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Teamwork Keys to Sustaining Industry Wealth

Continual Innovation and Global Teamwork Keys to Sustaining Industry Wealth

Continual innovation with the rapid rollout of new technologies and global teamwork to leverage the integrated orchard to retail structure are critical to maintaining competitive advantage and growing returns, ZESPRI Group Chairman, Craig Greenlees told shareholders at the company’s Annual General Meeting in Tauranga today (July 29).

“We want to continue to create the environment that will deliver growth and opportunity so that net sales increase and industry wealth can be sustained. But, it is a team effort. We must work to hold together this structure as one team for one industry,” he told a landmark meeting as shareholders and growers celebrated the centenary of the arrival of kiwifruit seeds in New Zealand from China and the best financial and marketing performance ever in 2003-04 – the sixth consecutive record result.

ZESPRI Group has reported a 58.9% increase in net profit after tax for the year ended March 31 2004, up $8.5 million over the previous year to $22.9 million as a result of significantly higher net global sales which reached a record $911 million, which consequently boosted the company’s margin return, aided by prudent cost management.

The Board intends to declare a fully imputed dividend of 50 cents (20 cents) per share, amounting to $10.6 million ($4.2 million) to be paid in October 2004 to the company’s 2,517 grower shareholders. This represents a return of 41.7% on the original $1.20 share issue price.

Mr Greenlees, however, warned that the current selling season was proving difficult. Significantly higher volumes to sell would likely mean a longer sales programme, a need to continually ensure fruit met customers’ exacting specifications and foreign exchange movements would all have an impact.

He told grower shareholders that while an official forecast of returns for the current selling season was not due until next month, it was likely that returns would be about $1.50 a tray to $2.00 per tray at the downside, while Orchard Gate Return would probably be reduced by about 5 percent.

“In a season like this one it is critical that we all play on the same team for the same goal to optimise the return,” he told the meeting. “Every effort must be made by every participant to uphold quality and brand integrity., but our position in such a challenging season as this would be far, far worse if it were not for the one industry, one team structure.

“We do not want to see this industry lose through lack of care, or short sightedness, any of its cornerstones. The result would be fragmentation bringing uncertainty and loss of credibility where our fortunes are made – and lost – the marketplace.

“We need to hold our critical mass. We need to have a world class production and delivery system built for the market that delivers a unique range of outstanding products under a brand that resonates across the world as a promise of great taste, safety, health and energy and which can be reinvigorated through constant innovation,“ Mr Greenlees said. ”And we need to have commercial partnerships and relationships that are mutually beneficial with customers, with growers, post harvest and suppliers.”

The Chairman said the strategy would continue to focus on optimising returns from the current portfolio of kiwifruit products while seeking greater differentiation in the market in order to sustain the highest net returns possible to growers and shareholders.

Another important area for the business would be expanding the revenue base from new ventures, especially ZESPRI Fresh Produce’s year-round procurement and supply programmes and Aragorn’s GOLD Kiwifruit processing business. Both fledgling businesses recorded losses in 2003-04.

“There are some positive signs,” Mr Greenlees said. “Aragorn and its processing partners are rapidly improving processing efficiencies and quality and now have a range of products using GOLD Kiwifruit on the market in Japan, Korea and New Zealand There are signs already of stronger sales and we are optimistic that we will see an improved financial result from Aragorn this year.”

The offshore procurement and production programme was in the process of being reworked to achieve results for shareholders in both ZESPRI Group Limited and underwriter Kiwifruit International Limited – and returns for supply partners offshore in Italy, France, Chile, Korea, Japan and California, he said.

“What also is opening up quickly is a role for New Zealand grower and post harvest experts to fast track the experience of GOLD here and translate it into practice with production partners offshore. We have to have this kind of global teamwork for 12 month marketing to produce the returns and also leverage year round supply capabilities with customers to sustain premium positioning and pricing.”

He said that New Zealand growers and the company’s shareholder could look to the future with the confidence that comes from creating a heritage as the established world leader and the strength derived from “our united passion, knowledge and determination to continue to build competence to sustain that reputation and record of marketing success”.

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