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Harvest Minerals confirms profitability expectations as it addresses market misinformation (HMI)

Harvest Minerals (LSE:HMI) rose 2.3pc to 16.6p after confirming that it expects to turn over a profit in its first year of operation, having already exceeded the 30Kt annual sales target for its KPfértil remineraliser in Brazil. In a Q&A update aimed at addressing ‘misinformation, either deliberate or otherwise’ about its operations, Harvest said its existing sales are ‘more than sufficient’ to reach profitability and become cashflow positive.

It added: ‘In very broad terms, based on our existing structure, the company will reach profitability and become cashflow positive once it achieves sales of approximately 25,000 tonnes per annum. We have announced sales exceeding that number for 2018/2019.

Harvest added that it has decided to hold off revenue recognition in its results for the year ended 30 June 2018, which it will release on Friday. It said it has opted to post all its revenues in its new financial year to help investors see performance from a standing start by properly aligning income and related production expenses. The business’s comments come after it secured a transformational initial order for 36kt of KPfértil worth $2m in June from major fertiliser distributor Aggrocerado.

It said: ‘We believe the full year accounts to be released next summer will be far more meaningful if all the revenue and related expenses are [sic] recorded in one year rather than blending in the unrelated capital development expenses incurred during 2017/18.’

Elsewhere in today’s update, Harvest re-assured investors that it has not been impacted by ongoing weakness in the Brazilian economy and a depreciation in its currency, the Real. The firm, which is located in Brazil and domestically markets its products to the country’s agricultural sector, said it is actually benefitting from the increased cost of importing fertiliser products. The business also said it does not expect to be impacted by the current elections in Brazil, adding:

‘Agriculture is the third largest component of Brazil’s GDP and is a mainstay of its economy. The Brazilian Government has been demonstrating its support for the agricultural industry and encouraging the development of domestic fertiliser production.’

According to Harvest, today’s update will be the first in a regular series of Q&A sessions answering investors questions. The company added that it is the only party with accurate information about its operations, denouncing ‘individual pundits commenting in unregulated forums’.

Asked why investors are not buying Harvest shares now they are trading below placing price given that a recent £9.7m raise was oversubscribed, the firm said highlighted weak trading conditions in the broader AIM market:

The AIM market has been experiencing a particularly soft period of retail investor interest.  It is typically this interest that buys and sells shares based on momentum and sentiment aand forreasons unrelated to Harvest, this interest has been waning throughout the summer.  We believe it is this general market sentiment that has weighed on Harvest (like so many other [sic] companies).

It also said that the placing achieved its primary goal of identifying and securing the long-term support of particular institutional shareholders, adding:It is typical for these types of investors to take a longer-term view and it is not typical for them to buy on market as prices vary.  From that perspective, the recent capital raise has been an outstanding success.’

Author: Daniel Flynn

Disclosure: The author of this piece does not own shares in the company mentioned

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