Select Harvests Earnings Call Highlights Financial Recovery

Select Harvests Limited ((AU:SHV)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Select Harvests Limited painted a picture of strong financial recovery, marked by a significant increase in profits and a reduction in debt. This positive sentiment was largely driven by improved almond pricing and operational efficiencies. However, the company also faces challenges, including a reduced crop size, increased production costs, and issues related to bee management.

Record Safety Performance

Select Harvests Limited achieved a record Total Recordable Injury Frequency Rate (TRIFR) of 5.5, showcasing significant improvements in workplace safety. This milestone reflects the company’s commitment to maintaining a safe working environment for its employees.

Net Profit Increase

The company reported a substantial increase in net profit after tax, reaching $31.8 million, a remarkable rise from $900,000 in 2024. This surge in profitability underscores the company’s successful financial strategies and operational improvements.

Almond Price Improvement

Select Harvests benefited from a favorable almond market, achieving an average almond price of $10.18 per kilogram, which represents a 32.4% increase from the previous year. This price improvement played a crucial role in boosting the company’s financial performance.

Operating Cash Flow Growth

Operating cash flow saw a significant increase, rising by $109.1 million to reach $118.6 million. This growth in cash flow highlights the company’s enhanced operational efficiency and financial health.

Debt Reduction

In a strategic move to strengthen its financial position, Select Harvests successfully halved its net debt to $79.1 million and refinanced its debt under more favorable terms. This debt reduction is a key component of the company’s long-term financial strategy.

Project Optimus Expansion

The company is nearing the completion of Phase 2 of Project Optimus, which will increase its capacity to 50,000 tonnes. This expansion is expected to enhance the company’s production capabilities and support future growth.

Lower Crop Size

Despite the positive financial results, the company faced a 15.7% decrease in crop size, down to 24,903 metric tons. This reduction in crop size poses a challenge to maintaining production levels.

No Dividend Payment

In a bid to focus on debt reduction, the Board decided not to pay a dividend this year. This decision reflects the company’s strategic priority to strengthen its balance sheet.

Increased Production Costs

The company anticipates a $20 million increase in production costs, driven by rising expenses in areas such as water, bees, and electricity. These increased costs present a challenge to maintaining profitability.

Challenges with Bees

Select Harvests faced issues with bee availability, particularly in South Australia, due to Varroa mite management. This challenge has implications for the company’s pollination processes and overall production.

Forward-Looking Guidance

Looking ahead, Select Harvests remains optimistic about its financial trajectory. The company expects to maintain its improved net profit levels, driven by higher almond prices and operational efficiencies. While the Board has opted not to distribute dividends this year, they aim to resume payments as debt levels continue to decrease. The company’s strategic focus on safety, operational efficiency, and debt reduction positions it well for future growth.

In summary, the earnings call for Select Harvests Limited highlighted a strong financial recovery, with significant profit increases and debt reduction. Despite challenges such as a reduced crop size and increased production costs, the company remains optimistic about its future prospects, driven by improved almond pricing and strategic operational enhancements.