The US government's decision last year to subsidise ethanol production - to cut reliance on fossil fuels - meant a 25 per cent cut to the grain market's capacity and sent animal feed prices soaring. And as the credit crunch took hold, cattle and pig farmers - Genus' main customers - were unable to get the bank funding needed to cover their higher input costs. So Genus' results, which beat analysts' expectations, look remarkably resilient in the circumstances.
The US dairy sector, however, remains extremely depressed and the government there may have to intervene to support milk prices. Indeed, the severity of milk price falls have caused north American farmers to cut back in the second half, while pig farmers may have to cut their herds. The good news, though, is that feed prices are coming down and Genus expects a sharp recovery in demand in the second half. So chief executive Richard Wood believes Genus is "strongly positioned to take full advantage of the recovery when it occurs". While, longer term, the push into growth markets such as Latin America and Asia - where there's an ongoing shift towards a higher protein diet - should be a big plus.
KBC Peel Hunt expects adjusted pre-tax profits of £33m for 2010, giving EPS of 36p.
More analysis of company results
GENUS (GNS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 631p | MARKET VALUE: | £376m | |
| TOUCH: | 630-633p | 12-MONTH HIGH: | 891p | LOW: 467p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 343p* | NET DEBT: | 43% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 183 | 8.1 | 16.3 | 7.50 |
| 2006 | 201 | 15.1 | 24.5 | 8.25 |
| 2007 | 234 | 19.9 | 23.1 | 9.10 |
| 2008 | 247 | 22.0 | 24.7 | 10.0 |
| 2009 | 280 | 26.2 | 30.4 | 11.0 |
| % change | +13 | +19 | +23 | +10 |
Ex-div: 9 Dec Payment: 8 Jan | ||||
