Pandemic hits Scales outlook, share price

AUCKLAND: Scales Corp shares dropped 4.6% after the agribusiness was less upbeat about annual earnings as Covid19 hits global sales and prices.

The company said it expected underlying net profit to be at the bottom end of its $30 million to $36 million guidance range in calendar 2020. Underlying profit was $36.4 million in 2019.

‘‘While operations within New Zealand have been able to operate effectively, sales rates and pricing in international markets have been more variable and, as a result, earnings for the full 2020 year are forecast to be impacted,’’ it said.

The horticulture division — which normally made up the bulk of earnings — had been the hardest hit: earnings before interest, taxes, depreciation and amortisation were expected to be ‘‘materially below’’ the prior year’s $39.7 million.

Sales to date were about 70% of the expected total export volume.

Salt Funds Management joint managing director Matt Goodson said the stock had been rallying in recent weeks and may have got a little ahead of itself.

‘‘It is a little disappointing after real strength in the share price,’’ Mr Goodson said.

‘‘It is natural for an agricultural stock to have some strong years and some years where the stars don’t always align,’’ he said.

Scales said Asia had been the hardest hit, as the pandemic had caused ‘‘ongoing disruption in most Asian markets’’.

Market conditions for traditional varieties to Europe and United Kingdom were operating as expected.

The firm said horticulture division earnings from Asia and near markets were expected to revert to historical levels next season — but given the blow to horticulture, ‘‘the mix of earnings between business divisions is forecast to change meaningfully from the previous year’’.

The food ingredients division had fared better and global demand for pet food, in particular, remained strong.

Scales is due to report firsthalf earnings on August 26. — BusinessDesk