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You say the products work fabulously - are you in the trade? Interesting also to hear the broker target, I hadn't realised. Wow. Also, it's clear the products are selling, but does anyone know how the all-in costs compare to others/doing nothing?? I'm no farmer or investment expert, just a scientific background a long time back, and a tendency to be a bit adventurous.
Good to have you onboard Qd22.
Yes, the macro picture is excellent and PHC products work fabulously. I await the next RNS with trepidation because 2023 ‘may’ prove to have been a right off. However eyes will be on the forward statement (my eyes at least). If the destocking problem is over, then this is a great time to buy or add at the current levels.
Hard to believe the broker target is 40p+. Hope the company remember this in case of any TO bid.
FMC Corporation expands biologicals crop protection platform in Canada
https://finance.yahoo.com/news/fmc-corporation-expands-biologicals-crop-113000728.html
Agreed, bots. I've bought in here today, had my eye on it since Moneyweek recommended it in November. [Before the fall!]. Risky, but lots to recommend it, so it's bottom drawer for when those registrations come in and hopefully volumes rise a lot.
From Moneyweek:
'Shah points to estimates that the overall global consumption of food will grow by 1.2% a year for at least the next three decades, leading to a 50% increase in demand by 2050. While this may not seem a particularly large challenge, the sector will have to meet this demand at a time when “the available land is shrinking”.
This is partly due to urbanisation, especially in the developing world, where many formerly agricultural areas are being swallowed by towns and cities. However, another factor is the impact of climate change. As Shah points out, this isn’t just a matter of rising temperatures anymore, but also a case of “increased droughts, more pests and generally more frequent extreme weather events”. '
Biological Pesticides Market
Soybean remains the largest crop with +50% share in area and value, followed by corn and sugarcane
+70% of the market value is BioNematicides (soybean and sugarcane as key crops) and BioInsecticides (corn is the key crop)
Bionematicides in corn is considered a big growth opportunity
Biostimulants - Soybean
Soybean area treated with biostimulants has increased 17.5% from 2020 to 2023
An increase of 43% in biostimulant value between 2022-3 was mainly driven by product price
Foliar application remains the most common in soybean at 87% in value terms in 2023, with 13% of biostimulants in value terms applied as a soil treatment
https://news.agropages.com/News/NewsDetail---49474.htm
I noticed a few of the agri tech business starting to recover a bit, FMC being the one highlighted by Cavendish in their note.
https://finance.yahoo.com/news/fmc-fmc-11-7-since-163014584.html
Fertilizer prices are also starting to increase, not sure if there is much read across to PHC
Its a start, does show at least UK gov has noticed something is up.
Potato prices continue to climb, shortages reported in Netherlands:
On 27th February 2024, the Mintec Benchmark Price (MBP) for Dutch processing potatoes reached €37.5/100kg, the highest price for February since the price series began in 2014.
https://www.mintecglobal.com/top-stories/dutch-processing-potatoes-reach-their-highest-ever-february-price
Brit ISA to boost UK markets and growth stocks in particular just announced in the budget. I assume PHC would count as UK listed. Anything to increase interest and liquidity has to be a good thing.
"The market is growing for greenhouses since farmers are now noticing that biostimulants are becoming a must. In my opinion, it's quite impossible to produce high-quality, healthy, and safe food in a greenhouse without dealing with crop stress as a critical issue that needs to be managed.
In the Spanish market, we already see that biostimulants are as important for greenhouse growers as irrigation or nutrition is. The stress will always be there; nothing can change that; you have to reduce and manage it."
https://news.agropages.com/News/NewsDetail---49407.htm
ICL Accelerating Biologicals Portfolio Growth in Brazil with Strategic Acquisition
Company adding meaningful manufacturing capabilities and expanding product portfolio with acquisition of Nitro 1000
https://www.businesswire.com/news/home/20240227911936/en/ICL-Accelerating-Biologicals-Portfolio-Growth-in-Brazil-with-Strategic-Acquisition
Couple of brief articles:
According to a recently compiled report from Market.us, the biostimulant market size is forecast to exceed $5.6 billion (USD) by 2033. This reflects significant growth from its estimated value of $2.7 billion (USD) in 2023. The expected growth would equate a compound annual growth rate of 7.5% from 2024 to 2033.
https://news.agropages.com/News/NewsDetail---49145.htm
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Brazil’s surge in biopesticide use marks a sustainable agriculture shift
Over the last five years, Brazil has witnessed a 45% yearly increase in biopesticide use.
This growth far exceeds the 6% seen in traditional agricultural chemicals. Now, biopesticides cover 70 million hectares in Brazil.
https://news.agropages.com/News/NewsDetail---49362.htm
'write up'
Good right up in Ago pages for SAORI
https://www.linkedin.com/posts/plant-health-care-inc_sustainableagriculture-agriculturasostenible-activity-7167994791434076161-6GJh/
'Chr. Hansen and Novozymes have joined forces to create Novonesis, a leading biosolutions partner.'
This merger looks to be well received by the market, shares are well up since the low in Oct.
Novozymes is obviously our partner in India, great partner to have with deep pockets.
https://www.novonesis.com/en
It bodes well for TEIKKO (PHC68949) which is awaiting approval in Mexico, that leaves just California and India with outstanding registrations.
For me it’s important that PHC continues to make progress with registrations in key countries. Suggests there’s a bright future beyond the current global agrochemical headwinds.
Good spot, its slow but the regulators are gradually phasing out conventional herbicides in favour of climate friendly substitutes.
OBRONA never really got off the ground last year (pun intended), legislation (if passed) could be a great opportunity for Wilbur-Ellis to pick up on.
https://www.thedailyscoop.com/news/new-products/wilbur-ellis-offers-obrona-fungicide-2023-corn-diseases
Exclusive: White House set to back tougher climate model for ethanol, sources say
https://www.reuters.com/world/us/white-house-set-back-tougher-climate-model-ethanol-sources-say-2024-02-16
Feb 16 (Reuters) - President Joe Biden's administration is poised to announce an adjustment to its scientific modeling for ethanol that will show the corn-based fuel to be less effective at reducing greenhouse gas emissions than previously estimated, three sources briefed on the plans told Reuters.
The adjustment, previously unreported, will make it more difficult for ethanol producers to take part in lucrative new U.S. tax credits for so-called sustainable aviation fuel, seen as crucial to the industry’s growth, the sources said. It will still leave them a pathway to the subsidies if they can partner with corn growers that use sustainable farming practices.
The adjustment is intended to more accurately account for the environmental damage caused when land is converted into farms to grow corn, while also rewarding climate smart farming techniques like no-till farming and covered crops, said the sources, who asked not to be named because they are not authorized to speak publicly.
Poland and France are pretty much joint second behind Germany for potato production, Staphyt are also based in France, two big markets.
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=The_EU_potato_sector_-_statistics_on_production,_prices_and_trade#Potato_production_in_the_EU_is_highly_concentrated
Reviewing the overall situation again, there may be grounds for optimism this year – reasons outlined below.
For Poland it would have been too late to secure a distributor and get product applied, according to the potato field trials (below) Harpin is a foliar fertilizer (via the leaves) application which has to be applied regularly during growth phases.
The same applies to Agrii UK partnership which was announced in October again, too late for 2023 growing season.
‘The Agreement will support commercial sales of PREtec technology and novel Agrii foliar micronutrient combinations. The first Agrii foliar fertilizer product to be launched containing PREtec technology will be sold under the brand Innocul8 and is expected to be widely available to growers in the UK for use in 2024.’
Agrii field trials November 2021
Potato specialist discusses the crop health and yield benefits of using a bio-stimulant containing the protein, Harpin αβ.
https://www.agrii.co.uk/news-and-media/news/trust-the-science-with-bio-stimulants/
In terms of a distributor for Poland, the Agrii article above mentions:
“Trials by Staphyt in Poland in 2019 show that early applications can increase tuber numbers, while later applications boost tuber size and quality. Both approaches resulted in an improvement in marketable yield and, depending on variety and sale price, net margin benefits of up to £350/ha.”
https://www.staphyt.com/en/sectors.
‘
Staphyt assists companies in various industries, multinational, micro and small enterprises or start-ups, from development strategy to launching products on the world markets.’
Couple of potential bright spots for Plant healthcare this year, wet conditions in Europe last year have seen a shortage of seed potatoes for planting, prices continue to rise.
EU faces dire potato seed supply challenges for 2024 growing season, prices soar
February 8, 2024
https://www.potatonewstoday.com/2024/02/08/eu-faces-dire-potato-seed-supply-challenges-for-2024-growing-season-prices-soar/
It would be good to hear if PHC has secured partners in these regions, especially Poland (quotes from news releases):
‘Achieved three significant country registrations for Harpinαβ in Europe (Poland, France and Cyprus); plans are advancing for product launches in these geographies, anticipated in 2024.’
‘In August, Harpinαβ successfully achieved Mutual Recognition in Poland. This is a major milestone for the Group and permits immediate sales of Harpinαβ in Poland. Poland is the sixth largest agricultural producer in the European Union, and the second largest potato producer behind Germany, growing around 322,000 hectares.’
January 18, 2024
Mintec Benchmark Prices (MBP) for White Potatoes rose by 16.3%
https://www.mintecglobal.com/top-stories/short-supply-pushes-uk-potato-prices-up
Still plenty of time to catch this year’s growing season, if successful could have a material impact on 2024 results.
Since news flow's dried up; here's my wild (& probably incorrect) speculation.
I'm wondering if PHC are selling Teikko directly to growers thus taking 100% of the profits.
The Brazil technical team is amazing and they've been doing loads of promotional work over the last year.
Just a thought...
This is what Cavendish detailed in their November update
‘Our FY24 revenue forecasts have been reduced by 28% in line with guidance and, despite this downgrade, a more cautious outlook on costs means we still expect the company to reach positive EBITDA in FY24.’
Going back to the consultation last year, it felt odd as management didn’t offer any alternatives to the current situation. It wouldn’t surprise me if they already had interest from a third party and this was a toe in the water exercise to see how investors feel about going private.
The attraction for one of PHC’s existing partners must be tempting, Origin for example (owners of Agrii UK) currently have a €20m share buyback programme and well-funded, Chris Richards is also Chairman.
Wilbur-Ellis similar situation, Plant Healthcare would almost earnings enhancing from day one with cost savings, plus the benefit of $100m of accrued losses going forward.
No worries, in general terms PHC need to generate around $16m to reach breakeven. Cavendish have forecast $16.6 for this year which seems too high, at least at the moment anyway.
In the right market I think this is very achievable especially with several new products on offer, if they can pull back on admin costs it will bring this threshold down.
In terms of value, product development, patents and registrations are all barriers to entry, this is why many think consolidation is inevitable as currently too fragmented.
One other thing worth mentioning for any potential acquirer is the significant accrued losses of nearly $100m, this in itself has value to the right purchaser.
@1Pencil - thanks, that's a great chart. I'm in the stock for the long term, because I believe in the value proposition the products offer to farmers. In my experience in new agriculture products, they are always 2 (or 3) years later than hoped. Regulatory approvals, distribution contracts etc all take time, but then become huge barriers to entry for a company to defend against competition. My frustration is that I thought that the company was "asset light", and that the value was in the intellectual property. When product was contract-manufactured by a third party, huge profit margins would belong to shareholders (with a barrier to entry). I did not expect to see no profit at all, and cash flows now going into manufacturing technology. When am I ever going to see earnings, even if sales targets are met?