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Asian Citrus battered by the weather

Asian Citrus had a terrible first half and trading doesn't look set to get juicier any time soon.
February 27, 2015

Two typhoons, freezing rain, frosts and drought battered Asian Citrus Holdings' (ACHL) leafy plantations in China last year, leaving many of the trees damaged. Total orange production consequently slumped by a quarter to 110,993 tonnes in the first half, and at one plantation production plummeted by almost three-quarters. That pushed adjusted company profits - which exclude changes in the fair value of biological assets - into the red to the tune of ¥192m (£19.9m), from a ¥45.3m profit in 2013.

IC TIP: Sell at 7.25p

As for most agricultural groups, the cost of maintaining Asian Citrus's plantations is fixed, so when volumes fall it decimates the bottom line. Moreover, chief executive Ng Ong Nee - who stepped into the role a year ago - presented a grim outlook. He said the inclement weather and persistent heavy rainfall over the past two years had drained nutrients from the soil, while the typhoons had only added to the problems, rendering the crops susceptible to citrus canker disease and further soil leaching.

As a result, high levels of direct costs will be incurred in the short term, with conditions expected to remain "demanding". The weak condition of the orange trees also means it will take a number of years for harvests at the two fully operational plantations - Hepu and Xinfeng - to fully recover.

Analysts at Cantor Fitzgerald have put their forecasts under review.

ASIAN CITRUS HOLDINGS (ACHL)
ORD PRICE:7.25pMARKET VALUE:£90.6m
TOUCH:7-7.5p12-MONTH HIGH:15pLOW: 6p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE: ¥4.80NET CASH:¥1.53bn

Half-year to 31 DecTurnover (¥m)Pre-tax profit (¥m)Earnings per share (sen)Dividend per share (sen)
2013748.3-543.7-44.5nil
2014584.4-235.3-18.9nil
% change-22---

Ex-div: na

Payment: na

£1=¥9.65