Scales hunts for NZ agribusiness acquisitions to fit with apple export business

Thursday 19th April 2018

Scales Corp is eyeing potential agribusiness acquisitions that would fit well with its export apple business as the country's largest apple grower aims to become the foremost investor in and grower of New Zealand agribusiness.

"We think New Zealand agribusinesses are in a good space, they make good products, and sell them to Asia," chief executive Andy Borland told BusinessDesk. "We have over the years developed our skills around exporting and dealing with Asia, particularly China, and we are looking at businesses within New Zealand that would work with those sort of dynamics and be complementary to our apple business. We are really looking for those sort of New Zealand opportunities."

Scales is New Zealand's second-biggest apple exporter after T&G Global and has invested in apple crops that are sought after by customers in Asia, where the sweeter, redder varieties fetch a premium price over more traditional varieties. Borland said the company sells apples to retailers around the world and is looking at other products that could sit alongside those apples. The company is currently reviewing acquisition opportunities, although he declined to provide more details.

Borland confirmed Scales isn't the unnamed party that is looking into acquiring honey company Comvita. Both companies count China Resources Ng Fung as a significant shareholder.

New Zealand's government is tightening rules around foreign investment and Borland said regulations making it more difficult for foreign buyers would suit buyers like Scales which is classified as a 'New Zealand person' under the Overseas Investment Act, with its overseas ownership below 25 percent.

"We are quite determined to remain at this stage anyway a New Zealand person as the legislation defines it," he said.

In its 2017 financial year, Scales reported earnings before interest, tax depreciation and amortisation of $61 million and average net debt of $54.8 million, giving it a debt/ebitda ratio of 0.9 times.

"Our debt to ebitda position is very low and we have got a lot of capacity there to borrow," Borland said. "We have never pushed the debt levels too high. There’s quite a large buffer there at the moment."

As at Dec. 31, the company held cash and equivalents of $5.7 million and scope to draw a further $43.5 million from its $90 million banking facilities.

Shares in Scales were recently up 1.1 percent to $4.45, having gained 35 percent over the past year.

(BusinessDesk)

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