Dekel Agri-Vision plc (LON:DKL), a multi-commodity agricultural business based in West Africa, continues to make strides in its operations, particularly in the palm oil sector. The company’s latest production update, covering July, highlights the ongoing success of its palm oil activities, setting a positive tone for the rest of 2024.
Strong Palm Oil Performance
Dekel’s palm oil segment remains a cornerstone of its business. The company reported a 7% year-on-year increase in crude palm oil (CPO) sales for July, aligning well with market expectations. As Research Analysts Nick Spoliar and Charlie Cullen from Zeus Capital point out, “July production was well-aligned to our and the market’s expectations,” a clear indication of the steady progress Dekel is making in this area.
One of the standout aspects of the July update is the significant improvement in the extraction rate, which saw a 7.43% year-on-year increase. This improvement is not just a technical success; it directly impacts profitability by enhancing gross margins. With international CPO prices recovering and local prices closing in on those international levels, Dekel’s palm oil business is well-positioned to continue delivering strong financial outcomes throughout FY24.
A Growing Presence in the Global Market
Dekel’s role in the global food chain cannot be overstated. Despite holding a sub-10% share of the local market, its sustainably sourced palm oil is crucial not only as food but also as a fuel substitute. This dual utility underscores the strategic importance of Dekel’s products in a world increasingly focused on sustainability and resource efficiency.
Looking ahead, the outlook for Dekel’s palm oil operations remains bright. As Spoliar and Cullen observe, “We see good ongoing growth drivers for the company’s sustainably sourced palm oil activity against a backdrop of scarcity of supply locally and internationally.”
The Promise of Cashew Operations
While palm oil has been a steady performer, Dekel’s move into cashew processing represents a major growth opportunity. Although there were some delays earlier in the year, the recent acquisition of remedial machinery is expected to turn things around. This machinery is anticipated to significantly boost cashew processing, transitioning the business from a loss to profitability by FY25.
According to Zeus Capital, “As cashews deliver, the scale of the business is set to be transformed,” with overall revenues forecasted to reach €45 million by FY26, a significant increase compared to previous levels. The potential for growth in the cashew sector is immense, and Dekel’s strategic investments here could redefine the company’s future.
Final Thoughts
Dekel Agri-Vision is on a strong path, driven by its robust palm oil operations and the promising developments in its cashew business. As the company continues to execute its strategic plans, it is poised to not only enhance profitability but also to play an increasingly vital role in global food security and sustainable energy. With a solid foundation and exciting prospects, Dekel is a company to watch as it continues to grow and thrive in the dynamic agricultural sector.
