Strong Crop Not Enough To Save Select Harvests Dividend

Shares in the ASX-listed almond producer Select Harvests were cracked yesterday by investors after the company released a weak first-half result and cut its interim dividend.

The shares slumped to more than 13% to a day’s low of$6.65 after slipping out the first half figures late on Friday. The company had been due to report this week.

The sharp fall in reaction on Monday underlines why the company pushed the figures out after the close of trading on a Friday when business media have early deadlines and investors didn’t have a chance to react immediately to the weak report.

Select Harvests reported a 13.4% fall in net profit to $17.4 million, thanks to weaker prices across the industry due to a large US crop, higher water costs, and the early impact of COVID-19 on sales and shipments of its nuts.

The weaker result had been telegraphed in an update in February, so it shouldn’t have been all that much of a surprise to investors.

And despite confidence about the current second half, directors trimmed the interim payout by a quarter, or 3 cents to 9 cents a share from the 12 cents a share paid for the first half of 2018-19.

While most of the company’s recent almond harvest (around 70%), is contracted for sale, returns were hit by a 4.7% drop in prices because of a flood of US almonds.

COVID-19 made it harder to get access to markets. COVID-19 also impacted the firm’s cash flow in the half, as it delayed shipments of the popular nut.

Select Harvests has large orchards in Victoria, South Australia, and NSW covering almost 8,000 hectares which is around 20% of Australia’s annual almond crop.

Total revenue for the six months to March 31 fell 6.5% to $93.5 million and operating cash flow was a negative $32 million, although the company says current second half will be better as the current harvest – now completed – is processed and sold.

Select’s earnings before interest, tax, depreciation, and amortisation dropped more than 10% to $34.5 million, from the same time last year.

“The first half has delivered a good result considering the challenges of the drought and the disruption of the supply chain caused by COVID-19,” CEO Paul Thompson said in yesterday’s statement.

The current bout of trade tensions with Australia are a concern as well for Select. Up to the last couple of years, China was buying 5% of the company’s crop, – now its around 30%.

“We have to maintain an emphasis on being sure to supply a competitive product on time,” Mr. Thompson said yesterday.

The shares ended down 11% at $6.75 which was a bit of a thumbs down from investors seeing the wider market was up more than 2% yesterday.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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