Scales shares down after first-half profit drops 14% after bad weather, reaffirms annual guidance

Thursday 24th August 2017

Scales Corp shares fell 5.8 percent after it said its first half profit fell 14 percent after its apple orchards were hit by heavy rain and winds and needed more expensive care.

Net profit was $29 million, or 20.7 cents, for the six months to June 30 versus $33.8 million, or 24 cents, in the same period a year earlier, the Christchurch-based company said in a statement. Revenue was $216.7 million, up 3 percent on the year, while earnings before interest, tax, depreciation and amortisation dropped 11 percent to $48.4 million.

"During the growing season, the Hawke’s Bay region experienced heavier than normal rainfall as well as heavy winds due to ex-Cyclone Cook. Notwithstanding these conditions the Mr Apple orchard team produced an overall export volume consistent with the record 2016 crop," said managing director Andy Borland. Rainfall was double the average in two months of the growing season, the apple exporter said.

As a result, it incurred higher costs to "ensure that in a very difficult season customers’ expectations were met as far as practicable in terms of quality and volume." Expenditure included higher spray costs, storage costs and additional labour in picking and thinning, it said. It noted that combined Mr Apple export volumes are consistent with last year and like-for-like production was only 5 percent less than 2016 volumes in a very challenging growing season.

Ebitda in its horticulture business was $34.7 million, down from $39 million in the prior year. It was $11.6 million in its Storage and Logistics business, versus $12 million a year earlier and was $4.2 million in its food ingredients business, versus $4.9 million.

Scales said the Longview post-harvest operations acquired last year added notable efficiency to its post-harvest infrastructure, permitting further specialisation and savings within its post-harvest operations. It bought the Hawke's Bay apple grower, packer and marketer Longview Group Holdings for $20.5 million in November 2016, adding capacity to sell fruit into the fast-growing Asian market.

The company said its "Storage & Logistics division has seen steady volumes and the division expects to achieve year end targets." The acquisition of OceanAir was completed Aug. 1 and adds Auckland and Melbourne ports along with more perishable expertise to its growing freight forwarding and logistics business.

Looking ahead, Scales said the Asian and Middle Eastern markets continue to grow and reiterated that it expects full year ebitda to be between $55 million and $62 million, compared to $67.3 million in 2016.

Scales shares dropped 5.8 percent to $3.40 and are up 4.6 percent this year.

(BusinessDesk)

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