Asian Citrus shares tumbled to their lowest since 2008 as
China's top orange grower said it had no insurance against losses to Typhoon Rammasun,
and added a "material" writedown against an acquisition to its setbacks.
Shares in the group dropped 10.2% to 11.0p in London, the
lowest since October 2008, before staging some recovery to stand at 12.25p at
10.00 UK time, down 2.0% on the day.
The tumble followed the company's announcement that its
profits will be hit not just by losses to Rammasun, but by a "material
impairment loss" over its takeover in 2010 of Beihai Perfuming Garden Juice Company
(BPG), China's top supplier of tropical fruit juice concentrates.
The extent of the loss, reflecting BPG's "current business and
operating environment" compared with the business's goodwill value at time of
acquisition, "is still under review", Asian Citrus said.
However, the prospect of a writedown adds to pressures on results for
the year to June 30 already facing a hit from Rammasun, the most severe typhoon
to hit southern China since 1973, which hit the company's Hepu plantation in Guangxi.
Asian Citrus said that that the storm had destroyed all the 222,000
banana trees planted in an effort to diversify from citrus fruit, and which had
been due for their first harvest next month.
The storm had also damaged infrastructure such as greenhouses,
power lines and windbreaks, besides causing an electricity outage at the group's
BPG juice operation which meant some fruit could not be processed and has been
The group unveiled a 36m-yuan ($5.85m) impairment against
these losses, meaning its core earnings for the year to the end of June "will
now be lower than current market expectations".
No insurance payout
Furthermore, the storm – which US Department of Agriculture
officials reported had also wiped out more than 20m poultry and 40,000 pigs in
Guangdong, Guangxi and Hainan provinces – has also dented prospects for the
company's 2015 financial year, which started this month.
"The typhoon caused a significant volume of premature fruit
drop from existing oranges trees in Hepu plantation, which will result in
decreased production yield in particular for the upcoming winter and summer
crops," Asian Citrus said.
"It is also expected that the impact of the typhoon will
prolong both the susceptibility of the orange trees to citrus canker infection
and soil leaching in the plantation areas," factors that dented the group's
And the group said that it will not receive any insurance compensation
for storm damage, because of limitations on coverage – which are now under
"The group's insurance policy does not cover damage from
natural disasters and as such there will be no reimbursement of the losses
incurred from the typhoon," Asian Citrus said, adding that it "will review its
insurance cover to ensure it is appropriate going forward".