ACHL Asian Citrus

TIDMACHL

RNS Number : 3433K

Asian Citrus Holdings Ltd

29 December 2015

 
 For immediate release   29 December 2015 
 

Asian Citrus Holdings Limited

("Asian Citrus" or the "Company", together with its subsidiaries (the "Group"))

Market Update

Asian Citrus provides the following update on the financial and operational impact of the presence of Huanglongbing disease at the Group's Xinfeng Plantation, as previously announced on 18 December 2015.

In view of the substantial decrease in production yield of winter oranges at Xinfeng Plantation as announced on 18 December 2015, the Group engaged two independent research centres, Citrus Research Institute, the national scientific research centre for citrus fruits and directly subordinated to the Chinese Academy of Agricultural Sciences, the Ministry of Agriculture of the People's Republic of China (the "PRC") and Guangxi Academy of Specialty Crops, the scientific research centre subordinated to the Department of Agriculture of Guangxi Zhuang Autonomous Region, the PRC, to conduct comprehensive investigations into the extent of the infection of Huanglongbing disease (the "Investigations").

The Group has identified the presence of Huanglongbing disease at Xinfeng Plantation since April 2015 with an initial estimated infection rate of approximately 18% of the total orange trees in Xinfeng Plantation based on visual detection of the symptoms. 317,839 winter orange trees suffering from Huanglongbing disease were removed and additional pesticides were applied as to prevent the spread of the Huanglongbing disease and protect the unaffected orange trees since then. Visual detection by scouting is only about 50 to 60 per cent. effective while the latency period between infection and symptom development can range between 6 months and 2 years or longer depending on the health condition of the tree. Based on the information available to the board of directors of the Company (the "Board") from the Investigations, the estimated average rate of infection of Huanglongbing disease is currently assessed to be more than 60% of the total orange trees in Xinfeng Plantation.

Neighbouring plantations of Xinfeng Plantation have witnessed severe infection of Huanglongbing disease due to the lack of action programs and cohesive coordination of efforts in controlling the transmission of Huanglongbing disease by the local governments and growers in the nearby regions. Management believes the widespread coverage of infection in the nearby regions diminished the effectiveness of the protections implemented by the Group, namely the removal of infected trees and pesticide application against insect transmission at Xinfeng Plantation, thus increased the infection at Xinfeng Plantation since April 2015.

In view of the massive infection of Huanglongbing disease and the present uncertainties over the effectiveness of the control measures on the spreading of Huanglongbing disease in Xinfeng Plantation, the Investigations conclude that the average infection rate is expected to increase to 70% to 80% of the total orange trees in the next two to three years and Xinfeng Plantation is no longer economically productive. As a result, the Board has decided to shut down Xinfeng Plantation with operations ceasing permanently after completion of the winter orange harvest in this year.

The amount of turnover attributable to Xinfeng Plantation represented approximately 33.7% of the Group's total revenue for the financial year ended 30 June 2015. As previously announced on 18 December 2015, the estimated production output of Xinfeng Plantation for the second half of 2015 will be substantially reduced to approximately 11,000 tonnes in comparison to the actual production output of 103,847 tonnes in the same period last year due to Huanglongbing disease. The Board currently estimates that impairment losses and provisions relating to the cessation of operation of Xinfeng Plantation of approximately RMB 850 million to assets will be required in the Group's financial statements for the financial year ending 30 June 2016 (the "FY2016") and the results of the Group for FY2016 are expected to be adversely affected.

The Board wishes to reiterate that the Group's insurance policy does not cover damage from the presence of any diseases and as such there will be no reimbursement for the losses incurred from Huanglongbing disease.

The content contained in this announcement is based on the latest information available to the Board and the assessment of the financial impact to the Group for FY2016 is still under review, and should be read in conjunction with the winter orange crop as previously announced on 18 December 2015.

Shareholders and investors are advised to exercise caution when dealing in the shares of the Company.

For further enquiries please contact:

 
 Asian Citrus                        +852 3951 000 
  Vasco van der Flier, Head of Investor Relations 
 
 Cantor Fitzgerald Europe (NOMAD     +44 (0) 20 7894 
  and Broker)                         7000 
 Rick Thompson, David Foreman, Michael Reynolds 
  (Corporate Finance) 
 
                                     +44 (0) 20 7067 
 Weber Shandwick Financial            0700 
 Nick Oborne, Stephanie Badjonat, Tom Jenkins 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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