A revival in shares in Asian Citrus foundered as the group, China's top producer of oranges, unveiled a plunge in profits and ditched its dividend –
offsetting thoughts of a "positive" ahead over the prospect of a change of
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.
Including one-off factors, notably an annual assessment
reducing the value of its plantations, the group fell 548.0m remninbi into the
red, compared with reported earnings of 212.4m remninbi a year before.
"The past year has been a challenging one," said Tony Tong,
the Asian Citrus chairman and chief executive, who announced that he was, after
14 years, seeking replacement leadership.
However, 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," Mr Tong said.
"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
However, the broker – retaining a "hold" rating on Asian
Citrus shares with a target price of 22p - added that "whilst investors have benefited
from Mr Tong's guidance over the years since the company was founded, the
appointment [of fresh management] should be positive for the group".
Asian Citrus shares tumbled 8.5% to 13.0p in morning deals in
London, coming close to the 13.0p level reached two weeks ago which represented
the lowest since 2008.
The shares recovered some ground to stand at 13.85p in
lunchtime deals, down 4.2% on the day.
Mr Tong, who founded the group, and has taken it into
bananas and juices in an effort to diversify and reduce market risks, said that
"have decided that now is the right time for new leadership to take the group
"We are actively seeking a suitable candidate, who is well
versed and experienced in China's business environment as well as international
capital markets, to lead the group to a new era."
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.
Some unscrupulous market operators dyed fruit with
cancer-causing red Sudan, usually used to colour plastics, to make oranges
appear ripe, and gain premium prices from the early market.
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.