Sharechat Logo

Government could be stung by Enza's rotten year

By Michele Simpson

Friday 23rd June 2000

Text too small?
UPSETTING THE APPLE CART: Potentially costly fruit
Monopoly apple marketer Enza is facing a financial blowout this year which could see growers hit with a loss as big as $40 million or the government asked to bail it out.

The rot began with foreign exchange losses as well as extra costs from its Napier Omniport. And the sale of its Frucor Beverages business and subsequent float has raised questions about whether Enza was paid the true value for the assets.

The Apple & Pear Marketing Board received $50 million in 1998 for Frucor, which this month listed on the New Zealand Stock Exchange with a market capitalisation of $187.5 million.

Board-linked company Enza will be in the red at the end of its financial year on September 30 and outgoing Enza chairman John McCliskie estimates the write-off costs will be $15-20 million.

But a source close to the company has seen evidence that pushes that budget blowout to as high as $40 million. "The cost of running Enza has gobbled up any surplus," he said.

Enza this year issued 20 million shares on the grey market, where stocks are not listed. The shares had an estimated value of $5 a share in April and traded in May for $1.70.

Yesterday, one of the largest single trading days, more than 27,000 Enza shares changed hands at 65 cents.

Sources close to the company predict it will be one of the worst years for payments to growers but Mr McCliskie is adamant there will be an operating profit in this financial year.

He defended the Frucor sale, saying Frucor had since invested overseas and plunged more capital into developing its brands - giving it a greater value.

"We would have had to invest a load of money between then and now at a high risk - the growers would have kicked us around town. [Frucor] was not constrained by an act of Parliament - we were," he said.

Enza still has a financial relationship with Frucor, supplying it with apple juices for its brands including Fresh Up and Just Juice.

Political party Act New Zealand has written to apple growers warning of the pending losses and that Enza could be looking at preparing a government rescue package.

"We've heard there are going to be substantial losses and you have to ask why," Nelson grower and Independent Pipfruit Growers Association chairman Danny Freilich said.

Complaints have also been filed at the Apple & Pear Board after Enza reneged on sharing $25 million from the sale of Frucor Beverages with the pipfruit growers.

The money is instead being used to help fund the write-off costs from the forex exposure and Omniport.

Mr McCliskie denied any government bailout was necessary, saying any abnormal costs would be incurred this year and Enza was on its way to a profit next financial year. After partial industry deregulation in April, Mr McCliskie said, independent growers were taking pot- shots at Enza.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: Blue-chip stocks Meridian, A2 lead market lower
NZ dollar rises on Brexit hopes, rate cut reassessment
Three not failing, just needs a new owner - MediaWorks CEO
Major investors back new CBL class action targeting directors
Rip Curl purchase a done deal on Kathmandu proxies alone
Comvita chair Neil Craig eyes the exit once he finds a new CEO
Mercury raises guidance on increased storage, high spot prices
Eroad reports strong 3Q sales growth, eyes ASX listing
MediaWorks puts TV business on the block
NZ dollar benefits as preliminary Brexit deal improves risk appetite

IRG See IRG research reports