Great second quarter results for SANW
Ian Gilson, CFA
The second quarter illustrates the impact of the return of Saudi
Arabia as a customer. Alfalfa seed revenue increased from $0.5
million to $4.1 million, the later harvesting in 2011 increased the
milling and processing revenue and stevia made its first (small)
contribution. The severe discounting of alfalfa seeds in the Middle
East has ended due to the shortage of all types of alfalfa seeds.
S&W Seed's proprietary seeds are now selling at a premium to
commodity seeds of between 15% and 20% whereas it was close to 30%.
This has encouraged many growers to return to, or to start to,
using the proprietary seeds. The selling price in the December
(2Q12) quarter was essentially the same as in the 1Q12 at $3.70 a
pound. The company has 1.2 million pounds of seed in inventory, at
a cost well below the current selling price.
Through leasing, buying and contractual agreement the company now
has 4,300 acres available for alfalfa cultivation, up from 2,400
acres harvested last year. The Saudi Arabian market uses over
14 million pounds of seed a year, with a three year rotation.
The company booked $0.025 million in stevia sales in the
second quarter. The 114 acres planted was used as a test site to
prove out the cultivation methods and not to maximize production.
The plants are significantly bigger than those grown in China.
Total Steviol glycoside concentrations are well above average.
S&W Seed (
is cultivating several million seedlings in greenhouses for
planting when the weather improves and will add between 80 and 150
acres, depending on how far apart the plants are. Some of the
plants will be harvested for leaf twice a year, in June and
September, and some just once a year. Harvesting occurs when the
plant begins to flower.
The company is looking to expand acreage as long as it is
profitable to do so.
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