UPDATE 2-New Britain says palm oil price rise to help growth

* H1 profit $41.9 mln vs $68.1 mln last year

* Liverpool plant due to start running by Q2 2010

* Shares rise 2 pct; Leberum repeats “buy” rating (Adds detail, shares, executive director comment)

LONDON, Aug 6 (Reuters) - Australasian palm oil producer New Britain Palm Oil Ltd NBPO.L expects higher raw material prices and new refining capacity to help to drive growth, it said on Thursday after reporting a sharp drop in first-half profit.

The company said the price of palm oil, a cheap vegetable oil used for both food and fuel, had recovered to around $700 per tonne from $550 at the start of the year.

It posted a 38.5 percent drop in pretax profit for the six months to the end of June to $41.9 million due to lower palm oil prices.

Shares in New Britain, Papua New Guinea’s largest oil palm plantation operator, fell just over 1.6 percent to 376 pence in thin trade, but are up nearly 150 percent for the year.

Broker Liberum repeated its “buy” rating for the stock with a price target of 435p, saying New Britain shares were undervalued in comparison to other palm oil producers.

The trading outlook for the second half was in line with company expectations, partly thanks to forward sales of 254,800 tonnes of palm oil at $700 per tonne, while new refining capacity and strong demand for biofuels would help growth.

“We’ve quite a lot of sales on the books at reasonable prices and that gives us the ability to have stable earnings going forward,” Executive Director Alan Chaytor told Reuters.

New Britain’s projects include a palm oil processing facility in Liverpool, northwest England, on track to start producing in 2010; a new plantation near Kimbe, capital of West New Britain in Papua New Guinea; and new methane capture ponds.

The Liverpool refinery would grant New Britain access to Europe’s expanding biofuels markets in Germany, the Netherlands and Italy, Chaytor said, while larger production would help it keep up with food industry demand from China and India.

“It’s a China and India story,” he said. “Palm oil pricing is predominantly driven by developing nations in Asia -- that’s where the growth is coming from.”

“The energy story is largely in Europe (where demand is) growing quite rapidly with new usage for power and biodiesel,” he added.

The price of palm oil tracks crude oil prices, which have risen over $70 per barrel on economic optimism. (Reporting by Nicholas Vinocur; Editing by Hans Peters and David Holmes)