Scales annual profit beats IPO forecast as apple exports drive horticulture earnings

Scales Corp, New Zealand's biggest apple exporter, reported a 9.8 percent drop in annual profit, beating its offer document forecast, after better-than-expected apple volumes drove up earnings in its horticulture division.

Net profit fell to $18.4 million, or 14.3 cents per share, in calendar 2014, from $20.4 million, or 16.8 cents, a year earlier, the Christchurch-based company said in a statement. That beat the $15.9 million profit forecast in its June 2014 prospectus, a target the company had previously said it was on track to "slightly exceed". Revenue slipped 3.2 percent to $263.3 million, and earnings before interest, tax, depreciation and amortisation before listing costs was 2.7 percent ahead of its offer document forecast at $39.8 million.

The result highlights "the strength of Scales' diversified agribusiness portfolio," chairman Jon Mayson said. "The horticulture and food ingredients divisions materially exceeded their prospectus forecasts, with stronger-than-anticipated volumes and market prices."

In December, Scales affirmed its 2015 guidance for profit of $20.8 million and Ebitda of $41.2 million on strength in Asian and Middle Eastern markets, favourable currency movements, and cheaper shipping costs.

Scales' horticulture division today reported an 8.9 percent decline in revenue to $158.8 million while underlying Ebitda of $23.9 million was 6.2 percent higher than forecast. Apple volumes were 7.1 percent ahead of expectations.

Its Mr Apple brand is expected to add 450,000 cartons of premium apples by 2018, which Scales hopes to sell into Asia and the Middle East.

The company's food ingredients unit reported a 2.7 percent decline in sales to $32.2 million, while lifting Ebitda 19 percent to $5.7 million on higher-than-expected volumes.

Its storage and logistics segment increased external sales 2.8 percent to $66.8 percent, while earnings fell 11 percent to $12.3 million, which the company said was due to record product turnaround cycles and a late start to the cropping and meat processing seasons.

Scales is working to expand capacity in the division, including an upgrade of its Timaru cold store and bulk liquid storage facilities, and development of an Auckland cold store.

The board declared a dividend of 3 cents per share in December, six months earlier than forecast.

The share last traded at $1.51, and have gained 5.6 percent this year. The stock is below its $1.60 offer price when it listed in July last year.