By Michele Simpson
Friday 23rd June 2000
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|UPSETTING THE APPLE CART: Potentially costly fruit|
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.
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