Average Kernel price per tonne | € 183 | € 183 | nil |
| PKO production (tonnes)* | 492 | Nil | – |
| PKO Sales (tonnes)* | 425 | Nil | – |
| Average PKO price per tonne | € 743 | Nil | – |
| PKC production (tonnes)* | 712 | Nil | – |
| PKC Sales (tonnes)* | 417 | Nil | – |
| Average PKC price per tonne | € 42 | Nil | – |
Kernel Crushing facility commenced operations in November 2015. Kernel sales ceased and PKO and PKC sales commenced.
• Strong local and regional demand has enabled DekelOil to sell its CPO at a premium to CIF Rotterdam prices. The Company expects this trend to continue and notes that international crude palm oil prices are beginning to improve as very low rainfall caused by a very significant El Nino impact in South East Asia during H2 2015 is resulting in lower production levels which are expected to continue into H1 2016.
• KCP now fully commissioned with PKC and now PKO being produced and sold locally
35,770 tonnes of CPO during what was the Mill’s first full year of operations is an excellent outcome. In our view this reflects the strong relationships DekelOil has established with local smallholders and also the effectiveness of the logistics network we have put in place in the surrounding
area to facilitate the delivery of FFB to the Mill for processing. DekelOil believe the current PKO extraction rate of 37.45% should also improve materially as the newly established kernel crushing operations stabilise in 2016.
A couple of other points worth a comment:
1. DekelOil Public Ltd has been accepted as an approved supplier to the World Bank-backed Projet d’Appui au Secteur de l’Agriculture de Côte d’Ivoire project (‘PSAC’), which aims to support and improve the palm oil industry in Côte d’Ivoire. PSAC is 70% financed by both the World Bank and International Finance Corporation (‘IFC’) and 30% by the local Inter- professional Association of Oil-Palm Industry. See our Breakfast Today note on 19th August 2015
2. Palm Oil facing upward Pressure on Pricing: ‘Palm oil will extend its rally next year as the worst El Nino in almost two decades curbs output in the world’s biggest producers and Indonesia uses more for fuel, according to delegates at a conference in Bali. Futures climbed to the highest in almost three weeks. The most consumed cooking oil found in everything from candy to instant noodles has jumped 26 percent from a six-year low in August after drought and smog hurt plantations in Southeast Asia. At the same time Indonesia is raising the amount of palm blended with diesel to 20 percent from 15 percent. That’s boosted futures as prices of other farm commodities slump.’ Source: Bloomberg
With the recently announced €5.1 million reduction in debt, the Company is on course to realise the highly cash generative potential of the vertically integrated project at Ayenouan. In line with their strategy, this will provide a strong platform from which to deliver on the Company’s objective and build a leading West African focused palm oil company.
Earlier in December 2015 DekelOil announced that it had entered into an agreement with its joint venture partner, Biopalm Energy Ltd, which reduces the Company’s debt position by €5.1m. This will have a major positive impact on the Company’s profitability. Importantly, whilst there is no announcement about dividends, with the debt reduced, obstacles to paying a dividend have been removed.Buy (HS)
Beaufort Securities acts as corporate broker to DekelOil Public Limited
