AEP Plantation (LSE:AEP) shares declined more than 8% on Monday after the oil palm plantation operator warned that El Niño conditions and prolonged dry weather could affect fresh fruit bunch production in 2027, despite reporting higher output for the first nine months of 2026.
The London-listed company said potential weather-related disruption could weigh on future yields, although it expects crude palm oil prices to remain supported during the fourth quarter of 2026 by food-sector demand, firm energy markets and Indonesia’s planned B50 biodiesel programme.
The warning accompanied a trading update showing growth across the group’s main production categories in the nine months ended 30 September 2026.
Own fresh fruit bunch production increased 13% year on year to 924,500 tonnes, compared with 816,200 tonnes in the corresponding period of 2025.
Crude palm oil production rose 18% to 379,200 tonnes from 321,600 tonnes, while palm kernel output advanced 17% to 93,100 tonnes from 79,600 tonnes.
The company attributed the increases primarily to higher production in South Sumatra, supported by its acquisition of Pinago Plantations, and improved output from operations in Bengkulu.
AEP Plantation reported net cash after borrowings of $99.0 million at 30 September, compared with $232.3 million at the end of 2025.
The reduction largely reflected acquisition expenditure, including $160.2 million for Pinago Plantations and $8.4 million for Admiral Potential Sdn Bhd and PT Jaya Jadi Utama.
The group also returned $33.2 million to shareholders through dividend payments and share repurchases during the period.
An interim dividend of 3.73 US cents per share was declared, unchanged from the comparable payment a year earlier.
Looking ahead, AEP Plantation expects the continued recovery in production and additional contributions from Pinago to support its full-year financial performance.
The board maintained its confidence in meeting market expectations for 2026, despite identifying potential production risks associated with drier weather conditions in 2027.
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