Satara warns of earnings drop on lower fruit volumes and removal of tax deductibility

Thursday 1st July 2010

Fruit packer and coolstore operator Satara is forecasting “significantly” reduced earnings for 2010 due to a lower level of crop processing as well as a one-off removal of tax deductibility for building depreciation.

“The lower throughput has arisen from a lower number of supplying growers and a lower industry fruit yield compared to 2009,” said Satara chairman Hendrik Pieters. Satara’s main crop is kiwifruit.

The company didn’t give an actual forecast. Last year the company’s earnings before interest and tax fell to $4.7 million from $6.2 million in 2008. A key efficiency gain was a joint venture development with an Auckland automatic packaging machinery company. The Satara automatic packer can pack up to 750 fruit a minute compared to a hand-packing maximum of 90 fruit a minute.

The changes in the government’s tax deductibility of depreciation for buildings with a life of 50 years or more will see Satara’s deferred tax liability increase by approximately $1.6 million and see a reduction in the reported profit after tax by a similar amount.

“This one-off, non cash tax adjustment has no impact on the ongoing underlying business profitability or operating cash flows,” Pieters said. Other recent initiatives undertaken by the co-op include re-engineering of the company’s business model and a refocus on profit centre accountability, cost saving initiatives and increased crop throughput.

Satara is forecasting that its Gold kiwifruit handling performance will see an improvement over the 2009 result where the company was the industry’s best with only 1.47% fruit loss.

Its shares are trading at 59 cents just above a year-low level of 58 cents.

Businesswire.co.nz

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