Join our community of smart investors

Camellia flags Kenyan pricing pressures

Although better weather conditions also meant tea production improved
August 24, 2018

Benign weather conditions can be a blessing and a curse for food producers. For Camellia (CAM), better weather in Kenya, coupled with the opening of the expanded Jogopur Bought Leaf factory in India, helped boost group tea production by 7 per cent during the first half. However, the abundance of tea produced during the period has also resulted in significant downward pressure on Kenyan tea auction prices since the end of June. Given most trading from the core agriculture business happens during the second half, that could dampen progress made at the start of the year.

IC TIP: Hold at 10550p

Still, an improvement in tea prices in Bangladesh and India, and the end of strikes in Darjeeling, meant trading profits came in at £2.2m, compared with a loss of £2.8m at the same time last year. Following two years of drought, the macadamia harvest improved, with volumes for the year expected to be 45 per cent higher than 2017. The engineering services business posted 30 per cent growth in revenues, thanks to an improvement in prices in the oil and gas markets. However, specialist crops faced several difficulties, including a downturn in natural rubber prices.

The group made two acquisitions, engineering services specialist Black Gold Oil Tools and an 80 per cent stake in specialist tea supplier Jing Tea.

Analysts at house broker Panmure Gordon expect adjusted pre-tax profits of £28.5m for the year to December 2018, giving EPS of 304p (from £29m and 307.7p in 2017).

CAMELLIA (CAM)    
ORD PRICE:10,550pMARKET VALUE:£295m
TOUCH:10,450-10,700p12-MONTH HIGH:13,700pLOW: 10,000p
DIVIDEND YIELD:1.3%PE RATIO:12
NET ASSET VALUE: 13,536pNET CASH:£86.5m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20171241.9-39.837
20181286.129.040
% change+3+221-+8
Ex-div:6 Sep   
Payment:5 Oct