Scales Corp profit slumps 17% on weaker prices

Horticulture revenue fell 1 per cent to $228m while underlying ebitda dropped 21 per cent to $31.1m. Picture / NZME

Scales Corp posted a 17 per cent drop in 2017 profit as its horticultural division contended with weaker sales prices and an increase in on-orchard costs after poor weather.

Net profit fell to $31.8 million in calendar 2017 from $38.2m a year earlier, the Christchurch-based company said. Earnings before interest, tax, depreciation and amortisation (ebitda) fell to $62m, meeting guidance, from $67.3m in 2016. Sales rose 7 per cent to $399m.

Scales reiterated its 2018 ebitda guidance of $58m to $65m, saying gross production in its horticulture division, which operates under the Mr Apple and Fern Ridge Produce brands, was expected "to be consistent with five-year average volumes" with lower costs expected as a result of a less challenging season.

The company's first-half profit had dropped 14 per cent after its apple orchards were hit by heavy rain and winds and needed more expensive care.

"As reported in our half-year results, the Hawke's Bay region experienced a difficult growing season," said chair Tim Goodacre.

"However, the horticulture team produced an overall export volume consistent with the record 2016 crop and an export packout percentage also in line with the prior year."

Horticulture revenue fell 1 per cent to $228m while underlying ebitda dropped 21 per cent to $31.1m. Scales said it represented a "resilient performance in a challenging growing season". Gross profit fell 8 per cent on higher on-orchard costs and additional labour costs, it said.

Sales at its storage and logistics business, which includes Polarcold cold storage, recorded a 16 per cent gain in sales to $126m. Ebitda climbed 18 per cent to $19.1m, driven by a 24 per cent gain for cold stores to $14.5m and a 46 per cent increase in Scales logistics to $3.3m.

Its smaller Liqueo bulk liquids business posted a 42 per cent drop in ebitda to $1.3m, which it said reflected the loss of a large customer, lower volumes and closure costs after relocating to a site near Napier Port.

Food ingredients, which includes the Meateor petfood ingredients business, recorded a 19 per cent gain in full-year sales to $68.9m while underlying ebitda fell 12 per cent to $8m.

Meateor sold 27,663 tonnes of petfood ingredients during the year, a 20 per cent gain, while sales of juice concentrate fell to 56 million litres from 5.7 million litres.

Scales shares last traded at $4.54 and have gained about 30 per cent in the past 12 months.