As part of ancient Roman tradition, almonds were showered on newlyweds as fertility charms. Now, their own fertility rate has fallen. With fewer almonds to go around, Aussie almond farming company Select Harvests (ASX: SHV) has advised that its earnings are set to fall in the near future, even as rising prices provide some relief.
The current data relates to the nonpareil almond variety, i.e. the non-pollinator variety which is harvested first, comprising approximately 50% of Select Harvests’ total volume. Initial data from a variety of farms across all geographic regions currently indicates that the volume of this almond variety is potentially 25-35% lower than initially forecast.
Poor bloom periods and unusually colder and wetter conditions throughout the growing season have led to the reduction.
Managing Director, David Surveyor, said, “Recognising the variabilities of agriculture, the company advises that the 2023 almond crop volume is expected to be lower than initially forecast.
“This revised position is based on initial weighbridge data received from the 2023 crop being delivered to our Carina West Processing Facility. Select Harvests understands this trend is generally consistent across the Australian Almond industry.”
The Company expects that the financial impact of this volume downgrade should be somewhat offset by rising almond prices globally. There’s also strong export activity, especially as per the US and Australian reports and cold weather conditions impacting the US 2023 crop bloom process.
Shipments from the Californian Almond Board position report in February are 23.4% higher than in February 2022, and the January shipments from the Australian Almond Board position report are 60.4% higher than January 2022.
Rising prices mean bad news for consumers but great news for Select Harvests’ shareholders. Following the easing of Covid measures, buyers in China have shown increased interest in the market. Plus, the Indian and Middle Eastern markets are seeking contracted material at improved pricing levels.
Based on recent contracted sales, the Company is currently forecasting net pricing for the 2023 crop to be in the range of $7.25 –$7.70/kg—up from about $6.15 – $6.30/kg in January 2023. There is also a potential for further increase.
Surveyor added, “The quality of the 2022 crop was the worst the company has experienced over the last 10 years. The remaining portion of this crop is undergoing a detailed assessment and a plan is being progressed to sell marketable almonds and utilise the remaining balance through the company’s value-add process.”
Despite the 2022 crop revaluation and the 2023 crop volume downgrade, the Company is forecast to remain within its current banking limits, with its debt to equity expected to be approximately 37%.
Just recently, in January 2023, the Company reported record low prices for almonds, denoting a downturn in its overall profits, with the price reduction and an inventory write-off expected to reduce the 2022 crop fair value earnings by $18 million to $22 million.
Now, falling supply is coming for its financials. The uncertainty of its crop quality and price has resulted in the Company’s share price falling by 4.6%, falling from over $4.20 to $3.96.
Alinda is a Business Reporter for The Sentiment
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