Asian Citrus's winter crop deal lacks appeal

Asian Citrus, the Chinese orange plantations owner, has negotiated a tiny year-on-year increase in the average selling price of its winter orange crop from its Hepu and Xinfeng plantations.

The share price fell to a 52-week low after it said the negotiated increase in price on its winter crop is less than 1% higher than last year's. The shares have lost a fifth of their value so far in November in what has been a torrid month; on November 6th non-executive director Ip Chi Ming failed to get re-elected at the firm's annual general meeting, while on November 9th the share price was knocked by a 50m shares sale by an investment vehicle controlled by Asian Citrus's Chairman, Tong Wang Chow.

Based on the recently signed supply agreements, the group will supply a total of 32,700 tonnes winter oranges from the Hepu plantation in the second half of 2012, representing a decrease of 27% in comparison to the actual production output of 44,906 tonnes in the same period last year.

Even house broker Seymour Pierce described the development as "a little disappointing in terms of both volume and price" and has, accordingly, trimmed its fiscal 2013 earnings per share forecast by 4.5%. The broker had been advised that the price increase would be between 0.55 and 0.7%.

As part of the ongoing replanting programme 66,449 winter orange trees in the Hepu plantation have been replaced with new species of summer orange trees during the year ended June 30th, 2012, leading to reduced winter orange production from the plantation.

The supply of winter oranges from the Xinfeng plantation increased to 131,600 tonnes in the second half of 2012. This is an increase of some 4% in comparison to the actual production output of 126,701 tonnes in the same period last year. Seymour Pierce had expected 146,000 tonnes.

"The following year, and assuming more normal weather conditions, we are expecting a healthy rebound given first harvest on some of the replanted Hepu summer trees and continuing growth towards maturity at Xinfeng," Seymour Pierce's Sue Munden said.

JH