Export sales boost T&G profit

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Mike Knowles

BY MIKE KNOWLES

@mikefruitnet

Export sales boost T&G profit

Company achieves net profit turnaround of more than NZ$30m as sales to Asia in particular continue to grow

Export sales boost T&G profit

Apple export volumes and prices were higher in 2013

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Increased sales to Asia and North America, as well as rising demand for Peruvian grapes and asparagus, helped New Zealand fresh produce company Turners & Growers (T&G) record a strong financial performance in 2013, according to new figures published by the company.

Noting it was on track to progress well in 2014 following the recent introduction of a new corporate strategy, the company posted a net profit after non-controlling assets of NZ$16.2m, compared with a loss of NZ$15.3m for the year ended 31 December 2012, marking the second successive year of improvement. Overall pre-tax profit for the year was NZ$23.4m.

During what was a highly rewarding year for New Zealand apple exporters, T&G's own result on topfruit was aided and improved by higher volumes, price increases in the market and greater market penetration into Asia, group chairman Klaus Josef Lutz reported.

"The Global Variety Development Programme also contributed to the improvement as the volume of Jazz and Envy apples grown in the Northern Hemisphere increased substantially due to more plantings and maturing trees," he said in a statement.

"Sales price increases, efficiency improvements in the supply chain and overhead cost reduction enabled Enza to significantly increase grower returns for all main apple varieties, led by further improved returns for Jazz and Envy."

Export effort

Overall, T&G's export business was the main contributor to its bottom line in 2013, rebounding from last year's NZ$2.9m to more than double the NZ$7.6m profit it made in 2011 and the NZ$2.9m posted in 2012.

This was "primarily due to better market conditions, operational improvements both in access to new markets and customers, and cost reductions," Lutz noted.

T&G's Delica subsidiary continued to perform well, meanwhile. "The New Zealand operation grew strongly with most products increasing in both volume and margin. Delica North America enjoyed continued sales and profit growth in pipfruit, berries and stonefruit categories."

Exports out of Australia also showed an improvement on the previous year, despite a 40 per cent reduction in the volume of citrus available.

"Delica Domestic in Australia made a profit in its second year of operation due to volume growth and a successful launch of EnzaGold kiwifruit into Australian retailers," Lutz said, adding that a further increase in the volume of South American grapes and asparagus had resulted in an "uplift in profit" for the company's Peruvian office.

Domestic help

T&G's domestic operation faced tough market conditions in the second quarter of 2013, with low margins on imported produce and weak prices for tomatoes.

However, a strong performance in quarter four – especially for bananas and topfruit as well as its crate supplier the Fruit Case Company – reportedly helped it increase its profit to NZ$3.6m compared with NZ$1.5m during the previous year, although that was down on the NZ$5m generated in 2011.

Enzafoods, the group's processed foods arm, posted a NZ$31.m loss compared with profit of NZ$3.3m in 2012, largely as a result of world market prices for apple juice concentrate being depressed, storage constraints associated with the unusual warm weather in autumn and a sharp rise in the value of the NZ dollar against the Australian and US dollars.

Growing operations

Overall, T&G's production base posted a profit of NZ$6.7m, against a NZ$22.8m loss in 2012, buoyed by the "outstanding" performance of its apple orchards, where yield and quality apparently supported strong pricing in the market.

"Increased price expectations and improvement in growing conditions resulted in an upward valuation of the biological assets which contributed to a very good result," Lutz said.

However, the long and warm New Zealand autumn resulted in lower tomato prices in the second quarter than 2012: "Despite continuing improvements in yield and reduced energy costs, Status Produce could not repeat last year’s record profit."

Kerifresh, which produces citrus, kiwifruit and blueberries, also failed to meet expectations, despite achieving a "slight improvement" on the previous 12 months.

"The citrus crop was small in volume and size for almost all varieties generating lower margins than 2012," Lutz continued. "The 2013 kiwifruit crop was higher in volume and quality and has been successfully marketed by Delica in Australia delivering a positive result."

Flowers, processing and transport

Elsewhere, T&G reported that flower subsidiary Floramax had suffered from a lack of supply, which was partly offset by increased imported product; Enzacor, the processed products firm trading as Fruitmark, enjoyed good market conditions and successfully cut its costs to secure a profit increase; and higher transport volumes and the completion of a fleet overhaul led to a "moderate profit increase" for Turners Transport.

As far as its property portfolio was concerned, T&G sold two sites in Auckland, resulting in gains and an overall profit of NZ$3.1m compared with NZ$0.9m in 2012.

On 31 May 2013, T&G acquired the remaining 30 per cent of issued shares in Delica Limited for NZ$25.8m.

It also recently acquired the non-controlling interests in Delica Domestic Pty Ltd and Delica Australia Ltd.

In November 2013, it set up a new company in Peru to increase its presence in the region's grape business.

Lutz concluded: "Early 2014 trading is within expectations and the business is progressing well with the implementation of the new corporate strategy."

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