Why is Select Harvests up 238%?

Strong global demand and a new business style to go nuts over.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Almond producer and marketer of nuts, dried fruits and natural health foods Select Harvests (ASX: SHV) reported a net profit of $2.87 million, up from a 2012 loss of $4.47 million. Total revenue was down 23.9% from $253.1 million to $190.1 million.

This year saw the completion of the transition from operating as managers of almond orchards for third-party growers to being the owner and grower of the orchards. In total, 10,000 acres are currently under lease/ownership. This will give the company more direct exposure to the international almond market, which has recently been growing 8% per annum. Almond prices have been increasing overseas, and with the recent devaluation of the Aussie dollar, Australian almonds are more cost competitive, positively affecting company earnings.

The company has decided to leave a greenfield almond production area made up of about 4,000 acres in WA after projecting that it would not be economically viable to continue it based on the investment needed to develop the crop to maturity. A write-down impairment of $39.9 million was recorded, and the assets will be sold off.

However, it has expanded its presence in VIC by purchasing 1,286 acres of mature almond orchards, costing $5.7 million with projections that the acquisition will be positive accretive to shareholders. Including this acquisition's crop, the company estimates the 2013 total almond yield will be 12,000 metric tonnes, up 106% from 5,830 tonnes in 2012. Almond prices are expected to rise by 26% from $5.08/kg to an estimated $6.38/kg. This is due to firm global prices, crop quality, and the Aussie dollar's drop by over 10% in the last four months recently.

Paul Thompson, Select Harvests' Managing Director, said: "The company continues to identify and evaluate opportunities to grow our almond orchard portfolio through acquisitions, leasing, and developing new plantings. This is important to ensure we maintain our market share of supply in a growing global market."

The Foods division has seen more resistance in growth because of the competitive domestic trading conditions. Its EBIT contribution was down 9.6%, impacted by the loss of private label almond contracts with the major retailers. Branded business, including Lucky, and sales to food manufacturers, which have grown 40% year on year, have shown positive improvements.

The lost almond volumes from the domestic market have been compensated by higher exports sales, which have increased to 80% of sales in the almond division.

A final dividend of 9 cents per share fully franked was declared, bringing the full year dividend to 8 cps, similar to last year. The share price has risen 238% from $1.30 in July 2012 to about $4.40 currently against the approximate 22% increase in the S&P ASX All Ordinaries Index (ASX: XAO).

Foolish takeaway

The company is taking advantage of global supply and demand imbalances to improve themselves while the domestic market is still sorting itself out.  That shows smart business and foresight in action.

Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »