Harvest Minerals Limited, the AIM listed fertiliser producer, is pleased to announce its unaudited interim results for the six-month period ended 31 December 2018.
Highlights
· Focused on developing a profitable, sustainable business for the long term
· Completed the mine and associated processing plant build-out at Arapuá Project to facilitate the production of 320Ktpa fertiliser, KPfértil
· Produced KPfértil to service existing and new sales contracts
· Received approval from MAPA to register KPfértil as a remineraliser
· Continued generation of impressive agronomic results, providing further validation for KPfértil
· Increased marketing activities in emerging marketplaces in Brazil
· Planted demonstration farm adjacent to site to show benefits to prospective customers
· Improving month-on-month sales rates and repeat customers on maintained selling price
· Initial revenue numbers of A$1,048,062. having only just commenced approaching the marketplace in earnest during the review period
· Production costs anticipated to stabilise to below the US$10/t mark
Chairman’s Statement
2018 was a transformational year for Harvest Minerals Limited (‘Harvest or the ‘Company’) with the period under review playing a crucial role in that process, as we focused on generating value for shareholders through realising several key milestones and establishing a firm platform for future growth.
During the review period, we concentrated on the continued development of our Arapuá Project (‘the Project’), in the heart of the largest and fastest growing fertiliser market in Brazil, where we produce KPfértil, a registered and approved organic multi-nutrient fertiliser that contains many of the essential nutrients required by plants.
In June 2018, following an oversubscribed placing, Harvest spent the remainder of the year completing the mine and associated processing plant expansion at the Project to facilitate the increased production of up to 320Kt per annum, to be in a position to service both existing and new sales contracts. Additionally, we have increased marketing activities to include local advertising, demonstration trials, attending trade events and strengthening key relationships with local customers and cooperatives.
In July 2018, we received approval from the Ministry of Agriculture (‘MAPA’) to register KPfértil as a remineraliser and generated more exceptional agronomic results that provided further validation for our product and the significant benefits it can provide to farmers. Through the planting of a demonstration farm adjacent to the site, we can clearly show the benefits to prospective customers first-hand.
Since inception, Harvest has been very successful, but like all new businesses we have had some outcomes that have fallen short of our expectations, the most notable of these was the premature termination of our strategic alliance with Geociclo Biotecnologia S/A (‘Geociclo’) that could have provided an impetus to the Company’s expansion plans. The resultant insolvency of Geociclo, did create an opportunity in being able to appoint key members of its sales team to our own team and its existing client database.
The Company’s expectations, at this stage, are that the sales price and cost of production numbers assumed by the Company brokers are materially in line with the Company’s full year expectations. The Company expects that the assumptions relating to sales volumes (and therefore revenue) and resultant profit before tax, will not be met by the 30 June year end, predominately as a result of a timing issue where the prime selling seasons in Brazil and the Company’s financial year end do not reconcile and as such we see this as a timing issue not as a permanent impairment. Additionally, the Company has experienced some unbudgeted one-off costs that have impacted the Company’s profit before tax in H1 2019, which are not expected to be repeated in H2 2019 or thereafter. The Company therefore expects to report a 2019 full year revenue figure approximately 25 per cent. below current analyst estimates, and to breakeven at the profit before tax level.
Some of the key metrics that the Company monitors internally to give us comfort that things are progressing well include our improving month-on-month sales rates and the fact that to date all customers who have received our product have either purchased again, or indicated that they will purchase again, when the need arises. Importantly, we have been able to maintain our selling price. Additionally, the Company has stabilised its production costs in accordance with expectations.
With an improving sales run rate and repeat customers, the business can only grow. We have entered the phase of building a profitable, sustainable business for the long term. There are many moving parts to achieving this and the timing and scheduling of achieving our objectives will not always fit the schedule of all shareholders or the timing of 6 monthly reporting. Building the business up to capacity will take months, not weeks and there will be periods where the communication with the market may be thin. This should be interpreted as a good thing; it means we are busy building the business.
As we report on the closing of the 2018-year, Harvest is well placed to move forward. The macro fundamentals that brought investors to Harvest remain as strong as ever: the very significant demand for fertiliser product in Brazil, the attractiveness of our product compared to alternatives, our proximity to customers, and our extremely attractive economics are all in place and bode well for a profitable and exciting future.
The Board believes that Harvest is an attractive proposition: it is well-funded; revenue generative; the Project is ideally located within an emerging market; with the product being competitively priced and an outstanding natural product with a robust profit margin.
As always, the Board would like to thank our team for their work and our shareholders for their continued commitment to Harvest.
