I think it’s fair to say that MP Evans (LSE:MPE) is a UK stock that attracts little attention. Today (15 September), the palm oil producer announced its results for the six months ended 30 June. But even though the group revealed a 60% increase in earnings per share compared to the same period in 2024 — and a 20% rise in its interim dividend — it didn’t hit the headlines.
This could be due to the fact that its primary assets are located on the other side of the world. It might be a case of out of sight, out of mind. The group has substantial interests in Indonesia where it owns six palm oil mills, 49,800 hectares of majority-held palm oil plantations and a further 16,200 hectares in smallholder co-operative schemes. It also has a 38% interest in a large estate and a 40% share in a property development company in Malaysia.
But like any agricultural business, its earnings are dependent on two factors – market prices and crop yields — that are largely outside its control. This means its profit can be volatile.
| Year | Production (tonnes) | Selling price ($/tonne) | Cost ($/tonne) | Earnings per share (pence) |
|---|---|---|---|---|
| 2025 (six months) | 737,700 | 868 | 446 | 71.7 |
| 2024 | 1,608,900 | 823 | 410 | 129.6 |
| 2023 | 1,622,900 | 729 | 427 | 78.1 |
| 2022 | 1,511,700 | 854 | 402 | 108.0 |
| 2021 | 1,366,200 | 810 | 350 | 115.6 |
A growing but contentious market
However, palm oil is the most traded vegetable oil in the world. Demand has doubled over the past 20 years. It’s now used in food, cosmetics and cleaning products.
But it can be controversial. The industry has been accused of engaging in mass deforestation and human rights abuses.
That’s why MP Evans emphasises the sustainable nature of its crop and its partnerships with local communities.
Valuation metrics in the sector
Based on the group’s earnings per share for the 12 months to 30 June, its stock trades on a multiple of 8.5. This seems very attractive compared to the average for the UK stock market of around 19.
Having said that, two of its closest FTSE rivals appear cheaper. Anglo-Eastern Plantations, which produces palm oil and rubber in Indonesia and Malaysia, trades on 5.7 times earnings. R.E.A. Holdings, which also produces palm oil in Indonesia, has a multiple of 1.8.
But neither of these companies can match the dividend yield of MP Evans.
Today, the group announced that it was increasing its interim dividend by 20% to 18p. Add this to last year’s final payout of 37.5p and the stock offers a healthy yield of 4.2%. Of course, there are no guarantees when it comes to shareholder returns.
| Year | Dividend per share (pence) |
|---|---|
| 2025 (six months) | 18.0 |
| 2024 | 52.5 |
| 2023 | 45.0 |
| 2022 | 42.5 |
| 2021 | 35.0 |
Pros and cons
But anyone wanting to take a stake needs to be comfortable with the fact that its earnings are likely to be unpredictable. Bad weather conditions (too dry or too wet) can adversely affect yields and the long-term impact of climate change on the group isn’t yet known. Pests and disease could also present a problem.
However, palm oil prices have been reasonably stable since the middle of 2022 and the group continues to expand. It’s recently added another 3,000 planted hectares to its portfolio.
It also retains a strong balance sheet having moved to a net cash position of $70.3m at 30 June — 12 months earlier, it reported net debt of $7.5m.
And then there’s the dividend. It’s grown by an average annual rate of 24.3% over the past four years.
On balance, I think MP Evans is a stock worth considering.
