Six out of six for Zespri

By Hugh Stringleman

Friday 11th June 2004

Prices received for New Zealand kiwifruit in Europe rose 15% last year, offsetting $50 million downside in currency movements for Zespri.

Payments to growers and packhouses rose 12.5% to $585 million, out of total kiwifruit sales of $911 million, Zespri has reported.

The single-desk marketer recorded its sixth consecutive year of improved results, a performance which has lifted its reputation among growers.

Zespri shares are now selling for $3 each, when they come on the market, against $1.20 some 18 months ago.

Zespri made a net profit after tax of $23 million in the 2003-04 financial year (March 31 balance date) and will pay a 50c dividend on 21.2 million shares, all held by growers or ex-growers.

Equity in the "co-operative corporate" has increased 50% to $54 million, being an equity backing per share of $2.55.

Zespri is aiming for 10% compounded growth at orchard gate annually through sustained premium prices for branded fruit, chief executive Tim Goodacre said.

He singled out offshore fruit procurement, to supplement Zespri supplies in the NZ off-season, as an area needing improvement.

Only 200,000 trays were put through this route last year, mainly gold kiwifruit from California and Italy. Former Zespri chairman Doug Voss, who was in charge of this division, no longer works for Zespri.

The improved performance in Europe came from television marketing and aggressive selling by the team under a new regional manager, Goodacre said.

European revenue is about half of world sales for Zespri, and Japan accounts for 30%, including the lion's share of the emerging gold variety.

Zespri's challenge this year will be to make $1 billion in sales, cope with a 20% volume increase in green and a 65% increase in gold, and keep the lid on foreign exchange influences.

This is done by hedging with forward contracts on euros and yen, without which last year's losses attributable to currency effects would have been a great deal higher, Goodacre said. "The philosophy is to smooth returns, not to speculate on currency movements."

"We work within bands and try to pick the peaks and troughs up to two seasons in front, while keeping an eye on freight and fuel costs.

"The value of the yen against the New Zealand dollar has been a challenge to us during the past year."

Growers have been told to budget on $1 a tray below the 2003-04 results, but Zespri hopes to maintain or improve upon the per hectare returns. These were $37,593 for green, $37,033 for organic green and $44,425 for gold fruit, all at the orchard gate.

Zespri, which owns the worldwide rights for gold, has a moratorium on new plantings of that variety. Consequently existing gold orchards are selling at up to $500,000 a hectare.

The current selling season is 20% through and the net price (all varieties, all markets) is $14.53 per tray, about $1.40 down on last year. Zespri will make an official forecast of returns to growers in August.

It spends $60 million a year in marketing and $5 million in research and development, both of which Goodacre said growers see as necessary costs of doing business.

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