The Select Harvests Ltd (ASX: SHV) share price has started the week strongly.
In afternoon trade, ASX All Ords almond producer's shares are up 9% to $4.76.
Why is this ASX All Ords share racing higher?
Interestingly, investors have been bidding the Select Harvests share price higher today despite the company releasing its half-year results and reporting a huge loss. Here's a quick summary of how it performed:
- Revenue down 11.4% to $60.9 million
- Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss of $55.6 million
- Reported EBITDA loss of $117.4 million
- Loss after tax of $96.2 million
- Interim dividend remains suspended
What happened during the half?
For the six months ended 31 March, Select Harvest posted an 11.4% decline in revenue to $60.9 million and a whopping loss after tax of $96.2 million.
The dreadful performance has been driven by a combination of record low almond prices and 2022's crop being the worst the company has experienced in a decade. The latter has been caused by La Nina weather patterns, which have also impacted the 2023 crop and led to a significant goodwill write-off.
It is this write-off that largely explains the difference between its underlying EBITDA loss of $55.6 million and reported EBITDA loss of $117.4 million.
Unsurprisingly, this led to the Select Harvest board not declaring an interim dividend for FY 2023.
Why is the Select Harvests share price rising?
Management's commentary on its 2023 crop may have given the Select Harvests share price a bit of a boost.
Although the quality of the crop is far from what investors have been used to in previous years, management notes that it is better than last year. It said:
The 2023 crop harvest has now been completed. Despite the unfavourable growing conditions, the quality of the crop has improved compared to last year. Due to a drier 2023 harvest period the prevalence of mould has decreased from 2022 crop levels. Inshell levels are lower, however kernel sizes are larger. Insect damage is higher (a function of the lower crop size) however recent investment in state-of-the-art sorters will lead to the final product quality profile improving from last year.
Investors may believe that this is a sign that the worst is now over for the Select Harvests share price.
Particularly given management's comments on the 2024 crop outlook. It adds:
Early indications are that the 2024 crop is on track to return to normal yields. Following three years of the wet La Nina weather patterns, the Bureau of Meteorology has forecast that Australia is likely to move into an El Nino pattern which is typically favourable for growing almonds. The 2024 growing program has commenced and the Company is executing a full horticultural plan. Water allocations remain favourable, dam storage levels are high and temporary market water pricing is expected to remain at below average levels. Additionally, fertiliser pricing has reduced as expected.
In addition, it notes that the global almond pricing environment is favourable and that it has identified a series of value-accretive projects that will deliver improvements in profit and cash. A number of these are already underway and delivering economic gains.
