Deal widens Tegel access to Australia

Tegel says it will immediately pursue new import permits to take advantage of the the raw poultry approval. Photo / Kenny Rodger

Approval to sell raw product huge boost for poultry giant

• NZ's biggest poultry producer, founded in 1961.
• Core operations in Auckland, New Plymouth and Christchurch.
• Processes about 50 million chickens annually, about half of the local market.
• Reported a full-year profit of $11.3m from revenue of $582.4m for its last financial year.

Tegel has secured Australian market access for raw poultry products in a development an analyst says could add significant value to its growing export business.

New Zealand's biggest chicken producer, which carried out a transtasman sharemarket float in May, has until now been limited to exporting only fully cooked products across the Tasman.

Tegel said its Australian exports were worth A$70 million ($74m) in the last financial year, representing market share of 1 per cent.

Australia's total poultry market is worth around A$7.1 billion, according to Tegel.

"The wider market access will allow for a significantly larger range of Tegel products to be exported into all segments of the Australian market," the company said.

"This regulatory change opens up significant additional export opportunities for Tegel into the Australian market, although the revenue upside cannot yet be quantified."

The firm said it would immediately apply for new import permits to take advantage of the opportunity.

Tegel shares, which were priced at $1.55 in the firm's initial public offering, closed up 9c at $1.73 last night.

A growth story around a push into new and existing export markets was a major selling point to investors in the lead-up to the IPO.

Harbour Asset Management portfolio manager Shane Solly said there was solid opportunity for the company to channel raw product into the Australian market through its existing clients, which include retailers Aldi and Costco.

Tegel's other Aussie customers include Subway, Hungry Jack's and Sumo Salad.

"The confirmation of them growing into these export markets is important because this was one of the major premises of [the IPO]," Solly said.

News of the widened Australian market access follows Tegel's announcement last week that it had secured its first order from the Philippines.

It exports to a number of other markets including the Pacific Islands, Hong Kong and the Middle East and is also targeting expansion into South Africa and Japan.

Tegel said the Australian agreement would allow New Zealand raw poultry products to enter Australia within an "agreed access framework".

"This announcement is the result of a significant body of work undertaken by Tegel with the Ministry for Primary Industries to secure changed access conditions based on New Zealand's high standard of biosecurity and low disease prevalence," the company said.
Tegel, which has a roughly 50 per cent share of the New Zealand poultry market, reported a full-year profit of $11.3m in June.

That was a 29.5 per cent lift on the same period a year earlier and $1.3m ahead of the $10m forecast in the IPO prospectus.

Profit is forecast to more than triple to $44m in the current financial year.

The IPO, backed by Asian private equity firm Affinity Equity Partners, raised $284m, of which $130m went to pay external debt.

Founded in 1961, the company now employs more than 2000 staff in operations around the country.