If Harvest want the rainbow, they gotta put up with the rain
“…If there’s a bright light potentially at the end of the tunnel, it is that traditionally Q3 and the start of Q4 are our busier periods. 80 percent of sales are seasonally placed in the second half of the year. When the market changes and the tide changes yet again, we will be there to pick it up and ride the wave. Harvest Minerals is confident it’s still on track…”
Historically, investor updates released on Friday were accused by sceptics of being releases intended to bury bad news.
The timing of June’s final results from Harvest Minerals is therefore unfortunate. Sales figures are disappointing when compared to last year’s “out of the box” numbers which instead of being replicated and exceeded have “stopped abruptly.” But like it or loathe it, there are various explanations behind the numbers…
The reasons are out of the company’s control. Its consumers are hundreds of Brazilian farmers who grow crops including soy beans, coffee and livestock feed. Soybean prices have slid and farmers are lucky if they recoup the expenditure and time spent growing the beans. Then there’s the pressure on cattle prices, so the “pasture guys” are feeling it too. Furthermore conventional fertilizer prices have been falling and farmers are holding out to see if they drop further. And while they wait they are not buying Harvest’s organic multi-nutrient direct application fertilizer.
The quality and organic nature of Harvest’s product is a key differentiator. What isn’t in question is how good KP Fértil is. What is being questioned is against a depressed economic background can Harvest recover from a bad first and second quarter?
Chairman Brian McMaster hopes so, and the white knights may come in the form of the farmers of coffee. “If there’s a bright light potentially at the end of the tunnel,” says McMaster, “is that traditionally Q3 and the start of Q4 are our busier periods. Coffee hasn’t been as affected by these price influences.”
McMaster also highlights the support for farmers announced this month by the Brazilian government which includes “giving them access to credit to buy things like fertilizers.”
In this podcast with Sarah Lowther, Brian explains that while “It’s not doom and gloom, it’s not champagne and sparklers at midnight either.” He gently reminds investors about the economics of supply and demand. “We had the benefit of a great uptick last year, and we’re having the detriment of a downtick this year.”
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Brian’s covers June’s RNS in detail and addresses shareholder questions.
Below, are the timecode and topics covered in the featured podcast :
03:58 – Outlook for the year
05:14 – Sales anomaly of 33000 tonnes referenced in the annual report
08:12 – Relationship with accountant
08:38 – Shareholder question re: quarterly cash levels in quarter cash flows
09:36 – How resilient are farmers and are they spending on KP Fertil?
10:54 – Has the company considered adding additives to KP Fertil to give it broader appeal?
12:17 – Brian’s view about direction of fertilizer prices
13:47 – Update on the limestone project
15:48 – Is a takeover a possibility?
17:57 – Dividends
19:06 – Is a capital raise on the horizon?
19:54 – Is now the time to start a share buyback?
21:57 – Update on the court case and resolution with Agrocerrado
23:48 – An investor’s summary of harvest Mineral’s and whether it’s still relevant. Why is the market not ‘getting’ Harvest’s story?
27:10 – Highlights from June’s RNS
Read the latest corporate presentation
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Follow the company on Twitter @harvestminerals
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The author was remunerated but does not hold shares in the company
