Almond producer Select Harvests swung to a $114.7 million loss for the year to June as it sold smaller volumes at lower prices. However, it sought to reassure investors that performance would improve this year due to lower production in the US, the world’s-largest market, which would push prices back up.

Select Harvests suffered a 30 per cent decline in the 2023 crop to 19,771 metric tonnes as cooler and wetter conditions in the country’s third year of La Niña weather patterns hit all growing regions and weaker second-half pricing resulted in a year-average crop price of $6.42 per kilogram – $1.03 below the 2023 crop price the company estimated in the first half.

Australia’s second-largest almond producer also incurred $50 million in writedowns of 2022 crop inventory and goodwill in the year, which pulled its earnings into loss from a $4.8 million net profit in 2022.

After two “challenging” years, Select Harvests was well-placed to benefit from improving global conditions and would start its 2024 marketing campaign early in the new calendar year to make the most of recovering prices, Select Harvest managing director David Surveyor said.

“The forecast of warmer, drier conditions leading into our harvest period and likely improved crop quality profile, combined with a return to long-term normalised crop production volumes, is welcome and will further improve that position,” Mr Surveyor said.

“Almond pricing has started to move upwards over the past couple of months as the market receives more clarity on the implications of the poor growing and harvesting conditions for the 2023 US crop.”

A wave of institutional investment into horticultural assets such as nut farms by investors seeking higher-yielding assets has been followed by cooler and wetter conditions of the past couple of years, which hit nut producers and their landlords across the board.

Select Harvests and Rural Funds Group both warned earlier this year that poor conditions would hit their earnings. Melbourne-based Select Harvests said on Friday, however, that its total 2023 crop was 2271 metric tonnes higher than the estimate of 17,500 metric tonnes it made at the end of the first half.

The shares, which have underperformed the S&P ASX 200 index over the past six months – falling 7 per cent while the broader index is down 2.2 per cent – were trading 29 cents, or 6.6 per cent, lower at $4.08 on Friday.

Select Harvests, which signed a new three-year loan facility agreement
with NAB and Rabobank in March, said that despite lower 2023 earnings, it had kept within its required banking covenants.

“Debt levels remain well managed and current facilities remain adequate for operations moving forward, based on budgeted almond price and crop size,” it said.

“The company’s debt position is forecast to peak in April 2024 with debt headroom available. Post April 2024, debt levels will decline as the 2024 crop is processed and sold.”

Growing conditions were favourable, although costs would be “marginally” higher. Increased water, power and pollination costs would be partly offset by lower fertiliser and chemical costs that would result from a reduction in global prices for those inputs, it said.

“Almond pricing has started to move upwards over the past couple of months as the market receives more clarity on the implications of the poor growing and harvesting conditions for the 2023 US crop,” Select Harvests said.

“It is expected that as the received crop gets processed and becomes available for sale that pricing will rise further, particularly for higher grade material.”

Source - https://www.afr.com