Camellia PLC Trading Update (8556F)
July 20 2021 - 9:00AM
UK Regulatory
TIDMCAM
RNS Number : 8556F
Camellia PLC
20 July 2021
20 July 2021
Trading Update
Camellia Plc
Camellia Plc (CAM.L) is today issuing the following update on
trading.
Outlook
The underlying loss before tax(1) for the first half of the year
is expected to be approximately 15% lower than that of H1 2020.
This reflects improved profits from Agriculture (more details of
which are set out below) and the benefit of cost saving measures
which unfortunately have been offset in large part by the impact of
Covid on the markets served by our Engineering and Food Services
businesses and a softening of activity in the oil and gas
markets.
Whilst normality is starting to return in the UK, the speed and
intensity at which the pandemic has re-emerged in India, Bangladesh
and Africa creates uncertainty and demonstrates the need for
continued vigilance. We have a very strong financial position and
believe that over the long-term, demand for our agricultural
produce will continue to rise. As always, our financial results
remain largely dependent on Agriculture where the majority of
harvesting and sales take place in the second half of the year. It
is therefore too early to give a firm indication of the likely
results for 2021. However, the factors discussed below, in
particular the reduction in the expected avocado crop and the
continuing downward pressure on tea prices in Kenya, indicate the
potential for substantially lower overall results for the full year
than previously expected. Further announcements will be made as
appropriate in due course.
Trading
Agriculture We are pleased that, despite the pandemic, all of
our agricultural operations continue to operate broadly as
normal.
Tea
In Bangladesh, production in the first half of the year was 25%
higher than that of the same period last year and average pricing
has been significantly better (up 63%). The government has
announced a two week National lockdown although the tea industry
and tea auctions have been granted an exemption. We anticipate
lower prices in H2 2021 reflecting normal seasonality combined with
the possible softening of demand in the market as a result of the
National lockdown.
The Covid situation in India remains deeply concerning despite
the extensive efforts made to keep all our staff safe, including
restricting workforce deployment to 50% in West Bengal. Production
in the first half of the year was 16% up on the same period last
year. Prices in the Dooars have been strong (up 15%) but prices for
Orthodox teas in Assam, which constitute most of our production in
that region, are significantly lower than H1 2020. It is still very
early in the India tea sales cycle (around 70-75% of sales are made
in the second half of the year) which makes predicting prices for
the remainder of the year inherently uncertain even without the
impact of Covid.
In Kenya, benign weather continues to result in high volumes of
tea production nationally, although below the record levels of last
year. The market remains under pressure as a result and prices are
slightly below those of last year. Our estate production for the
first half is 11% below that of the same period of 2020 with
average prices down approximately 2%. We continue to see a risk of
further downward price pressure for the remainder of the year.
In Malawi, production is approximately 11% higher than the same
period last year but sales have been delayed by the uncertainty
created by the Malawi Revenue Authority's investigation into the
applicability of VAT to certain tea sales as reported in our 2020
annual report. This is expected to be a timing issue as between H1
and H2. Average tea prices are 2% ahead of H1 2020 but following
contractual discussions with our buyers and due to oversupply in
the Kenyan market, we now expect lower prices in the second half of
2021.
Avocado
The harvest for our Hass avocado crop is progressing well.
However, following a very strong 2020, it is now becoming clear
that our volumes will be significantly lower than previously
anticipated and we now expect our estate Hass crop to be
approximately 30% lower than last year which, all else being equal,
will reduce profits for the year by GBP3 million. European markets
are currently well supplied with avocados and while market
conditions indicate that our average prices may be marginally
higher than those of 2020, it is too soon to predict prices for the
remainder of the year with any certainty. It is however unlikely
that prices will improve sufficiently to offset the significantly
lower yield.
Macadamia
Our macadamia operations continue to harvest and process their
production with volumes expected to be approximately 20% higher
than last year despite the pest damage in Malawi that we previously
reported. Although the kernel market is active with both demand and
prices improving, we expect our average prices to be below those of
last year as a result of the impact on quality.
Our remaining agricultural businesses are trading well, with our
farming operation in Brazil seeing very high soya yields being sold
into a strong market.
Non-agriculture
Our non-agriculture businesses in the UK have had a difficult
first half with the continuing restrictions hitting retail and food
service. However, as expected we have seen that as the restrictions
continue to ease, trading in these businesses is slowly improving.
The oil and gas services market in Aberdeen has seen some softening
of demand for AJT Engineering with a consequent reduction in
margins, while the Site Services division, which is focussed on the
renewables sector, has seen a significant increase in activity over
2020. Aerospace also remains very quiet and as previously reported,
we anticipate no improvement in performance at Abbey Metal
Finishing for the remainder of the year.
BF&M recently reported shareholders' net income for the
three months ended 31 March 2021 of BD$6.5 million, a significant
improvement on the net loss reported for the comparative
three-month period of 2020 of BD$2.2 million. This reflects an
uplift in all lines of business but particularly in gross premiums
written in property and casualty in the Cayman Islands and The
Bahamas. An increase in interest rates adversely affected the
values of fixed-income securities but this was offset by strong
equity market performance. Short term claims and adjustments
experience increased 42% however this was more than offset by a 71%
reduction in Life and Health policy benefits. BF&M's Q2 results
are due to be released in late August.
Strategy
As announced in the AGM statement, the Board of Camellia is
undertaking a series of measures aimed at improving share price
performance. These measures include reducing our exposure to tea
auction prices, accelerating our agricultural diversification and
divesting of certain assets. Additional detail will be issued in
due course and as appropriate.
Notes
1 Underlying loss before tax is the unaudited loss before tax
before separately identified items (legal costs and impairments)
and excluding the trading profits of Horizon Farms to which was
sold the second half of 2020. Horizon Farms trading profit for H1
2020 was GBP3.6 million
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
Enquiries
Camellia Plc 01622 746655
Tom Franks, CEO
Susan Walker, CFO
Panmure Gordon 020 7886 2500
Nominated Adviser and Broker
Emma Earl
Erik Anderson
Maitland/AMO
PR
William Clutterbuck 07785 292617
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