Asian Citrus revealed plans to exploit China's growth as an
orange exporter, to support revenues which dropped 14.5% in the last half of
2012, sapped by weak citrus production and a glut of pineapple juice.
The group said it was "exploring markets outside of China",
after starting sales to Vietnam, which borders Guangxzi province, in which Asian
Citrus has one of its plantations, Hepu.
If the Vietnam trial proves successful, "we will consider entering
other markets" within the Asean trading bloc, Tony Tong Wang Chow, the Asian
Citrus chairman, said.
"This is at a very early stage at the moment. But it makes
sense to export if there is demand there," a person familiar with the company
Citrus trade balance
China has been roughly self-sufficient in oranges in recent
years, with exports actually exceeding imports by 31,000 tonnes in 2011-13, on estimates
from US Department of Agriculture officials.
A weaker 2012 harvest, thanks to persistent rains which
dogged producers including Asian Citrus – whose own production fell 6.0% to
161,233 tonnes during the July-to-December half – is expected to reduce the gap
between exports and imports to 10,000 tonnes in 2012-13.
The country is better known for its exports of tangerines
and mandarins, which USDA staff see reaching 900,000 tonnes in 2012-13, up 7%
year on year, and well ahead of imports of 10,000 tonnes.
Asian Citrus's announcement came as it unveiled a 23% drop
to 249.5m remninbi in underlying profits for the second half of 2012,
reflecting a 14.5% drop in revenues to 892.0m remninbi.
Besides the drop in production, revenues were undermined by
a destocking by fruit juice companies in the Philippines and Thailand of pineapple
concentrate, cutting world values, and sending sales at Asian Citrus's juice
operation tumbling 27%.
However, prices have continued to recover since September,
after the end of the destocking exercise, while continued growth forecast for
China's economy bodes well for domestic demand of juice and raw fruit.
The "disappointing" results of the latest half represented a
"temporary setback", Mr Tong said.
"Our fundamentals remain strong [and] our oranges continue
to be well received by customers."
The results prompted a mixed response from Liberum analysts,
who retained a "buy" rating on Asian Citrus shares, saying that the "silver
lining" to the below-forecast results "is the 2.374bn remninbi (£250m) net cash
position and [the fact] that earnings should recover simply by virtue of the
maturing of the company's three orange plantations and higher juice volumes".
However, "for this value to be released, evidence of
improved trading is needed, but more importantly so is corporate action to
address the balance sheet structure and recent corporate governance concerns", the
London-based broker said.
At Seymour Pierce, analyst Sue Munden said that "whilst the
results do represent a disappointing performance, the group still achieved a
pre-tax profit margin of 28.6% and so remains a robustly profitable enterprise
with considerable potential to grow".
Ms Munden restated a "buy" recommendation on the shares, and
a price target of 50p.
The shares stood 4.3% lower at 30.4p in lunchtime deals in