Friday 1st November 2019
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A 76 percent plunge in annual profit for its commercial arm and challenging economic conditions has seen Ngai Tahu launch a wide-ranging review of its businesses.
The South Island iwi posted a net profit of $37.5 million for the year ended June from $153.7 million the previous year and the latest profit is also lower than forecast because of a $57.1 million write-down of its Oha Honey unit, formerly known as Watson & Son. The manuka honey unit’s operating deficit before the write-down was $6.3 million.
“Oha has been a challenging investment. We underestimated the risks and overestimated our ability to manage those risks. Those errors on our part were compounded by three years of very unusual climatic conditions resulting in under-production, lower sales, and financial under-performance,” the iwi says.
Ngai Tahu Holding’s farming unit was another which failed to fire during the 12 months to June 30, posting a $10.3 million net deficit, from $28.31 million the year prior. Ngai Tahu said while its forestry to farm conversions had generated strong capital gains in recent years, it was not getting the operating returns it wanted.
The unit's operating return on investment for 2018 was lower than 1 percent and, in addition to that, the value of its farms declined by 8 percent. The company wants returns of 4-6 percent.
Conversely, the iwi’s forestry division, which has been split into its own reporting line, made a $13 million profit. However, Ngai Tahu is warning falling log prices mean the performance will not be repeated next year.
Chair Mark Tume and chief executive Mike Sang say in the annual report they are confident of an improved performance over the next few years to achieve an operating surplus of more than $90 million. This year’s underlying profit was $94.1 million, up from $89.8 million.
“We are facing different economic times than that experienced over the last decade. As one would expect with a diverse range of operating businesses, we want to ensure they are well-positioned to maximise performance in the years ahead,” Tume says.
The review is being undertaken internally and Ngai Tahu says it is still business as usual in their portfolio, which includes Hilton Haulage
Tourism was area another which had a muted year, posting a net profit of $8.9 million from $14.72 million the previous year. Ngai Tahu said growth is slow in the sector following Brexit and the US-China trade wars.
The iwi announced earlier this week a strategic partnership with Air New Zealand that will develop a regional strategy for the South Island and promote its tourism experiences. The airline has already signed a similar deal with North Island-based Ngati Porou.
The iwi’s seafood arm remains relatively steady, posting a net profit of $24.9 million down from $28.68 million.
The business unit is undergoing leadership changes with Sang exiting in March next year. His job is about to be advertised.
Tume joined the board in February last year and former Tainui chief executive Mike Pohio joined the board of the commercial arm.
Ngai Tahu member Tina Nixon told BusinessDesk the commercial arm had made hard calls and been upfront about it.
“Ngai Tahu is a large organisation that has grown in complexity. There are going to be some bumps in the road.”
The commercial unit distributed $67 million to fund tribal initiatives, up from $61 million the year before.
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