Speirs Group, the Palmerston North-based food processing business founded by the Speirs family, posted its first annual loss in four years after its salad business was hit by higher costs and weaker revenue as competition forced it to cut prices.
The company posted a loss of $205,000 in the 12 months ended June 30, from a profit of $117,000 a year earlier, according to its 2017 Annual Report. Speirs is foregoing a dividend payment and the directors will reduce their total fees for 2018 to $99,000 from $174,000 in 2017.
Speirs, founded in 1966, said its latest earnings were hurt by a poor trading result from its core Speirs Foods unit, which process, distributes and markets fresh salads and related products to supermarkets throughout New Zealand.
Competition forced it to cut prices at a time it was facing higher vegetable costs due to wet weather shortages and increased freight expenses following the Kaikoura earthquake.
The Speirs Foods unit posted a trading loss before interest of $309,000, compared with a profit of $460,000 a year earlier.
Several one-off costs related to management changes and restructuring also impacted earnings at the foods unit, the company said, noting general manager Chris Newton and financial controller Brett Robertson left in December.
Acting general manager Ross Kane was leading a transformation of the business while new financial controller Tracey Alston led a restructuring of the administration and finance functions, it said.
"Over the last nine months of the 2017 financial year and the first few months of the 2018 year, the Foods business has undergone substantial review and change to better position the business for the future and improve its financial resilience," the directors said.
A revised new product development process resulted in a steady pipeline of new, higher value salads which were proving popular with customers, it said.
To simplify the business and stabilise its freight costs, the company decided to exit its freight operation from August this year, outsourcing to a specialised chilled freight business.
Key customers had recently accepted price adjustments to reflect higher material costs, as well as changes to specials and discounts, it said.
"We have started seeing the benefits of the changes implemented over the first two months of the new financial year and expect to return to profitability in the 2018 financial year, although we expect the impacts of higher material costs to continue for some time," the company said.
"The full benefits from the changes will fully be realised in the following financial year."
Meanwhile, in its other businesses, Speirs Group said Porirua-based Rosa Foods, which manufactures prepared meals for supermarkets, had "another solid year", with its 40-per cent holding providing a contribution to the group of $115,000, up from $103,000 a year earlier.
The group's Advaro financial services investment was restructured during the year, giving Speirs a smaller holding in a larger company after Advaro was transferred to a new holding company Equipment, Leasing & Finance Holdings, which used new capital to acquire NZ Trucks and AB Equipment from Hellaby Holdings.
Speirs now held 2.4 per cent of the shares in the new company, down from 9.2 per cent, and had lost the right to appoint a director and would have limited influence on its operation.
Still, it said the transactions had been positive and the business is trading to expectations.
Separately, it said it sold its intellectual property, processing technology and know-how associated with its Omega-3 fish oil product and discontinued its manufacturing operations in New Zealand.
Future revenue would only arise if sales of the Omega-3 product range by the new owner commences, it said.
Shares in Speirs Group last traded at 6 cents on the USX market, valuing the company at $680,000.