Palm oil producer New Britain Palm Oil Ltd. (NBPO.LN) Wednesday reported a sharp rise in full-year pretax profit, inflated by huge gains on the value of its trees, and said it bought an established oil palm plantation company in Papua New Guinea which will increase annual production by roughly 40%.
At 1046 GMT, shares in New Britain were up 20 pence or 4.2% at 497. pence, outperforming a 0.1% higher FTSE All-Share index.
New Britain Palm Oil said it bought an 80% stake in CTP PNG Ltd. from Cargill Inc. for $175 million in cash, paid for from its borrowing facilities.
Chief Executive Nick Thompson told Dow Jones Newswires the CTP deal adds 25,000 hectares producing about 160,000 metric tons of palm oil a year to New Britain's estates.
He added the company is confident it can increase production from the CTP plantations to 200,000 tons a year within two years.
Liberum Capital analysts said the deal could mean New Britain gains a 10% market share of the European market for palm oil used in food. The oil is also used to make soaps and as fuel.
The broker said the acquisition will boost 2010 earnings 7% and between 15% and 20% during the years 2011 to 2014.
Papua New Guinea-based New Britain Palm Oil reported a pretax profit of $200 million in 2009, compared with $28.8 million a year earlier. Revenue dipped to $323.8 million from $352.2 million.
Earnings were boosted by non-cash gains on the value of the company's biological assets–its trees–required under accounting standards.
Excluding these effects, pretax profit fell 19.8% to $85.3 million, the company said, as plunging palm oil prices offset an increase in production to 366,000 tons from 320,000 in 2008.
The company added it is scheduled to complete construction of a refinery in Liverpool, England, this spring. Executive Director Alan Chaytor said New Britain Palm Oil has already received a lot of interest from U.K. and European food producers keen to buy palm oil from the site, because it can be traced back to a sustainable source.
The palm oil industry has come under attack for destroying rainforest and endangering wildlife, especially in Indonesia, where food giants like Unilever NV (UN) have stopped buying oil from certain producers.
New Britain's plantations are certified sustainable by the roundtable on sustainable palm oil, or RSPO, a non-profit venture established between producers, buyers, investors and environmental groups to promote sustainable palm oil production.
Company Web site: www.nbpol.com.pg
-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com
(END) Dow Jones Newswires
February 24, 2010 05:56 ET (10:56 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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