The company is facing significant problems and today's price...

The company is facing significant problems and today's price gain looks like a knee jerk reaction to very modest director buying.

The first problem is that the almond price is falling due to the receding drought in California. If California returns to normal output levels, almond prices could return to their historical averages around $6/kg, or even lower for a period if the market ends up in oversupply. This would decimate SHV's profits and lead to large asset right-downs.

The second problem is that the management team do not have the experience to deal with the current environment. Given the uncertainties surrounding the almond price, paying such a high dividend was a reckless capital allocation decision. Management keep trying to talk up the market fundamentals rather than acknowledging the risks that are beyond their control and acting accordingly.

The balance sheet looks strong but this can change quickly (as has been witnessed in the mining sector) particularly if management makes further poor capital allocation decisions.