Daily ShareChat: Turners & Growers

By Jenny Ruth

Friday 11th March 2011

Turners & Growers' annual operating profit of $23 million was up 29% on calendar 2009 but below his $24.1 million forecast, says John Cairns at Forsyth Barr.

Turners' business is mature and continues to face threats from growing groups and the supermarkets, Cairns says. "To mitigate these threats, Turners is becoming more involved in growing produce in its own right."

The company has extensive interests in growing tomatoes, apples, lemons, mandarins and kiwifruit.

"Most of these are in the development stages and will only reach full production over the next three to four years," Cairns says.

However the fact the growing operations contributed a $2.8 million profit compared with a $2.5 million loss in 2009 "is an encouraging trend," he says.

The high New Zealand dollar eroded market returns for Enza, New Zealand's largest pip fruit exporter which accounts for 35% of apple exports.

"The main investment issue confronting Turners is the lowly return on funds employed as evidenced by the forecast 2011 ROE (return on equity) of 3.5%," Cairns says.

Plans by its 65.6% shareholder Guinness Peat Group to sell down its investment portfolio over time in a way which optimises value for GPG shareholders could act as a catalyst for change at Turners, he says.

Recommendation: Hold.

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