It certainly has been a rollercoaster of a year for shareholders of Select Harvests Limited (ASX: SHV). This year its share price has traded as as high as $8.50 in January and as low as $3.73 in April.
In fact, just last month it looked like it was going to head beyond $8.00 once again. But that has well and truly been stopped in its tracks following the release of full year results which revealed a 53.1% drop in net profit after tax to $27.9 million despite a 28% increase in revenue to $285.9 million.
Although the drop in profits was expected, today's result still fell short of the market's expectations and has caused an 8% drop in its share price to $6.18.
This drop in profits was of course a result of a correction in the global price of almonds from the record highs of last year. Those record highs came about due to exceptional circumstances which saw a four-year drought in California hit production levels.
But with drought conditions alleviating and production normalizing the company reported an average almond price of just A$8.08 per kg this year, compared to A$11.45 per kg in FY 2015. This resulted in earnings before interest and tax in the Almond Division dropping 58.7% from $87.5 million to just $36 million.
A bright spot was a strong performance from its smaller Food Division which includes the Nu-Vit and Sunsol brands. The division reported a 51.7% increase in earnings before interest and tax to $10.3 million.
But it certainly wasn't enough to offset the Almond Division's decline, nor was it enough to convince investors to keep holding onto their shares.
Whilst Select Harvests is not something I would personally invest in, at 13x reported full year earnings it does look reasonably good value now. But as I've said before, much like Newcrest Mining Limited (ASX: NCM) and Fortescue Metals Group Limited (ASX: FMG) which rise and fall on gold and iron price fluctuations, a successful FY 2017 will be dependant on almond prices remaining favourable.
