The Select Harvests Limited (ASX: SHV) share price rose over 9% today after giving a crop update, hitting a 52-week high.
Select Harvest announced today that the 2019 yields are above the industry standard and have exceeded the previous forecast.
The almond company said this announcement reflects the benefit of the ongoing focus on high-performance horticultural programs and a further investment in risk mitigating frost fans.
Select Harvests' Carina West Processing Facility has also processed the crop at a higher rate of efficiency than the prior year with new sorting technology and an increased focus on processing performance by line staff.
With 95% of the crop processed, Select Harvests is forecasting crop volume of 22,200 MT to 22,500 MT. The remaining 5% represents the tail end of the crop, which is normally lower yield and poorer quality.
The company also revealed that demand from China has grown significantly, with strong demand from traditional export markets and domestic customers as well.
Increased global demands for almonds, the weaker Australian dollar against the US dollar and the lower than expected estimate for the USA crop has seem the market price for almonds remain firm, which is expected to remain constant unless the US supply outlook significantly changes.
Current contracted sales, actual sales and internal commitments equate to around 80% of the forecasted crop at an estimated pool price of $8.60 to $8.70 per kilo.
However, Select Harvests did warn that the Food Division remains challenged. There's demand from the export market but there has been increased prices of all tree nuts.
Select Harvests Managing Director Paul Thompson said "Recent capital investments in our Carina West Processing Facility and in our orchards has resulted in improved productivity, yield, crack-out levels and reduced costs per kilo. These factors, in addition to the strength in the global almond market, will lead to Select Harvests delivering a healthy FY2019 financial result."
The nut company went on to say that for the 2020 crop, the trees are in good health and additional frost protection has been put in place. Water purchases remain a priority and management are encouraged by the recent improvement in the Victorian catchment.
Select Harvests is starting to reap the rewards after a difficult few years. Its share price may grow further over the next year, but it's best to buy a cyclical business near the bottom of the cycle – which I don't think describes the current situation.
