Dekel Agri-Vision plc (LON:DKL) Executive Director Lincoln Moore caught up with DirectorsTalk for an exclusive interview to discuss key points from April’s palm oil production update, exceeding last year’s H1 production, cashew Q1 operation update, what investors should be looking out for and achieving record revenue & profitability in 2023.
Q1: This news you’ve provided, it’s a very positive production update for the palm oil project and last month you also provided a quarterly production update for the large scale processing plant. Just looking at the palm oil project first, what were the key points from the announcement?
A1: This week Dekel Agri-Vision announced the April palm oil results, really happy, it’s a standout month.
We had fresh fruit bunches up 119%, CPO production up 108% and CPO sales up 123%, compared to April last year, admittedly against a weaker comparable last year because it was a poor harvest season. Still, really strong results coupled together with continued really strong pricing, that’s why I refer to it as a relatively standout month where you’ve got both very strong production and very strong pricing so it’s fantastic to see.
The high season obviously came which is the first good point, it has come later than normal, normally you find February/March are the strongest months but this year certainly March was strong and now April strong. So, really should have been a very profitable month for us and it set us up to finish the first half of the year really well.
Q2: In our last interview you were hopeful that the first half production would exceed last year, is that still the case?
A2: Certainly now, yes. I think in April alone, we made up the 15,000 tonnes gap that was there from the weeks and months in January and February so we’re ahead of last year, I think probably around 9,000 tonnes.
We provided some guidance in the announcement this week that May was going to be higher than May last year so you can suggest there that we’re going to be higher than last year. It’s just a matter of how much really at this stage, we’ll see. May should be a good like-for-like month versus last year albeit, again, a weaker comparison and hopefully, the same can be said for June.
So, yes, we’re certainly going to hopefully materially ahead of last year ion terms of half-year production.
Q3: Turning to cashews, could you provide your thoughts on the first quarter update?
A3: First of all, it’s good to get them made in the first quarter cashew update and really set our shareholders a platform of which we can grow from here.
So, most of the business is working quire well as you can see from the numbers, where the production is flowing, sales are flowing and we’re getting some guidance on sales prices. I think in all aspects, what we expect to see over the next quarter, and certainly also in the second half, is gradual to strong improvement in all those facets so it’s a good base.
I want to temper expectations, it’s going to be a slow buildup but I think we’ll see over the next quarter and the quarter after, a material improvement for this business. It’s got a huge upside from here, the quarterly production numbers are only, let’s say 20/25% of thew potential processing capacity.
So, we’re building in the shelling machines which when you’re commissioning items like this, you need to stop and then you need to start, it has an impact on daily production. If we get to the end of the second quarter and show the daily run rate significantly improving there, sales quantities improving and I think overtime as well, the pricing will certainly improve.
So, it’s where the next leg of growth is going to come from in the back end of this year and certainly next year as well.
Q4: Just looking ahead, what should investors look out for over the coming months from both the palm oil operation and cashew operation?
A4: We’ll just perhaps look at the next 3 months which is probably where realistically you have good vision.
I think the investors and potential shareholders can expect to see strong production from the palm oil business in May versus May last year, and although slightly further out, June you’d expect would be, on the current trend, stronger as well. So we should finish the first half on the palm oil business, as I said earlier, with production materially higher than the last year’s prices. They were extremely high last year but still very very good.
So, we’re certainly, on the palm oil operation, looking for the potential record financial half year, that might depend on timing issues of final sales of product, whether some of it slips into H2 or not, but it’ll be very strong.
The cashew business, as I said, we’d like to see greater improvement over the key KPI’s, daily production and sales, and so I think we’ll see that business improve. What we want to see is that become an EBITDA profitable business as soon as possible, and we’re earmarking at looking to make those statements as quickly as we can of course.
So, I think first half is stacking up really well and in terms of the business, I think that’s as far froward as I think we should probably look at the moment.
Q5: You mentioned that record revenue was an objective for 2023, and profitability obviously, how do you think you’re tracking?
A5: I think we’re tracking well in terms of record revenue, I think our best revenue year was €37 million, I think at the moment the palm oil business, as a standalone, is tracking onto that similar type of target. You’ve then got the cashew business overlaid which should start to produce more revenue as the production increases in Q2/Q3/Q4.
So, the numbers in the market are €42-odd million revenue, €7 million EBITDA and I think we’re tracking nicely towards both those numbers, which would be records for both Dekel Agri-Vision.
The cashew business, as I mentioned, we’re hoping for a contribution this year of something like €4-5 million revenue. Certainly that business has scoped to substantially grow next year and the year after and will be the catalyst for further growth in the business in the medium term.
We’re tracking well on those numbers, fair way to go but it’s certainly been a really positive 2/3 months with the cashew coming into commercial production and the really strong current high season on the palm oil business really driving a great first half.
