Seeka chief executive Michael Franks says New Zealand's biggest kiwifruit grower is comfortable with its current infrastructure capacity.
Seeka chief executive Michael Franks says New Zealand's biggest kiwifruit grower is comfortable with its current infrastructure capacity.
Only market signals can determine the extent of further investment in kiwifruit export infrastructure, says New Zealand’s biggest kiwifruit grower, NZX-listed Seeka.
While global marketer Zespri is keen for further investment to support projected export volume growth, Seeka chief executive Michael Franks said his company willneed more certainty and clear market signals to make investment decisions on “fundamentals” such as expenditure on costly automation systems and cool stores. Seeka is also a large post-harvest operator. It grows around 40% of the fruit it handles.
New Zespri chief executive Jason Te Brake told the Herald this month that the industry needed to continue to invest in infrastructure to permit further growth beyond Zespri’s projected comfort zone of around 220 million export trays, 145 million of which would be the best-seller SunGold variety.
Te Brake said the industry had managed to handle 192 million export trays this year and had “a lot of head space available” in the packing, cold storage and port infrastructure sense.
Zespri’s five-year outlook, updated last in December, projected an increase in total supply from 133 million trays in the 2023 harvest season to 208 million trays in 2028. This was equivalent to 56% volume growth, though 2023 produced a sharply smaller volume due to challenging conditions in the growing season. Zespri has the regulated authority to export all New Zealand kiwifruit, except to Australia.
Te Brake said he believed some in the post-harvest sector would be investing after a strong season, while others were taking a wait-and-see approach.
Seeka, which also grows and supplies kiwiberry, avocado, persimmon, citrus and Australian fruit, is in the latter camp.
Franks said while the company had a five-year plan for progressive, incremental automation enhancements to individual North Island packing sites and machines, it had sufficient kiwifruit capacity for the short term.
“We’re cognisant that things are subject to change and so we need some more certainty in order for us to make these sort of fundamental decisions ... but we’re pretty happy with the configuration of machines we’ve got at the moment.”
On the cool storage side of its operations, Seeka also had enough storage in its current network to handle crops it expected in the foreseeable future. Franks said it had options to extend that network “with commercial partners”.
But at $25 million for a million-tray cool store, “we won’t do that until and unless we’ve got a clear commercial picture of its validity.”
New Zespri chief executive Jason Te Brake.
“We know we can handle this year, next year and the year-after crop without getting too pressured.
“We’re looking for market signals to tell us what the market wants so that we can handle the fruit in the most efficient configuration so that the grower actually makes as much money as possible and we can [make money] on the way through.
Pressed as to who should be supplying the signals, Franks would only say “I think we could all benefit from much clearer market signals ...”
Meanwhile, Seeka is recovering from a grim FY23 when it reported a loss before tax of $21m (in line with guidance), after a big drop in kiwifruit volumes pushed revenue down to $301m, from $348m in 2022.
The company last week increased its FY24 net profit before tax guidance to between $21m-$25m, from $17m-$21m in previous guidance. It also announced an early dividend of 10c/share.
In a stakeholder update, it cited several positives, including excellent late fruit quality, a continuing focus on costs and margins, higher orchard gate returns and earnings and improved Australian operation earnings.
In a six-month performance summary last week, the company said its kiwifruit production had rebounded by 53% to 17 million trays in New Zealand, with packed volumes up 44% to 43 million trays. Australia kiwifruit volumes lifted by 164%. Revenue was up 34% at $284m and net profit before tax rose 230% to $45m. Debt of $170.9m at June 30 was $6.1m less than the previous period in 2023.
Franks told the Herald Seeka’s current strategy is to “sit quiet and to focus on our core business, its performance, its profitability, and its performance for growers and reducing our debt”. Seeka has around 700 permanent staff in New Zealand and Australia. In the height of the fruit season it employs 4500 seasonal workers, 1300 of them through the Government’s Recognised Seasonal Employer scheme.
The company’s fully integrated produce business in Victoria, Australia has around 300 hectares in production or development. It was purchased in 2017.
On Seeka’s plans for Australia, Franks said the focus was getting the development orchards into production.
“We have an exciting new nashi [pear] variety in Australia which we are bringing into production. We’re thrilled about it. It was developed in New Zealand by [fruit innovator] Prevar and we’ve picked up the licence.
“It’s probably the only red nashi available. It’s red and it’s got an apple appearance but it’s a white flesh pear. It’s a beautiful piece of fruit.”
The new variety will go to market in February and may make its way to New Zealand, Franks said.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
