- Select Harvests (SHV) says its worst almond crop in a decade, combined with poor market conditions, could result in a potential loss of $22 million for its 2022 crop fair value
- A large portion of the company’s 2022 crop harvest was affected by “challenging wet conditions”, which reduced the quality of the almonds
- Global almond prices have also been very low, reducing SHV’s fair crop value inventory sales price by up to 65 cents less per kilogram than initially predicted
- The company is anticipating its goodwill to be impaired, which could result in a non-cash write-off of $26 million for the first half of FY23
- Still, SHV Managing Director Paul Thompson says the medium-term outlook for the company is optimistic, with growing demand for almonds in multiple markets
- Select Harvests shares are up 3.8 per cent and trading at $4.08 at 2:38 pm AEDT
Select Harvests (SHV) on Friday reported that its worst almond crop in a decade, combined with poor market conditions, could result in a potential loss of $22 million for its 2022 crop fair value.
The company said rain impacted the quality of the crop.
“Challenging wet conditions for the 2022 crop harvest meant a larger than expected portion of the crop has been negatively impacted, requiring a downgrade in quality,” SHV Managing Director Paul Thompson said.
“At the same time, global almond prices have continued to decline, impacting the value of the product sold by the company since 30 September 2022 and the assumed value of the remaining 2022 crop on hand.”
The company said a large portion of the damaged crop required mechanical drying, meaning a higher percentage is of “manufacturing grade quality”.
Global market prices for almonds are currently poor, particularly for lower-grade almonds.
SHV said the value of its remaining 15 per cent of crop on hand had been correspondingly reduced.
The combination of wet weather and poor market conditions has reduced SHV’s fair crop value inventory sales price from $6.80 per kilogram to between $6.15 and $6.30 per kilogram.
In total, the 2022 crop fair value earnings before interest and tax (EBIT) is expected to be $18-$22 million lower.
Nevertheless, Mr Thompson said the medium term looked more optimistic, with increasing demand from India and the Middle East and with the easing of lockdown restrictions in China.
“While global market pricing remains at near historic lows, there are positive signs emerging,” he said.
“The December shipments from the Californian Almond Board position report and the November shipments from the Australian Almond Board position report were strong.”
Mr Thompson said with the floods now behind them, the company was focused on “pre-harvest programs” and that the farming outlook in the medium term was “business as usual”.
SHV said despite the losses, it was still within its current banking limits, with debt-to-equity levels at 1H FY23 expected to be around 35 per cent.
Still, the company is anticipating its goodwill to be impaired, which could result in a non-cash write-off of $26 million for the first half of FY23.
Select Harvests expects to begin the 2023 crop harvest in February.
Select Harvests shares were up 3.8 per cent and trading at $4.08 at 2:38 pm AEDT.