Zespri, the world's biggest single marketer of kiwifruit, wants more growers to own shares in the regulated company. Photo / Supplied
Zespri, the world's biggest single marketer of kiwifruit, wants more growers to own shares in the regulated company. Photo / Supplied
Global kiwifruit marketer Zespri is eyeing a listing on the NZX - but, sadly, investors keen for a bite of the $4 billion annual revenue earner will need to cool their jets.
If leaders of the Mount Maunganui-headquartered company go ahead with a listing, Zespri shares will continue to beonly held by, and available to, New Zealand growers.
Chairman Bruce Cameron, in an end-of-year message to Zespri’s 2800 New Zealand growers, said strengthening grower shareholding in the company had been a focus of directors for some time, with a number of options being considered to help unshared and under-shared growers become shareholders.
Just 48 per cent of Zespri’s New Zealand growers are shareholders these days. The company, the world’s single biggest kiwifruit marketer, also has offshore growers but they cannot own shares.
A range of initiatives were proposed for introduction next year and in 2024 to improve grower-share alignment and an NZX listing was a prerequisite for many of them, Cameron said.
This was because the initiatives would occur on an ongoing basis, for example a targeted dividend reinvestment scheme.
As it stands, regulated Zespri, which is entitled under legislation to be the only exporter of all New Zealand kiwifruit except to Australia, is subject to an onerous requirement to produce a full product disclosure statement every time it wants to issue even a small number of shares.
By listing on the NZX it could be recognised as a “continuous disclosure issuer”.
Zespri’s grower-only-held shares are currently traded on the Unlisted Securities Exchange. The company has 183.2 million shares on issue and a current market capitalisation of $1.2b. Shares last traded at $6.55 each.
Cameron said Zespri would start initial work on a listing process early next year, while consulting growers on the initiatives.
Craigs Investment Partners analyst David Harris said continuous disclosure would allow Zespri more options for aligning grower production with shareholding. An NZX listing with provision for continuous disclosure would make share issues much simpler and was likely one of the primary motivations for Zespri leaders, he said.
“With roughly 183 million shares outstanding now and trays (production) probably around 165 million this year but forecast to get above 183 trays, if you want to grow shares in line with increased production they need to issue shares on an ongoing basis. An NZX listing will streamline all that.”
Harris noted the potential for incentivising more shareholding within Zespri’s plan to next year ringfence 200ha of growing licences for green growers to switch to gold fruit production.
His guess was that many of those green growers would be understated.
Zespri SunGold-branded gold fruit is a global best seller for the company. Returns for green fruit, which does not require the purchase of a Zespri licence to grow, have disappointed for some time, with industry observers saying some growers are losing money each harvest.
Harris did not expect an NZX listing to have a material impact on the Zespri share price.
“I don’t think so. From a disclosure perspective Zespri is already really transparent and already follows the continuous disclosure requirements NZX would have. Information flowing out of the company would be the same.
“It might make transacting shares easier (for growers) but I can’t see a hugely material change.”
Harris believed Zespri leaders had been considering the alignment issue for two years now.
A “band-aid” short-term option would be forcing growers to buy shares and hold them for five years but it was comforting Zespri was obviously looking at a long-term solution for an ultimately better outcome, he said.
A downside of listing could be outside “keyboard warriors or whatever” trying to analyse the company and commenting on its performance. It could be subject to more public comment as its profile was lifted.
Meanwhile, Cameron’s year-end message also warned fruit volumes could be around 10 per cent down next year. The culprits were a warm wet winter which likely contributed to variable budbreak, wet and windy changeable weather during pollination, and a severe Bay of Plenty frost event in October.
“There remains much uncertainty at this early stage of fruit development and we will have a better indication of crop volumes from the February 2023 estimate,” he said.
The indication was the total crop would be around 10 per cent less than volumes harvested in 2022. Around 160m trays of New Zealand-grown kiwifruit were exported this year. Zespri had hoped for a record 2022 crop of 190m trays (each tray has around 30 kiwifruit) but severe labour shortages, fruit quality issues and weather eroded that forecast.
Zespri chairman Bruce Cameron. Photo / Supplied
Cameron said the Zespri board had also signed off on the publication of the 2023 outlook, an overview of Zespri’s five-year plan to 2027-2028.
The outlook included forecast orchard gate return ranges for the five-year period: SunGold forecast range $8-$12 per tray; organic SunGold $10-$14/tray; green $6.50-$8/tray at declining volumes; organic green $9-$11/tray at flat volumes; RubyRed $10.50-$16.50 once volumes exceed 3m trays.
The board also confirmed opening reserve prices for the 2023 SunGold and RubyRed licence release, discounted by around 25 per cent on last year’s minimum price.
Zespri’s gross revenue from New Zealand growing licence sales in FY22 was $430.1 million.
Zespri said the 2023 reserve price was a starting point for auction bidding only. It did not consider the reserve price to be the market value of the licences.
Kiwifruit is New Zealand’s biggest horticulture product. Zespri, which also has 1500 international growers, posted global net sales of $4.03b in FY22. Its total payments to New Zealand growers was $2.47b.
