Zespri cuts forecast 2017 profit, grower returns for Green kiwifruit on increased supply

Kiwifruit marketer Zespri has reduced its forecast 2017 profit and some grower returns for the current season because increased crop volumes for the Green variety are weighing on prices.

Following the company's annual meeting in Mt Manganui today, Zespri chief executive Lain Jager has cut the forecast corporate profit range for the year ending March 31, 2017, by $4 million to a range of $66 million-to-$71 million compared with the June forecast range of $70-$75 million.

That figure includes licence revenue of $50.2 million after tax from the release this year of 400 hectares of the new gold variety, Gold3. It compares with net profit of $35.8 million in the 2016 financial year.

"After a late start to the 2016 season with delayed maturity, we're pleased to report that weekly sales run rates have now surpassed last year's sales and we're on track to sell 82 million trays of NZ Green and 47 million trays of NZ SunGold," Jager said.

Zespri remains focused on delivering its strategy to provide the world's best portfolio of kiwifruit 12 months a year and on growing demand ahead of supply as volumes grow strongly, he said.

The August forecast for grower returns for the 2016/17 season shows returns dropping for the Green variety due to record supply, up 30 percent over the past two seasons, while Gold returns remain above last season.

The Green forecast return is $4.21 per tray, at the bottom end of the June range of $4.20 to $4.80 and well under the prior season's $5.13 per tray. That would mean an average per hectare return of $51,568 compared to $56,673 per hectare the previous season. The lower price reflects the record crop volume and subsequent impact of crop management of 5.3 million trays which have been removed from the sales inventory.

Organic Green is forecast at $6.25 per tray, under the June range of $6.40 to $8.50 and below the $7.18 achieved last year, with the average per hectare return at $48,431.

The Gold return looks rosier at $8.27 per tray, around the mid-point of the June forecast range of $8 to $8.50 with the average hectare return at $93,852. It compares to $71,080 per hectare and $8.21 per tray last season.

Forecast returns for Green14, the sweet variety introduced in 2010, is $5.12 per tray against a June forecast range of $5 to $6 and $7.01 achieved last season. The forecast return per hectare is $40,762 against $42,995 per hectare the prior year.

Zespri chairman Peter McBride said at the annual meeting that it had been a strong 2015/2016 season with record sales and total grower returns and progress made on implementing the recommendations of the Kiwifruit Industry Strategy project which covered long-term grower ownership, funding and structure of the monopoly-controlled $1.9 billion industry.

In a referendum last year, well over 90 percent of voters backed Zespri's single-desk seller model.

The government agreed to amend the Kiwifruit Export Regulations to allow Zespri shareholders to set a cap on maximum shareholdings and eligibility for dividend repayments which McBride said ensures "New Zealand kiwifruit growers continue to own and control Zespri into the future."

When Zespri was formed in 1999 production and shareholding were aligned but the regulations allowed former participants to retain their shares after exiting the industry and for some existing growers to have a significant number of shares. That raised fears the industry could eventually be owned by former rather than current growers as many get close to retirement.

The regulatory changes were part of a broader package of industry initiatives that have been implemented or are underway including forming a National Maori Growers Forum, a new approach to collaborative marketing, and an improved share trading platform for Zespri shares which are on the Unlisted platform.

(BusinessDesk)

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