Kiwifruit exporter Zespri plans a targeted share buyback and issue programme next year after the government approved changes to the kiwifruit export regulations.
The changes, announced yesterday, will come into effect on August 1 and will allow Zespri shareholders to consider setting rules around maximum shareholding and eligibility for dividend payments; clarify the activities Zespri can undertake as a matter of core business and enhance the independence and transparency of the independent industry regulator, Kiwifruit New Zealand, said Minister for Primary Industries Nathan Guy.
The amendments arose out of the findings of the industry-led Kiwifruit Industry Strategy Project and out of a government-commissioned independent review of Kiwifruit New Zealand, carried out over the past several years.
Guy underscored that the changes do not alter the industry's 'single desk' export framework, but will provide more certainty for Zespri's shareholders and growers. The Kiwifruit Industry Restructuring Act 1999 and the Kiwifruit Export Regulations 1999 established Zespri as a company and as the primary exporter of New Zealand-grown kiwifruit to all countries other than Australia.
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However, the updated regulations will enable Zespri to recommend changes to its constitution to align shareholding of the company more closely with production, said Zespri Chairman Peter McBride.
According to McBride, over time the industry has seen a growing misalignment between growers who supply kiwifruit to Zespri and people who own shares in Zespri. One reason is that orchards have been bought and sold but those leaving the industry have not always sold their shares to existing growers. A result is that a number of growers do not own shares, he said.
Zespri said it will hold a special meeting as soon as practically possible following consultation with shareholders, to ask shareholders to support changes to its constitution designed to improve shareholder alignment, including increasing the number of growers that own shares.
The share buyback and issue programme requires shareholder approval and would come into effect over a number of years. Zespri will communicate further details about the planned recommendations at its annual meeting on August 24, McBride said.
He said that changes to the definition of its core business -- which is expanded to include marketing of New Zealand-grown kiwifruit, market development for New Zealand-grown kiwifruit, and kiwifruit research and development -- acknowledge that Zespri's model has evolved, and recognises that research and development, market development and marketing are essential in leading the world in delivering quality kiwifruit and providing strong sustainable returns to New Zealand growers.
Kiwifruit sales from New Zealand have reached record levels with 137.7 million trays sold in the year to March 2017, worth more than $2 billion in export revenue. Global sales revenues are forecast to reach $4.5b by 2025, Guy said.
Zespri shares last traded at $5.38 on the Unlisted share trading platform.