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SANW: S&W Seed raises $10 million and revises fourth quarter guidance.

By Ian Gilson, PhD, CFA


The company (NASDAQ:SANW) has revised its guidance for the 2017 fiscal year, ending June 2017. The revised fourth quarter numbers were below our estimates, which were below published estimates and street guidance.
The problems are the strict water controls proposed in Saudi Arabia. Orders for alfalfa seed have dropped precipitously to essentially zero. As far as we can tell there have been no offsetting orders from adjacent countries.
We are now assuming zero revenue in 4Q17 from distributors in Saudi Arabia, flat sales year over year in the U.S.A. and a modest increase in the rest of the world. Total revenue is now assumed to be $17 million.
Gross margins are assumed to be down from 3Q17 levels but very slightly above year ago levels. The net impact is a loss of $1.3 million pretax. For the year it is possible that the negative tax rate could reduce the 4Q17 loss to $0.04 a share.
S&W Seed has raised close to $10 million from the sale of stock, mainly to existing shareholders. The additional 2.69 million shares, priced at $4.00 a share, will lower the loss per share in early 2018.


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