Scales raises 2016 annual earnings forecast as horticulture unit shines

Scales Corp, the best-performing stock on the S&P/NZX 50 Index this year, raised its forecast for annual earnings with the apple company citing improvement across all its divisions and a standout performance from its horticulture unit.

Earnings before interest, tax, depreciation and amortisation are expected to be between $66-69 million in calendar 2016, above an earlier forecast of between $55-62 million, and representing an increase of between 7.5-12% on the year earlier, the Christchurch-based company said in a statement. Underlying net profit is expected to be between $37.2 million and $39.4 million, above previous guidance of between $29.6 million and $34.6 million.

New Zealand's biggest apple exporter has invested in apple crops that are sought after by customers in Asia and the Middle East, where the sweeter, redder varieties fetch a premium price on average 55% higher than traditional varieties. The company said its horticulture unit had "a particularly strong performance" due to a significant uplift in export volumes, with fruit quality, particularly towards the end of the season, a highlight.

Its Mr Apple division packed a record 3.5 million trays, meeting a 2020 volume target four years ahead of schedule. To aid future growth, Scales in January increased its stake in Hawke's Bay apple exporter Fern Ridge Produce to 72.9 percent, and in November bought Hawke's Bay apple grower, packer and marketer Longview Group Holdings for $20.5 million, adding capacity to sell fruit into the fast-growing Asian market.

The company's storage and logistics division has benefited from network expansion, improved utilisation of its bulk liquid storage business, and improved cargo volumes in its freight forwarding operation. The food ingredients division is expected to deliver a record sales year, both in terms of volumes and revenue, the company said.

Scales will pay an interim dividend of 8c a share in January, ahead of the year-earlier payment of 6.5c. Its final dividend will be announced in May and paid in July.

Its full 2016 annual earnings will be released on February 28.

Scales expects ebitda in the 2017 year of between $55-62 million, a drop from the 2016 year, reflecting earnings from Longview and lower budgeted yields and revenue from its Mr Apple unit.

The company said its net debt at December 31, 2016, is forecast to be about $31 million, keeping its balance sheet in a strong position even after acquisitions and investments in growth during the year.

Scales shares last traded at $3.50 and have jumped 46% this year, ranking it the best performer on the benchmark index.

(BusinessDesk)