October 6, 2020

By Lynda Kiernan, Global AgInvesting Media

ASX-listed almond giant Select Harvests announced the completion of an institutional placement with a take-up rate of nearly 99 percent, raising the company A$81.7 million (US$58.4 million) – A$40.2 million (US$28.7 million) under the Placement, and another A$41.5 million (US$29.6 million) under the Institutional Entitlement Offer.

A second fully underwritten placement through which the company will issue 7.7 million news shares will also be pursued to raise another A$40 million (US$28.6 million).

This capital was secured upon the announcement by Select Harvests of its intentions to acquire the Piangil Almond Orchard in northern Victoria for A$129 million from current owners, United Almonds, Bright Light Agribusiness, and Lake Lucas Almonds. The deal includes 1,177 hectares (2,908 acres) of mature plantings, 961 acres of not-yet mature plantings, 1,877 megaliters of high security water entitlements, another 622 megaliters of low-reliability water entitlements, select equipment, and full ownership of a crop coming in for 2021. Additionally, Select Harvests has agreed to reimburse a portion of input costs to the sellers for the current crop. 

Upon its closing expected in December, this acquisition would increase Select Harvests’ planted acreage by 20 percent, from 7,695 hectares (19,014 acres) to 9,262 hectares (22,887 acres), and will increase its production volume by 4,600 tons in its first year, and by 5,400 tons per year when it reaches full maturation in 2026.

“The Piangil Almond Orchard has an attractive maturity profile with a weighted average age of 10.9 years [younger than the company’s pre-acquisition orchard age of 12.6 years] and approximately 25 per cent immature plantings,” said Managing Director Paul Thompson.

“It has demonstrated consistently high yields in recent years and is a top quartile orchard. The recent bloom at the orchard was strong, indicating the potential for another above industry average crop in 2021.”

The increase in acreage for Select Harvests with the addition of Piangil, together with upgrades to the orchard’s water supply and equipment that Select Harvests is planning that will further increase production on-site, are also expected to have a positive effect on throughput efficiency at its nearby Carina West processing plant, located 100 kilometers away near Mildura. 

Challenges and Outlook 

It’s not all bloom and bud for Select Harvests, however, as the global pandemic has led to disruptions on multiple fronts for the company – from shifting its supply chain away from the food service industry to the retail market amid a 37 percent drop in overall Australian almond exports for 2019/2020.

Conditions have led the company to undertake a review of its supply chain and its options for strategic growth. This review of its food division, which includes examining its Melbourne-based Thomastown offices and warehouse site which has had its lease expire, is set to be completed by the end of this year.

At the same time, AFR reports that almond prices have fallen by half over the past five years, which has driven up demand. But in Australia, where water scarcity is always a top concern, especially for water-intensive crops such as almonds, expansionary measures must be weighed carefully.

Indeed, despite Australian almond planting increasing by tenfold in only 20 years, last year the Almond Board called for a moratorium on the issuance of water licenses for new almond developments in the Murray Darling Basin until a review is completed to determine the system’s ability to meet demand. 

Despite these challenges, Select Harvests stated that 91 percent of the hulling and shelling for its 2020 crop is complete, with the balance to be completed by mid-October 2020. Production volume has increased to more than 23,250 metric tons – up from 22,690 metric tons last year.

Pricing for the 2020 crop is still expected to land between A$7.25 – A$7.75 (US$5.18 – US$5.54) per kilogram. 

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.