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Scales sees full-year earnings at top of forecast range

Tuesday 28th August 2018

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Scales Corp expects a good export apple season will deliver full-year operating earnings at the top of the company’s forecast range.

The apple grower, food processor and exporter today reported a 22 percent increase in net profit to $34.8 million for the six months ended June 30 on the back of good growing conditions and better volumes through its logistics and pet food operations.

Earnings before interest, tax, depreciation and amortisation were 20 percent higher at $57.1 million and full-year earnings should to be at the top end of the $58 million to $65 million range previously forecast, the company said in a statement on NZX.

While pricing and volumes had been strong for apples, the company anticipates some softening at the end of the season. Second-half volumes at the firm’s Meateor petfood ingredients business may also be lower, while the firm also expects to incur about $1 million of costs from the recent sales of some cool stores and bulk liquid operations and its search for acquisitions.

Scales shares rose 0.8 per cent to $4.89 and are up marginally from the start of the year.

Christchurch-based Scales has been on the prowl for new agri-businesses which better match its remaining portfolio. It wants businesses that are fully vertically integrated, export-focused and can benefit from the firm’s relationships in China.

Earlier this month it announced the $20 million sale of Liqueo, its bulk liquid storage business to Taranaki’s SBT Group. In May it sold its Polarcold cool stores to US-based Emergent Cold for $151.4 million.

The company today reported a 24 percent lift in first-half revenue to $255.2 million. Excluding the Polarcold and Liqueo businesses, revenue increased 25 percent to $220.1 million. Ebitda from continuing operations increased 20 percent to $46.7 million, as did net profit to $29.3 million.

All the firm’s operations reported strong gains in earnings. Horticulture, the largest division, accounted for $6 million of the earnings increase on the back of a 9 percent increase in own-grown export volumes from the Mr Apple business. Sales of premium varieties were also 17 percent higher.

Scales said the sale of Polarcold and Liqueo should leave the company with about $130 million of net cash by Dec. 31.

It is reviewing potential acquisitions but said there are also strong investment opportunities within its existing business units.

Scales usually pays interim dividends in January. Directors will consider that later in the year, the company said.


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