Plant Health Care confident despite softer US market

Agricultural biological specialist Plant Health Care reported a slight growth in overall first-half revenue of 1% on Wednesday, to $5.6m.

The AIM-traded company noted significant growth in Brazil, with a 48% increase in revenue, attributed to heightened in-market demands for H2Copla, which saw a 29% increase, and Saori, which went up 38%.

Mexico also showcased a positive trajectory with a 12% uptick in revenue, while European sales remained constant.

In the US, a strategy by distributors to lower inventories in a declining market led to a postponement of purchases for all agricultural products during the period.

That resulted in a 56% decrease in US sales.

Nonetheless, the resulting low inventory indicated a potential boost in sales for the second half.

Additionally, direct customer sales in the agricultural fields showed positive momentum, with Employ sales growing by 35% and FASTAND by 9%.

Operational expenses for the company rose 33% to $2.8m, down to higher trade receivables and a dip in accounts payable, although there was a noted improvement in inventory.

Historically, the company's operational costs in the first half of the year exceed those of the second half.

The group successfully raised $3.3m after expenses in June.

As of 30 June, cash in hand totalled $5.7m, a slight drop from $6.3m in 2022.

Plant Health Care anticipated a robust second half, with significant revenue growth expected.

The company said it expected to align with market expectations by the end of the year and was also on course to achieve a revenue benchmark of $30m by 2025.

That ambitious target was fuelled by the continued success of HarpinaB and the introduction of innovative peptides.

“Market conditions in the first half have been very challenging for traditional agricultural input businesses, with most large companies reporting a significant revenue reduction,” said chief executive officer Jeff Tweedy.

“The US has been particularly difficult, with all distributors sharply reducing inventory to reduce the impact of price volatility and slow demand.

“Most agribusiness companies saw a significant revenue decline in the first half of 2023 compared to last year.”

In that context, Tweedy said growth outside the US allowed the group to grow revenue marginally, adding that profit margins were importantly maintained.

“Strong on-ground sales growth in our core markets gives us confidence in robust revenue growth in the second half.

“The group's first-half performance was driven by the growing demand for HarpinaB and Saori in Brazil.

“The Brazilian market for Saori is significant, with potential for $10m in revenue.”

Tweedy said the company expected a solid second-half revenue performance, underpinning the group's target to deliver $30m in revenue in 2025.

“The group continues to register new products - we received the first PREtec approval from the US EPA, with the product being marketed under the brand name OBRONA.

“With the launch of PREzym and OBRONA, we now market PREtec on three continents, which is a significant accomplishment.

“We plan to launch new PREtec products for the next three years; our strategy of expanding relationships with major global distribution partners is on track.”

Jeff Tweedy also noted that during the year's first half, the firm signed a new agreement with Novozymes in India and a new commercial deal for OBRONA with Wilbur-Ellis.

“There continues to be strong demand and interest in our products; the world has an ever-increasing need for more food, with sustainable agriculture at the heart of meeting this need.

“Farmers face many challenges, including the impacts of climate change such as drought, to ensure food security.

“Plant Health Care helps farmers solve these problems.”

At 1050 BST, shares in Plant Health Care were down 14.76% at 7.39p.

Reporting by Josh White for Sharecast.com.