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Recovery from Psa and record returns drive rebound

Recovery from Psa and record returns drive rebound of orchard values

New Zealand kiwifruit growers have received the highest-ever average per-hectare return for supplying Zespri Green Kiwifruit, Zespri’s 2013/14 annual results show.

While the return to the individual grower is influenced by factors such as orchard yield, costs and fruit characteristics, the average $42,659 per-hectare Green return underlined confidence in the industry’s future, Zespri chairman Peter McBride said.

“After the impact of Psa over the past three years, there is a real sense of optimism in the industry now. Orchard prices have rebounded, investment has started again and the future looks bright,” Mr McBride said.

Psa continued to impact on overall industry returns with total volume down 15 percent from 101.3 million trays last financial year to 86.1 million trays in 2013/14. As a result, total fruit returns to New Zealand growers fell to $800.8 million from $959.1 million in 2012/13, due to a 55 percent fall in Gold kiwifruit volumes.

Mr McBride said the record Green returns and near-record returns across the other Zespri categories – Zespri Gold, Organic and Sweet Green – were driven by a number of factors.

On the market side, these results were the result of strong demand across Zespri’s 53 markets for the excellent quality fruit delivered by New Zealand kiwifruit growers last season.

While on the supply side, the long-term focus of Zespri and the wider industry on improving Green profitability across the supply chain from orchard to market was at the heart of the improved returns. Particularly pleasing was the fact industry-wide efforts since 2009 have halved the cost of Green fruit quality in foreign exchange-adjusted dollar terms.

“The Gold returns were heavily influenced by the short supply of Gold volume due to Psa. So while this did produce record returns for those with a crop, the 2013 season was painful for those who are still re-establishing their orchards after Psa,” Mr McBride said.

Mr McBride said the industry’s Psa recovery pathway was now well underway with most Hort16A growers now grafted over to Gold3 and a significant number of growers also choosing to graft from Green to Gold3.

“We now have more than 4,000 hectares of Gold3 in the ground. Long-term the future is very bright. After being under such pressure since Psa was confirmed in New Zealand in 2010, it is great to see the optimism and smiles returning for many growers,” Mr McBride said.

Zespri Chief Executive, Lain Jager said foreign exchange continued to impact on grower returns in 2013/14.

“Foreign exchange cost growers NZ$21 million, compared to the previous year. However, grower returns would have been NZ$88.5 million lower for the same period without our ongoing hedging policy,” Mr Jager said.

Looking forward, Mr Jager said the forecast range for the 2014/15 season was down for all categories, except Green. This is expected and is a reflection of market mix and pricing impacts as Gold volumes recover from Psa and is exacerbated by foreign exchange pressure suffered by all exporters.

“Zespri’s focus in 2014/15 is on continuing to deliver strong returns for growers and preparing for the significant growth period ahead as volumes recover and then surpass pre-Psa volumes,” Mr Jager said.
Other highlights of the 2013/14 annual results include:

· Supply of non-New Zealand fruit increased from 8.8 million trays in 2012/13 to 11.2 million trays this year – a 27 percent increase in volume delivering a 87 percent increase in profit from non-New Zealand supply to NZ$9.9 million

· Fruit loss was the lowest ever recorded in Europe and Japan

· Zespri continues to develop demand ahead of supply and is investing heavily in developing markets in China, Southeast Asia and the Middle East


Corporate result

Zespri’s net profit after tax for the year is $17.2 million, which is more than double the $7.5 million profit recorded in 2012/13 which was impacted by the China fine provision.

The Board has announced an intention to declare a final dividend of 7 cents per share to take full-year dividends paid to 11 cents per share.

2014/15 indicative returns


ENDS

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