Scales full-year profit falls 17% as prices dip, costs rise after adverse weather
By Jonathan Underhill
Feb. 28 (BusinessDesk) - Scales Corp posted a 17 percent drop in 2017 profit as its horticultural division contended with weaker sales prices and an increase in on-orchard costs after poor weather.
Net profit fell to $31.8 million in calendar 2017 from $38.2 million a year earlier, the Christchurch-based company said in a statement. Earnings before interest, tax, depreciation and amortisation fell to $62 million, meeting guidance, from $67.3 million in 2016. Sales rose 7 percent to $399 million.
Scales reiterated its 2018 ebitda guidance of $58 million to $65 million, saying gross production in its horticulture division, which operates under the Mr Apple and Fern Ridge Produce brands, was expected "to be consistent with five-year average volumes" with lower costs expected as a result of a less challenging season. The company's first-half profit had dropped 14 percent after its apple orchards were hit by heavy rain and winds and needed more expensive care.
"As reported in our half-year results, the Hawke’s Bay region experienced a difficult growing season," said chair Tim Goodacre. "However, the horticulture team produced an overall export volume consistent with the record 2016 crop and an export packout percentage also in line with the prior year."
Horticulture revenue fell 1 percent to $228 million while underlying ebitda dropped 21 percent to $31.1 million. Scales said it represented a "resilient performance in a challenging growing season." Gross profit fell 8 percent on higher on-orchard costs and additional labour costs, it said.
Sales at its storage & logistics business, which includes Polarcold cold storage, recorded a 16 percent gain in sales to $126 million. Ebitda climbed 18 percent to $19.1 million, driven by a 24 percent gain for cold stores to $14.5 million and a 46 percent increase in Scales logistics to $3.3 million. Its smaller Liqueo bulk liquids business posted a 42 percent drop in ebitda to $1.3 million, which it said reflected the loss of a large customer, lower volumes and closure costs after relocating to a site near Napier Port.
Food ingredients, which includes the Meateor petfood ingredients business, recorded a 19 percent gain in full-year sales to $68.9 million while underlying ebitda fell 12 percent to $8 million. Meateor sold 27,663 tonnes of petfood ingredients during the year, a 20 percent gain, while sales of juice concentrate fell to 56 million litres from 5.7 million litres.
Scales shares last traded at $4.54 and have gained about 30 percent in the past 12 months.