ML Mac loses $4M
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ML Macadamia Orchards LP's annual and fourth-quarter profits were hammered by difficulty selling its crop, contract price deflation and costs stemming from its failed acquisition of Mac Farms of Hawaii LLC.
General and administrative expenses rose by more than a third in the year to $2.6 million, as the Hilo-based company posted a loss of $4 million, or 53 cents a Class A unit, down from net income of $804,000, or 11 cents a unit, a year earlier. Revenue for the year was $11.3 million, down 34 percent from $17.1 million in 2006.
The results are forcing Hawaii's largest macadamia nut grower to suspend its quarterly dividend. It has paid 87 consecutive dividends since 1986, when it entered into a partnership with ML Resources Inc.
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ML Macadamia Orchards LP posted its third consecutive quarterly loss yesterday as crop sales and contract prices slumped while the attempted buyout of Mac Farms of Hawaii LLC drove up costs.
As a result of the "disappointing" financial performance, Hawaii's largest macadamia nut grower is suspending its quarterly cash dividend for the first time since the start of its partnership with ML Resources Inc. in 1986.
The Hilo-based company posted a loss of $4 million, or 53 cents a Class A unit, in 2007, down from net income of $804,000, or 11 cents a unit, a year earlier. Revenue for the year was $11.3 million, down 34 percent from $17.1 million in 2006.
"Lower contract prices, our inability to sell or harvest our entire crop, and the transaction costs related to the attempted acquisition of Mac Farms all contributed to an extremely difficult year," Dennis Simonis, president and chief executive of ML Macadamia, said in an e-mailed statement.
The company lost $3.5 million, or 47 cents a Class A unit, in the quarter ending Dec. 31, compared with net income of $846,000, or 11 cents, a year earlier. Revenue was $4 million, down by more than half from $8.8 million in 2006.
ML Macadamia has 7.5 million Class A Units outstanding and paid out 3 cents a unit in the fourth quarter, compared to 5 cents a year earlier. For the year, ML Macadamia paid 18 cents a unit, down from 20 cents a year earlier.
The company last posted a profit in the first quarter of 2007, when it reported $346,000, or 5 cents a Class A Unit, on a strong nut harvest.
Macadamia nut sales dropped by 43 percent for the year to $7.6 million from $13.3 million; while sales fell 65 percent to $2.6 million from $7.6 million in the quarter.
Contract farming revenue fell slightly to $3.8 million in the year, while rising 15 percent to $1.3 million from $1.1 million in the quarter.
"Other Hawaii macadamia farmers are suffering with us, but it appears that higher prices and improved demand are on the way," Simonis said. "Prices tend to fall rapidly and then they gradually come back."
The company also announced yesterday that its unitholders voted on March 10 to allow it to amend its partnership agreement to add processing and marketing capacity. The agreement was formerly restricted to macadamia nut farming. ML Macadamia said in its most recent proxy filing that the move is an attempt to insulate it from low commodity prices.
An 18-month attempt to acquire Mac Farms, the second-largest processor and marketer in the state, for $13.1 million fell through in December.
The company does not have a new acquisition target or purchase timeline yet, Simonis said.
ML Macadamia produced 15.4 million pounds of wet, in-shell nuts last year, 2 million pounds less than 2006, on 4,190 acres of orchards it owns or leases on the Big Island. The decrease is a result of the company's inability to sell or process its nuts, it said.
Macadamia nut kernel prices peaked in late 2004 on the popularity of nuts in the Atkins diet, but softened from about $6.50 a pound that year to $3.50 a pound last year.
ML Macadamia was paid an average price of 63 cents a pound for its nuts last year on sales of 11.1 million pounds, compared to an average price of 74 cents received in 2006 on 17.4 million pounds, leaving more than 3 million pounds of nuts unprocessed, Simonis said. This year's isle macadamia nut harvest is estimated at 36 million pounds of wet-in-shell nuts, or 38 percent less than last season's crop, according to a January USDA report. An oversupply on the world market has made selling Hawaii macadamia nuts challenging, the report said.