Bumper apple crop boosts Scales
NZ exporter reports a rise of 11% in net profit to a record $38.6 million
Last year’s record apple crop helped drive NZX-listed Scales’ annual underlying net profit up by 11 per cent to record $38.6 million in 2016.
Scales, New Zealand’s biggest apple exporter, said its horticulture and food ingredients business produced strong results while earnings at its storage and logistics unit were flat.
Managing director Andy Borland said the apple trade — which comprises about 60 per cent of the company’s business — had another very strong year on the back of a record harvest.
Scales also experienced a high “packout” rate — the proportion of the crop to reach export quality of 87 per cent per cent — compared with the usual average in the late 70s.
Borland said Scales had repositioned its orchards with varieties to suit lucrative Middle East and Asian markets.
“Our Divas, New Zealand Queens and Royal Galas are selling very well in those markets,” he said, adding the high packout rate was thanks to “good, clean crop” and Scales’ improved use of grading technology.
Scales’ result comes as the current apple harvest gets under way, and Pipfruit New Zealand says it is shaping up to be another record year in terms of volume, with the total crop expected to come to 390,400 tonnes.
The industry has high hopes for new variety Dazzle, which was launched late last year and is expected to be the biggest development since the launch of Royal Gala some decades ago.
“It’s going to be three years before we hit decent export volumes [of Dazzle] but we see it becoming a very popular apple,” Borland said.
“It has very good characteristics for the Asian market.”
Further afield, Scales faced some currency headwinds in Britain, where it sells about 10 per cent of its apples, thanks the New Zealand dollar’s near 20 per cent appreciation against sterling since the British voted to leave the European Union last June.
Scales’ operating earnings, or ebitda, came to $67.9m in calendar 2016, up 11 per cent on the previous year’s.
In its earnings outlook, the company reaffirmed its guidance of ebitda between $55m and $62m.
Borland said the decline from the 2016 result reflected Scales’ conservative budgeting policy, which is based on a five-year apple production average.
Revenue rose 24 per cent to $373.9m.
The previous year’s results were restated to reflect a change in accounting policy for its apple trees.
The food ingredients business lifted pre-tax profit 19 per cent to $8.5m as revenue increased 20 per cent to $58m.
Scales said its pre-tax profit at the company’s storage and logistics unit slipped 4 per cent to $10.9m.
Scales said the coldstore business usually performed better in slower markets and was affected by product moving quickly through the supply chain to market, as well as a slower start to the 2016/17 cropping season in the fourth quarter.