Asian Citrus Holdings shares dropped 5% to amongst their lowest levels in the last three years after China’s biggest orange grower confirmed a drop in profitability, thanks to setbacks from heavy rains to higher wages. The group said that, in results for the July-to-December half to be released next month, its turnover was “unlikely to exceed” the figure for the same period of 2011, while its core earnings were “expected to record a decrease”.
The forecast reflected a cocktail of factors, including a 6.0% drop in winter orange production blamed on the impact of a replanting program at the group’s Hepu plantation, and on “unstable weather and persistent heavy rainfall” which limited output at the Xinfeng site.
The conditions had also prompted an increase in consumption of pesticides, to tackle bugs encouraged by the damp, and fertilizers, to replace those leached by the inundations.
Furthermore, higher labor bills, “incurred as a result of the general wage inflation in China”, where salaries are increasing at double-digit rates a year, had raised costs, while selling prices of pineapple juice concentrates had been depressed by a splurge of sales by Philippine and Thai rivals.
Source: Fresh Plaza Jan 2013