Zespri conquers the odds

By LIAM DANN primary industries editor

Kiwifruit company Zespri has doubled profits and returned record dividends to shareholders despite the rising dollar, recession in key markets and a frost-affected season.

Zespri yesterday announced a net profit of $14.4 million for the year to March 31 - up from $7.2 million the previous year.

After receiving a fifth record payout in a row this season, growers can now look forward to a dividend of 20c a share - a return on equity of 16.7 per cent.

Net kiwifruit sales rose to $860 million, up from $800 million the year before.

Of that, $520 million was returned to growers at an average of $8.51 a tray.

A trinity of currency, climate and economic volatility has been a common theme in primary industries this year as export companies try to explain shrinking returns to producers.

But Zespri chief executive Tim Goodacre said the company had overcome those handicaps because it had invested in building a premium branded product that overseas consumers treated as a "must have".

"We've had a great year," he said.

The result was particularly satisfying because of the poor economic conditions in many markets.

Net fruit revenue rose in Japan and other Asian countries such as South Korea which have dipped into recession in the past year.

Demand - particularly for the new Gold variety which Zespri owns exclusively - has continued to outstrip supply, allowing the firm to raise prices to offset currency losses.

Goodacre said Zespri had a conservative hedging policy that took the edge off currency fluctuation.

But an aggressive pricing strategy had further minimised the impact.

In some South Korean supermarkets, Zespri Gold was now the biggest selling fruit. In Europe, Zespri kiwifruit outsold local product despite costing 30 per cent more. That was all a result of investing in quality and branding.

"We are a marketing company, not a trading company," Goodacre confidently declared yesterday. "We aren't a commodity. We are a branded product."

Supply was down 6.2 per cent last year to 62.2 million trays.

Goodacre said spring frosts had knocked about two million trays off production volumes. While that was a negative, because the company could easily sell all the fruit growers produced, a slightly short supply had made it easier to increase prices.

Goodacre said the record results were sustainable.

In the first 28 weeks of this trading year, prices had been raised further.

While that might not totally negate the effect of dollar's continued rise it would significantly close the gap. Further growth in Zespri Gold would also boost revenue.

The product - a hairless kiwifruit with a sweet yellow flesh - is just starting to take off in Europe.

Zespri has committed $5.7 million of its earnings to the commercialisation of Gold.

In its fourth year on the market it accounts for about 20 per cent of Zespri's revenue.

Gold kiwifruit is now New Zealand's third largest horticultural export behind green kiwifruit and apples.

While Zespri growers are smiling, there is little chance the general public will get the opportunity to invest in the kiwifruit industry.

Shares in the unlisted company are 85 per cent grower-owned and are seldom traded.

Goodacre said that a public listing was not something that could be ruled out completely.

"It might get considered somewhere down the track.

"But not in my time, I wouldn't think."