A revival in shares in Asian Citrus floundered as the group unveiled a plunge in profits and ditched its dividend – offsetting thoughts of a "positive" ahead over the prospect of a change of leadership. The group, which had braced investors for a fall in profits, said that its underlying earnings for the July-to-December half had tumbled by 84% to 41.0m remninbi. (1 remninbi= $0.16 USD)
While the earnings proved largely in line with market expectations, the group also revealed it was ditching its interim dividend, thanks to its weaker performance and a requirement to fork out for fertilizers washed out by heavy rains.
"In order to maintain production volume, we do expect a higher level of direct costs to be incurred in the short term to alleviate the leaching of soil nutrients caused by the heavy rainfall," said Tony Tong, Asian Citrus chairman and chief executive. "There has been persistent heavy rainfall and major typhoons in the plantation regions and although there was minimal direct damage to the plantations from the major typhoons, this has caused nutrients to leach from the soil."
The cancellation of the payout "will be disappointing to shareholders especially in view of the still-positive operating cash flow of 117.7m remninbi and cash balances of 2.1bn remninbi", house broker Cantor Fitzgerald said.
The decline in earnings in the latest period reflected - besides poor weather which helped cut group orange production by 8.3% to 148,000 tonnes - a 14.8% drop in sales prices reflecting increased competition and a food scare which curtailed demand.
Group revenues fell 16.1% to 748.3m remninbi for the half year, while production costs rose 7.8%, swollen by the need for extra fertilizer and agrichemical applications because of the wet weather.
