The Select Harvests Limited (ASX: SHV) share price is sinking lower today. This comes after the company released its full-year results for the 2020 financial year. At the time of writing, the Select Harvests share price is trading down 5.9% at $5.84.
What's driving the Select Harvests share price lower?
The Select Harvests share price is plummeting today after the company released a disappointing result for the past 12 months.
For the period ending 30 September, Select Harvests reported a net profit after tax of $25 million. This reflected a 52% decline on the prior corresponding period (pcp). Although record almond crop was achieved, the fall in global almond prices and delayed shipments heavily offset its strong performance.
Earnings before interest, tax, depreciation and amortisation (EBITDA) came to $57.8 million. In comparison, EBITDA for FY19 recorded $95.2 million. The company attributed the 39% change mainly to higher water prices and orchard lease commitments in its almond division.
At $13.2 million, operating cash flow was down more than 83% over the comparable period. This was a result of COVID-19 impacts with market access issues and delayed customer payments.
Earnings per share (EPS) lost more than 53% with the company registering 26 cents for FY20, as opposed to 55.5 cents in FY19.
Net debt excluding finance leases stood at $57.5 million, with just $1.5 million in cash on hand at the end of the period.
The board declared a fully-franked dividend of 4 cents per share to be paid to shareholders on February 5, 2021.
Management commentary
Commenting on the results, Select Harvests managing director Paul Thompson said:
FY2020 has delivered a third consecutive year of increasing crop volume, validating the company's targeted horticulture program and investment in risk mitigating frost fans and productivity enhancing on-farm technology. Both our mature and immature orchards again yielded at rates significantly higher than industry standard.
A focus on cost management and consistent high yields helped to mitigate softening almond prices and higher water costs in FY2020.
Mr Thompson said the water market remained challenging in the 2020 season, with record, or near record water prices across the Murray-Darling Basin:
Select Harvests' balanced water procurement strategy, which includes owning and leasing water entitlements, protected us from the full impact of increases in spot water prices.
The food division continues to confront a challenging domestic market. While underlying demand and sales were higher for our industrial value-added almond business, higher private label penetration and commodity costs negatively impacted the result.
Outlook for FY21
With focus now towards the new financial year, Select Harvests will continue to execute its growth strategy. Management said its 2021 horticultural program retained a positive outlook with good pollination and growing conditions seen to date.
The company said an improvement in weather saw water prices beginning to move back to long-term averages. In addition, Select Harvests has been taking advantages of the favourable situation by acquiring lease and temporary water in recent months.
No guidance was given due to the early start of the new season. With harvest to begin in February 2021, the company hopes to provide investors with a clearer picture of its market and pricing environment.
About the Select Harvests share price
The Select Harvest share price is trading lower since the start of the calendar year, down 28%. After reaching a multi-year high of $9.10 in February, the company's shares have failed to break the $8 barrier ever since.
Select Harvests has a market capitalisation of $705.7 million and a price-to-earnings (P/E) ratio of 11.
