Seeka Announces Result for the Six Months to 30 June 2015
Seeka Kiwifruit Industries
Six Months to 30 June 2015 [Unaudited]
Directors and management are pleased to present Seeka’s financial results for the six months to 30 June 2015. It was a challenging six months for the Company with a fire significantly damaging Seeka’s Oakside post-harvest facility just prior to harvest, then having to focus on managing a record 27.7m trays of kiwifruit; the first major lift in production since 2011’s previous high of 27.1m trays.
Profits are up. Profit before tax this half year is ahead of the previous corresponding period (pcp) by $2.87m [+115%] at $5.36m, reflecting record kiwifruit volumes handled by post-harvest along with good earnings achieved by the orchard division. The half year results include an allowance for the full second year cost of the three-year grower share scheme totalling $2.55m. The results also include the costs of the impairment of the destroyed buildings at Oakside and the insurance proceeds to date. The net impact at the six months of these two items is a $143,000 addition to profit. Later when the insurance claim is finalised and settled, a one-off gain is likely to arise which could be available to fund any further reinstatement or other costs associated with the fire.
Kiwifruit volumes are up. Hayward volumes handled by post-harvest increased by 3.9m trays while market share remained steady at 24.8%. Zespri SunGold volumes increased by 2.8m trays with market share up from 10% to 14%. Further growth in Zespri SunGold volumes are anticipated as orchards continue their recovery from Psa-V.
Our facilities were fully utilised this year with a record 27.7m trays handled compared to 21.2m trays in the pcp.
Margins have been maintained. The post-harvest environment remains competitive. Seeka has strived to deliver competitive pricing for services to growers understanding that many growers are still recovering their financial positions after the devastating effects of Psa-V. While margins have remained tight, the greater volumes of fruit delivered the benefits of scale to both shareholders and growers. In 2015, supplying growers delivered an exceptional crop. Exceptional yields of largely good quality fruit make the post-harvest job easier.
Seeka continues to focus on infrastructure expansion and careful capacity planning to ensure adequate capacity for anticipated volumes. There is little alternative to further investment in New Zealand infrastructure considering the industry’s inertia to implementing offshore handling and storage, and limited collaborative marketing opportunities. Seeka remains well prepared for investment with low core debt and unutilised debt facilities.
Orchard earnings are increasing. As New Zealand’s largest kiwifruit grower, Seeka benefited from record Hayward yields and new Zespri SunGold volumes. Seeka’s long term leases are returning to profitability following intense reinvestment. While Zespri’s forecast market returns are down, total orchard returns are supported by higher yields across all varieties. Orchard costs continue to be under inflationary pressure and per tray orchard returns volatile.
New business delivers incremental earnings despite being seasonally affected. The New Zealand banana business remains very competitive with large volumes of fruit depressing wholesale prices resulting in lower than anticipated returns to Glassfields. New supply lines to retail have opened for domestic supply of kiwifruit and avocados. SeekaFresh earnings have been affected by an earlier avocado selling season and lower volumes. Market prices were lower in the first quarter of 2015, however Seeka’s performance delivered supplying growers incremental returns, leading the market in grower returns for the second year in a row.
Seeka continues its growth strategy through operational growth and acquisitions that deliver accretive value. Our foundation and principal focus is kiwifruit. We will continue to pursue excellence and strive for improvements in this our core business. Our strategy is to build on that foundation and our vision is to become “New Zealand’s Premier Produce Business”.
Seeka continues to pursue excellence in its core business and will continue to strive for improvements to make it the best of breed in our kiwifruit business. Seeka will continue to look for opportunities to innovate and expand or diversify to secure long term growth and sustainable profitability. At the same time the Company will review its asset base to ensure that our operating assets and investments are aligned to our strategy and commercial drivers.
Full release: seeka_6_monthly_2015_announcement.pdf