Scales lifts half year sales across all divisions, reaffirms annual guidance

Apple volumes were significantly ahead of forecasts, Scales said. Photo / File

Agribusiness Scales Corporation reported revenue growth in all divisions in the first half and reiterated full-year guidance for increased underlying earnings.

The company said net profit for the six months to June 30 was $121.8 million versus $34.8m in the same period a year earlier. The latest result includes gains on asset sales of $93.2m.

Those divestments include the $151.4m sale of Polarcold to Emergent Cold, which settled in May, for a gain of $73m. The establishment of the Meateor joint venture also gave rise to a $10.1m gain on sale of assets into the new entity and a $10.1m revaluation gain.

Stripping out those gains, underlying net profit was $30.1m versus $29.4m in the prior year while underlying earnings before interest, tax, depreciation and amortisation were $47.3m versus $47.1m in the prior year. Total revenue lifted 26 per cent to $278m.

In the horticulture division – which makes up the bulk of Scales' earnings – volumes were ahead of forecast but markets were mixed. Underlying ebitda was $41.3m, unchanged from the prior year.

"Our horticulture division has delivered an excellent outcome, with apple volumes significantly ahead of forecasts. Total export volumes are likely to be consistent with the record 2018 crop notwithstanding significant orchard redevelopment in the intervening period," said managing director Andy Borland.

The unit continued to have a strong focus on Asian and Middle Eastern markets, with sales to those markets expected to comprise 64 per cent of all season sales and at strong prices.

That was partly offset by a slower start in the European market, which continues to be affected by a larger than normal domestic crop. "However, the outlook for the forthcoming European crop suggests this impact will not extend beyond the current season."

Scales' food Ingredients division delivered a solid result as it integrated new trading structures, with the first six months of trading from the US-based Shelby pet food unit and one-off profits relating to the establishment of Meateor NZ, its new pet food joint venture. Underlying ebitda was $5.1m versus $6.1m in the first half of the prior year.

The company paid US$23.2m ($36.4m) for 60 per cent of Shelby in December.

Its logistics division traded slightly ahead of the year-earlier period, benefiting from additional space and resource. It anticipates full-year results for this business to be in line with expectations. Underlying ebitda was $3.1m versus $2.9m a year earlier.

Scales reaffirmed its full-year underlying net profit guidance of $32-$37m and underlying ebitda of $49-$55m from continuing operations on a like-for-like basis. That's up from underlying ebitda of $48.5m from continuing operations in 2018.

The company also said it has "significant capacity for investment" with a net cash position of $59m versus net debt of $133m in the prior year.

Scales' dividend policy is for interim and final dividends to be split approximately evenly and paid in January and July. Scales remains committed to its current annual dividend level of no less than 19 cents cash per share whilst the company holds net cash, it said.

The shares last traded at $4.53 and are up 0.7 per cent so far this year.