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Scales says FY earnings in line with guidance, all divisions trading well

Wednesday 27th February 2019

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Scales Corp said its full-year earnings were in line with guidance as its Mr Apple unit reached record export volumes.  

The agribusiness group said underlying earnings before interest, tax, depreciation and amortisation were $67.1 million in the year to Dec. 31. In December, it said ebitda would be at the top end or would slightly exceed guidance of between $58-to-$65 million.

Underlying revenues - which include revenues from continuing and discontinued operations - reached a record $464.7 million, up 18 percent on the year. Net profit was $45.5 million, up 44 percent on the year, it said.   

Underlying net profit was $35.8 million, up 9 percent on the year.  

Scales is still waiting for Overseas Investment Office approval for the sale of its Polarcold cold storage unit.  The due date for that condition has been extended to May 31. It also sold bulk liquids storage division Liqueo in the year. The two sales sold for combined proceeds of $171.4 million, it said. 

The Christchurch-based company plans to use those funds to buy agri-businesses more closely aligned with the rest of its portfolio, and has indicated it's interested in businesses that are fully vertically integrated, export-focused and can benefit from the firm’s relationships in China.

Its first investment was in its food ingredients division, when it bought 60 percent of United States-based Shelby Foods for US$23.2 million in December. "We hope that this will be the first in a series of successful investments," said chairman Tim Goodacre. 

The board declared a fully imputed dividend of 9.5 cents per share, up from 9 cents a year when it gave guidance last December. 

Its horticulture division had underlying ebitda of $42.6 million versus $38.9 million a year earlier as Mr Apple's own-grown export volumes were up 9 percent, despite a slight reduction in packouts, the proportion of the crop to reach export quality, to 76 percent from 80 percent.  

"More pleasing was that volume growth was concentrated in sales of premium varieties, which collectively recorded volume growth of 18 per cent over 2017 export volumes," the company said.  

Goodacre said the outlook also remains positive. “The 2019 apple harvest is underway and early crop indications support a return to long-run packout rates," he said.  The company will also see the first commercial sales of its new Dazzle and Posy varieties this year. 

The storage and logistics division saw a 10 percent lift in ebitda to $21.1 million while the food ingredients division generated underlying ebitda of $10.2 million versus $8 million a year earlier. 

The company said it expects activity in the logistics division to remain at 2018 levels and said that initial trading in the food ingredients division is in line with expectations. 

It did not provide ebitda guidance for the current financial year, however, as the sale of Polarcold remains subject to OIO approval and "in line with our growth strategy, Scales continues to make positive progress on a number of initiatives, some of which may be agreed in the near term." 

The shares last traded at $4.72 and are up around 4 percent over the past 12 months. 


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