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Strong crop, tough market: Select Harvests’ (ASX:SHV) half-year in a nutshell
  • It's been a tough year for almond grower Select Harvests (SHV) after COVID-19 and strong U.S. competition drove the price of Aussie almonds to ten-year lows
  • The company halved profits compared to last year and pulled in 16.8 per cent less in total revenue
  • Similarly, earnings before interest tax, depreciation, and amortisation (EBITDA) for the 2020 financial year was almost 40 per cent lower than the year before
  • On top of COVID-19 woes, Select says near-perfect conditions in the U.S. made for higher final tonnage for the 2019 crop — pulling almond prices even lower
  • Looking ahead, Select says it's tough to predict what the year ahead might look like until conditions across the almond industry stabilise
  • The company is forking out a four-cent final dividend for the 2020 financial year
  • Shares in SHV are down just over 3 per cent this afternoon, currently at $6.01 each

It's been a tough year for almond grower Select Harvests (SHV) as COVID-19 and strong U.S. competition drove the price of Aussie almonds to ten-year lows.

Despite a record 23.25-million-tonne almond crop over the company's latest financial year, Select's revenue and profit still took a nasty hit.

For the 12 months to the end of September 2020, Select pulled in roughly $248 million in revenue — 16.8 per cent down on $298 million from the same time period the year before.

The company halved net profit after tax (NPAT), coming in at $25 million for the 2020 financial year compared to $53 million the year before.

Similarly, earnings before interest tax, depreciation, and amortisation (EBITDA) was just under $58 million over the 2020 financial year compared to the $95 million the year before — a difference of 39.3 per cent.

All this meant Select Harvests slashed its final dividend by 80 per cent — giving 4 cents per share back to shareholders this year compared to the 20 cents per share last year.

COVID woes meets U.S. strength

Of course, today's soft figures are to be expected — Select warned in February that the pandemic, coupled with droughts across Australia, was likely to deal a blow to the company's bottom line.

This was reiterated in the company's half-year report from May when Select revealed the start of the 2020 financial year profit slide. To add insult to injury, Select said near-perfect growing conditions in the U.S. resulted in a higher final tonnage for the 2019 U.S. crop, pulling almond prices even lower.

The result was an average price of $7.50 per kilogram of almonds for the 2020 financial year — a major decrease on the average price of $8.60 per kilo from the year before.

Nevertheless, Select Harvests Chair Michael Iwaniw and Managing Director Paul Thompson said the low almond prices come with a silver lining.

"The upside from almond prices falling to historic 10-year lows was a significant uplift in short-term demand with early indications of price recovery," the pair said in a joint statement to investors.

"While the impact of the ongoing pandemic remains unpredictable, early market access interruptions have now subsided, with increased momentum evident towards the end of FY20," they said.

Still, Select faced further challenges through its food division, with earnings before interest and tax (EBIT) for this arm of its business down $1.7 million to $3.3 million.

This result is below company expectations, having been impacted by "continued private level penetration and commodity costs".

Looking ahead

As it stands, Select said the issues plaguing the 2020 financial year are still ongoing, and as such it's tough to get a clear picture of what the next year might look like until there's more stability across the almond market.

As far as almond prices are concerned, the company said more definitive pricing is unlikely until there is a clearer picture of U.S. almond shipments and until the 2021 U.S. crop indicators are given during the second quarter of next year.

Similarly, while the company's tree health and crop outlook remains positive, Select said it's too early in its agricultural cycle to confidently forecast the 2021 crop.

Shares in Select Harvests are down 3.22 per cent at 2:21 pm AEDT, currently trading at $6.01 each. SHV has a $719.51 million market cap.


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