Select Harvest profits fall 40pc on back of record US almond crop and low global prices

Select Harvests is changing its marketing strategy for the 2022 almond crop. See why.

Select Harvests produced a record crop in 2020-21 but its profits suffered from a glut in global supplies as a result of a huge Californian harvest.

Almond company Select Harvests Limited has delayed its 2022 marketing program to take advantage of an expected rise in global prices as the impacts of the Californian drought and supply chain issues become more evident.

Select Harvests managing director Paul Thompson said the company would normally begin its marketing program in November for forward selling the following year’s harvest.

But Mr Thompson said current forward prices were “not reflective of where we think the market will be”.

“The price should be somewhere near $8 a kg, not $7 a kg where it currently is,” he said.

“Every dollar in price increase is $30 million in EBIT.”

Mr Thompson said the company would begin selling at “the appropriate time” but was likely to be before the US crop blooms next February.

Extreme drought has hit the Californian crop, wiping about 300-400 million pounds off the 2020 record harvest off 3.2 billion pounds.

The US crop, which accounts for about 80 per cent of global trade, is currently being harvested and the world was watching news of yields.

Mr Thompson said congestion in the key export ports of Los Angeles and Long Beach as a result of Covid-19 supply chain issues was also likely to impact on US shipments to key markets.

He said there were about 240 ships anchored off Long Beach awaiting to be loaded with various goods.

“We are having challenges as well but nowhere near what the Americans are having,” he said.

Mr Thompson said Australia now had an advantage over the US in the key almond buying market of China.

Releasing the Select Harvest’s financial results for the 12 months ending September 30, the company recorded a net profit after tax of $15.1 million, well lower than the $25 million NPAT reported in 2019-20.

Despite a much larger crop of 28,250 tonnes — five million tonnes more than what was harvested the previous season — the almond company only achieved an average price of $6.80 a kg, 9.3 per cent lower than the previous year.

Revenue from continuing operations for 2020-21 was $228.6 million, or 22.2 per cent higher than the $187.1 million reported the previous year.

Mr Thompson said the record Californian almond crop resulted in the export almond price falling back to historic low levels during the year.

“This drove the demand for almonds up 22 per cent as buyers initially took advantage of low prices,” he said.

“As demand increased, Select Harvests was able to take advantage of higher priced positions.

“While prices recovered somewhat, they have since reduced again dud to the impact of global supply chain issues.”

Global almond prices had remained relatively low at between $6.75/kg and $7.25/kg and were likely to remain that way until the size of the US 2022 crop was known, especially since California had suffered severe drought conditions as a result of the La Nina weather pattern.

Almond prices historically remained uncertain while the US crop was harvested in November through to bloom in February.

During the year, Select Harvests sold had sold off its consumer brands Luck and Sunsol and would no longer report on the basis of business segments.

Mr Thompson said the fundamental drives of the business remained strong.

The demand for almonds, including raw almonds and value-added almond products, continues to increase globally,” he said.

“We remained focused on executing our strategy to maximise yield and price realisation, control cost and mitigate risk where we can.

“Our 2022 marketing campaign will commence once there is more certainty in the market.

“We are confident market pricing will improve before we commit shipments of our 2022 crop.”

Select Harvests will pay a final dividend of eight cents a share on February 4 for shares held on December 10.

The company’s share price rose 14 cents to $7.09 a share in the first hour of trading on the Australian Securities Exchange but has since dropped back to $7.03.

Peter Hemphill’s family holds shares in Select Harvest.