What: Australia's largest onion and walnut grower and exporter Webster Limited (ASX: WBA) announced a net profit of $8.33 million on revenue of $54.90 million for financial-year 2014. Net profit was up 20% on the prior year, although revenues from the sale of produce were only marginally up on the prior year. The company also said it committed around $20 million in capital investment programs during the year.
The improved profit was in part the result of fast-rising walnut prices leading to an upward revision in the value of assets held as inventory. However, a provisional write-down of $1.6 million was also announced against debts associated with a related walnut business.
The company announced a final fully franked dividend of 2 cents per share, up from 1.5 cents in the prior period.
Now what: Having sold its ownership interest in fellow Tasmanian agribusiness Tassal Group Limited (ASX: TGR), Webster raised significant amounts of cash to strengthen its balance sheet and commit to future investment in its onion and walnut operating divisions. This strategy is now paying dividends, with plans for more to come.
Webster is an export business and walnuts are seeing strong demand from Europe, China and Asia. The farmer intends to significantly grow walnut production, via newly acquired developments and ongoing plantings at existing orchards. In its results commentary the company confirmed it currently expects its long-term yield forecasts to be achieved.
Fast-rising prices of another nut, the almond, have seen the shares of Select Harvests Limited (ASX: SHV) rise 40% over the past year.
Webster also reported last year's onion crop suffered from bad weather, however 2015's is well advanced with favourable climatic conditions.
What of the outlook: Webster has been investing for the future to grow yields, improve processing facilities and develop its vertical integration.
It produces a reliable dietary staple in onions and luxury product in walnuts which may see strong price rises as global demand grows. Developing Walnut orchards takes a long time and significant amounts of capital, which gives the business high entry barriers.
Selling for $1.30 Webster is trading on 21 times trailing earnings of 6.21 cents per share, with a forecast for the continuation of earnings growth in the 2015 financial year. Given the strong balance sheet and positive outlook I think this business remains an enticing proposition for those anticipating a dining boom.
