By Phil Boeyen, ShareChat Business News Editor
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Monday 26th November 2001 |
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The company has recorded a surplus of $531,000 for the six months ended September, well down on last year's $894,000.
However sales have improved from $9.52 million to $10.4 million, supporting the company's claim that the reason for the reduced profit is because it is in a major development phase.
This includes signing a long-term supply contracts with fast foods business Restaurant Brands (NZSE: RBD).
"Supplying initial product to Restaurant Brands, while also meeting existing domestic and growing export commitments, has placed considerable pressure on plant and staff," Mr Chips says.
"This has resulted in lower than normal yields and higher operating expenses compounded by a number of increased input costs. The existing plant is at capacity and this has necessitated the subcontracting of significant business with consequent loss of margin."
A new production line for coated potato wedges has also taken longer than anticipate and the company says this has also resulted in a loss of margin, although the plant is now operating adequately.
The company has also confirmed it will go ahead with building a new state of the art french fry manufacturing line on land next to its existing Auckland factory at East Tamaki to meet new domestic and export demand.
"Funding for the project will be a mixture of equity and bank debt. Negotiations are at an advanced stage for a share placement to a strategic party, which will be followed by a cash issue to all shareholders in the first quarter of 2002.
"The major shareholders have indicated their support for the cash issue. Bank facilities have been arranged conditional on the above equity contributions."
Mr Chips will pay an interim dividend of 2 cents per share and says "in the short term a more conservative dividend policy will be followed depending on overall cashflow."
The company admits the next year will be challenging but is promising rewards down the line with medium term projections showing the business will grow substantially both in sales, profitability and earnings per share.
Meanwhile plans for a strategic manufacturing alliance with Australian company Simplot is being scaled back.
The alliance was flagged in September but Mr Chips says Simplot has had a change in strategic direction and senior management, subsequent to the events of September 11.
"The two companies are still working together on an arrangement involving co-packing and technical assistance," the company says.
Simplot owns the Birds Eye brand in New Zealand and there had been plans for Mr Chips to manufacture product under that label.
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