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Zespri annual profit falls by almost two thirds on Psa costs, China fine

Tuesday 28th May 2013

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Zespri International, which controls exports of New Zealand kiwifruit, reduced its annual profit by almost two thirds after it increased spending to help the industry recover from the Psa vine bacteria and paid Chinese court fines.

Profit dropped 63 percent to $7.6 million in the 12 months ended March 31, as global kiwifruit sales fell 4 percent to $1.56 billion, the Mt Maunganui-based company said in a statement. Excluding the impact of Psa (Pseudomonas Syringae pv actinidiae), profit would have fallen 35 percent to $10.7 million, Zespri said.

New Zealand's kiwifruit industry came under pressure after the bacteria was discovered in 2010, infecting more than 40 percent of the nation's kiwifruit hectares. Psa significantly impacted the kiwifruit gold variety, with sales of gold kiwifruit trays down 16 percent last season, and expected to drop 47 percent again this season before recovering.

"Growers have taken very determined actions to recover from the impact of Psa by grafting across to Gold3 and other more Psa-tolerant varieties and changing their management practices to cope with the disease," chief executive Lain Jager said.

"While we have some confidence that we are making good progress to recover from the disease, biological systems are complex and we need to get through the coming winter and spring periods in good order and see the new Gold volumes materialise next season, before we can really say the Psa recovery pathway has been a success."

Zespri kiwifruit volumes fell 5 percent last year to 110.1 million trays because of Psa and seasonal impacts, the company said.

The kiwifruit marketer said average returns for its green Hayward fruit, which account for about 70 percent of export volume, rose 21 percent to $4.62 a tray, the highest level since the 2004 financial year. That led to record average returns per hectare for green growers of $37,959, the company said.

More than half of Zespri growers hold licences to grow its other varieties.

Returns for gold kiwifruit rose 12 percent to $101,973 per hectare, while organic greens fell 2 percent to $34,846 per hectare and the first year of green14 sales returned $18,916 per hectare.

In China, where Zespri has changed its management team and import partners, the marketer sold 9 percent more kiwifruit, increasing sales 21 percent to $117.3 million.

In March, NZ Kiwifruit Growers Inc. said Zespri's Chinese subsidiary company Zespri Management Consulting Corp. had been found guilty by a Chinese court of smuggling, fined $960,000 with reparation payments of as much as $10 million and an employee sentenced to five years in prison. The charges related to importing arrangements from 2008 to 2010.

The company's latest earnings include the full provision for the court-imposed penalties and fine from the China Customs investigation, Zespri said today.

Zespri expects to pay between $4.20 and $4.70 a tray for green kiwifruit in the 2013/14 season, from $4.62 last season, with the smaller size of green fruit a challenge for returns. It expects to pay $5.70 to $6.20 a tray for organic green from $6.18 last season with a focus on North America, Europe and Japan.

It will likely pay $10.50 to $11.20 a tray for the gold fruit, from $10.45 this season and between $7 and $8 for a tray of green14, from $6.65 last season as Japan increases its volume.

Foreign exchange rates, which cost growers an average 43 cents a tray last year, will continue to affect returns for kiwifruit, Zespri said. Meanwhile, reduced packing costs will boost returns, it said.

Zespri will pay a final dividend of 1 cent per share.

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