New Zealand agribusiness Scales has updated and reduced its earnings guidance following the effects of Covid-19 on its apple exports to Asia.
In an update the company, which owns New Zealand apple grower-packer-exporter Mr Apple, said while it had managed to adjust to some of the complications posed but the pandemic, EBITDA earnings for its horticulture division for 2020 were forecast to be materially below the previous year’s NZ$39.7m (US$25m).
With approximately 70 per cent of export sales completed on 3 August, Scales’ Asian markets have been the most affected by Covid-19.
“Sales rates for Asia and near markets have been adversely affected by the timing and impact of Covid-19 on China’s domestic apple sales, particularly during the lockdown period,” Scales said in the update.
“This has caused ongoing disruption in most Asia markets. With 35 per cent of sales also remaining to be made in these markets, total volumes and prices will be lower than 2019.”
Outside of Asia, Scales’ horticulture division had more positive results with 5.1m TCEs equivalent picked for its 2020 apple harvest, equal to the previous record in 2018.
“To date approximately 95 per cent of the crop harvested has been packed and export packout rates are now forecast to be 80 per cent, in line with rates for previous years and matching previous record volumes of own grown export volumes,” it said.
“Scales fortunately had access to adequate resources to cover harvest, packing, cool storage and shipping, and operating costs per TCE have been maintained at the levels close to the previous year.”
When it came to Europe and the UK, Scales said market conditions for traditional varieties were operating as expected with 35 per cent of sales remaining to be made and average prices for the season were expected to be higher than 2019.
These results contributed to a revision of earning guidance at a group level with Scale’s directors advising underlying net profit for the 12 months to 31 December 2020 is now expected to be at the bottom end of the guidance range, between NZ$30m (US$19m) and NZ$36m (US$23m).
However, the directors expected horticulture division earnings from Asia to return to historical levels next season as sales of China’s domestic crop revert to normal flows.