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Plant Health Care’s commercial business turns profitable and cash generative 

11:09, 1st February 2022
Francesca Morgan
Vox Newswire
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Plant Health Care (PHC FOLLOW) told investors that its commercial business, which is both profitable and cash generative, is set to deliver profitable growth for the business in the years ahead. 

In a trading update for the year to 31 December 2021, the patent-protected biological product provider to global agriculture markets said strong Harpin αβ revenue growth, combined with the first of many product launches from the PREtec platform, had marked “a very strong year.”

In the year to 31 December 2021, the company reported a revenue increase of 28% to $8.4m, up from $6.6m reported in FY20. The commercial business increased its EBITDA and was cash positive for the period while cash and cash equivalents by period-end came to $9.2m.

Harpin αβ sales increased by 55% to $6m and revenue within each of the group’s three large distributors came to over $1m. In addition, Plant Health Care signed a new distribution deal with Agrii, a leading UK distributor, for exclusive access to Harpin αβ for all crops in the UK. 

Analysts at Arden Research said this growth is reflective of previous commentary from the group regarding high in-market demand and the reversal of destocking effects from 2020.

The company noted that the launch of Saori® (PHC279), the world’s first commercial PREtec registration, into the Brazilian soybean market has been “well received” to date. It is planning to roll-out the product into the specialty crop market in the US in the second half of the year.

On Monday, the company announced that it had submitted a new application to the US Environmental Protection Agency (EPA) to register its novel peptide product PHC949 ( the second new product from its PREtec platform) for the control of damaging soil nematodes.

Plant Health Care, which plans to launch one major product every year, is targeting PHC949 against nematodes (soil pests), a market forecast to be worth $1.6 billion globally by 2025.

According to the company’s data, soil pests reduce crop yields by some $100 billion annually. 

Saori is also expected to be a significant driver of growth that could potentially deliver disease control and yield increase worth around $75 per hectare for Brazilian soybean growers, giving them an ROI of 6x or more, while reducing the use of potentially less safe agrochemicals. In the 2020/21 season alone, Brazilian soybean farmers spent US $2.85bn on disease control.

Plant Health Care said it has seen continued growth into 2022 and that it remains confident that the Company is on track to deliver cash break even within existing financial resources. 

PHC price chart

CEO, Chris Richards, said Plant Health Care is now “well positioned to become a leader in Sustainable Agriculture, as recognised by the award of the LSE’s Green Economy Mark.”

He said: “Plant Health Care has established core relationships with four of the largest global agricultural distributors, giving us scale in key markets.  Harpin αβ sales growth of 55% was driven by substantial increases in all Regions.  In Mexico, sales of Harpin αβ increased by 15% but third-party product sales were held back due to low crop production in 1H21.”

While sales volumes in 2021 were limited by the availability of Saori, Richards noted that the recently announced toll manufacturing agreement has secured “ample capacity to supply long-term growth in PHC279 (Saori’s active ingredient) at attractive cost for all global sales.”

The company is planning multiple launches of PREtec products into other large markets over the coming years, following an investment of more than $25m over the last eight years. 

In addition to the launch of PHC279 in the United States in partnership with Wilbur Ellis, Richards highlighted that more plans are in place “for further major product launches in following years, as the company builds a large business from the PREtec platform.”

Richards added: “We have good visibility to future revenue growth expectations from our distributors and are confident that the momentum within the business will continue into 2022 and beyond.  We remain on track to deliver cash break even within existing resources.”

“Plant Health Care has made significant progress on all fronts in the past 12 months and we expect 2022 is the year that the Group fully demonstrates the quality and  depth of its product portfolio and forecasts react appropriately,” Arden Research outlined in a research note today.

“Excellent product effectiveness and endorsement from the largest ag distributors globally provides substantial optimism for future growth,” analysts added. As a result, analysts at Arden have put a ‘buy’ rating on Plant Health Care, setting the stock’s target price at 36p. 

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The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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