SHV Details
Rise in crop volume for 2017: Select Harvests Limited (ASX: SHV) had reported for record operating cash flow in FY16 with a strong balance sheet with gearing reduced to 23.1% against 40.2% in FY15. However, the group reported for underlying NPAT of $27.9 million in FY16 against $59.4 million in FY15. Further, for the almond division, FY16 crop volume reduced to 14,200 tonnes from 14,500 tonnes of FY15, while SHV’s food division witnessed FY16 revenue growth of 16.6% with improved sales mix boosting the margins. On the other hand, the global almond market is witnessing strong demand from regions including China and India while US demand is also improving. US drought conditions which have been particularly heavy on Southern regions of Californian industry have played in favour of the group so far. Further, the group indicated for Australia crop up while Spanish crop down has been noted. Strong orchard health has been a recent highlight under the group’s performance, and 2017 crop estimate has been upgraded and set between 15,500 & 16,000 tonnes. 

Volume Growth (Source: Company Reports)
 
Looking at the larger picture, subdued pricing trends for almonds (spot pricing of about A$8.00/Kg in FY16 against A$11.45/Kg in FY15) along with softness in Australian export constitute key headwinds in the near term. Further, outlook for water availability in California for almond crop seems to be a little better now than what has been seen in the recent past and better weather conditions seem to pose a threat to SHV’s performance in the region.
 
On the other hand, capital initiative with regards to Greenfield orchard development remains on track. Further, benefits are also expected from projects such as H2E (Cogen). On a side note, there has been some delay with regards to installation and commissioning of key equipment for H2E and Parboil projects. The group has, nonetheless, given a positive touch to the latest updates with confirmation of forward sales representing 17% of the crop within the range of current spot prices. With the correction seen in the almond prices, a flat earning scenario is expected over next couple of years. The stock has fallen over 26.8% in last six months (as at January 31, 2017). Considering the mixed sentiments, long-term investors may ‘Hold’ the stock at the current price of $ 5.47

 
SHV Daily Chart (Source: Thomson Reuters)

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