Unusual weather patterns, which handed China a glut of oranges
earlier this year, are confronting it with the prospect of a drop in output
which is set to push prices higher, the country's top grower of the fruit said.
Asian Citrus forecast a "decrease in supply" ahead in the China's
supply of winter oranges from the forthcoming harvest "thanks to this year's
unstable weather", which landed excessive rains on many southern citrus-growing
The production downturn meant it would be "possible" for the
group raise its fruit prices – in contrast with the dynamics this year, when unusually
warm weather swelled the size of the winter crop, and sent prices of the group's
summer oranges falling 3.4%.
They had soared 24% over the previous three years.
Indeed, the prospect of price rises meant that the group was
placed to offset the impact on its fortunes of a slowing Chinese economy.
"Our main challenge will be whether we can increase orange
prices in a slower-growth economy," Tony Tong, the Asian Citrus chairman, said.
Sales would also be helped by orange's status "as a consumer
product rather than a luxury good", meaning demand "should remain generally
stable, Mr Tong said.
"We see excellent potential for this market, given the growing
demand for healthy food [and] rising household incomes."
'Less than optimal'
The comments came as the London-listed group unveiled
earnings up 8.7% at 629.1m remninbi for the year to June 30, on revenues up 26%
at 1.78bn remninbi.
The performance was "less than optimal", Mr Tong said,
flagging the impact of the depressed summer orange prices and a squeeze on
margins at its juice business fostered by destocking in Thailand and the Philippines,
which boosted world supplies and depressed prices.
Furthermore, production at one of its plantations was
depressed by "unexpectedly heavy rain" which also raised costs, by encouraging
pests and leaching fertilizer away.
The group's fertilizer bill soared 31% to 252.9m remninbi,
and its pesticide costs by 71% to 54.8m remninbi.
However, the results were termed by Liberum Capital as "relatively
solid considering the challenges of heavier than usual rainfall in southern
China and depressed prices for oranges and juice concentrate products.
"The strong growth fundaments of Asian Citrus remain very
much intact," the London broker said, restating a "buy" recommendation on Asian
Citrus shares, with a price target of 58p.
The shares closed 6.7% higher at 35.75p in