Select Harvest recent stock analysis

As we are watching closely how the current bushfires affect the Australian Nut Industry we are sharing recent stock analysis for Select Harvests by

Almond grower and processor Select Harvests is one of the world’s largest almond growers, and a large-scale manufacturer, processor and marketer of nut products, health snacks and muesli. It supplies the Australian retail and industrial markets and export almonds globally – the company exports almonds and value-added branded food products to China, India, the rest of Asia, Europe and the Middle East, with about 80% of production exported. The company’s brand portfolio includes Lucky, NuVitality, Sunsol, Allinga Farms and Soland in retail; and Renshaw and Allinga Farms in wholesale and industrial.

Select has just under 7,700 planted hectares of Australian almond orchards, in New South Wales, South Australia and Victoria. About 35% of its orchards will reach maturity over the next eight years, underpinning future growth. The company operates a state-of-the-art almond processing facility at Carina West in northwest Victoria, and a value-added processing facility in Melbourne.  

Select’s almond volume surged 44% in FY19, which, with a 6.8% increase in prices, underpinned a 160% jump in net profit, to $53 million. The company is actually benefiting from the US-China trade dispute, increasing shipments into China while the US almond industry has looked to boost its exports into other markets.

The company is affected by the drought: like all permanent horticulture, almonds are thirsty trees, and Select has three million of them. Select uses river water and aquifers and has water rights worth $51 million: water pricing is an issue for the company, and high water costs will persist in FY20, but in the meantime, it is using technology to reduce usage across its crops.

Select did provide earnings guidance for FY20, but analysts expect both earnings per share (EPS) and dividend per share (DPS) to fall: however, the company says its orchards are now consistently yielding over 1.35 tonnes per acre – brokers think this underpins solid growth in future years.