Friday, March 29, 2024

Early fruit challenges Seeka

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Big kiwifruit post-harvest operator Seeka is well through its SunGold packing and says the season is challenging after a long, hot and dry summer. The conditions brought forward fruit maturity but not all sizes matured together and early-softening was a risk for some fruit, chief executive Michael Franks said.
Seeka chief executive Michael Franks says the company’s category 1 emissions have fallen 4% since 2019.
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Bay of Plenty-based Seeka has completed about 70% of the SunGold work. The early harvest meant fruit could get away to market early to get the good early prices.

“How it keeps is the issue for us,” he said.

The Hayward pack-out was about 30% progressed and the pack house teams will be fully into that when the SunGold is completed in the next few days. 

The post-harvest operations make up 61% of Seeka’s annual revenues. It is the country’s biggest kiwifruit orchardist with a lot of leased-sites but post-harvest is much the bigger part of both the kiwifruit and overall operations. Its own orchards supply 36% of the post-harvest volumes.

Labour availability is always an issue for the kiwifruit sector and the early SunGold harvest this year means the group struggled initially as many seasonal workers were still doing other work in Hawke’s Bay, Franks said.

And the increasing SunGold volumes will keep putting pressure on having enough workers.

Seeka will know in the next four weeks or so how the overall harvest season is stacking up and the timing should fit in with more detail on the sale of remaining Northland kiwifruit blocks, which are being sold with long-term agreements to supply the group’s packing business.

On December 31 Seeka had $7 million worth of Northland orchards sold for a $600,000 gain and since then another nearly $26m of sale value has been settled or agreed for a gain of $4.2m. There is good interest in remaining orchards.

After the sales are completed and with a $48m capital-raising late last year, he expects Seeka to be within its targeted debt to operating earnings (Ebitda) ratio by the end of the year despite heavy capital investment over the last year.

It included the acquisition of orchard and post-packing group Aongatete in March for $25m. Seeka’s earlier earnings guidance for the year did not include the Aongatete impact but Franks said it would take some time, likely in 2020, to confirm the sustainable contributions from the new business.

The targeted ratio is debt at 1.5 to 2.5 times the earnings figure. The ratio was just over three times on December 31.

New Zealand kiwifruit makes up 76% of group assets and 87% of revenue. The other businesses have proved challenging.

Earnings from the Victoria-based orchard operations in Australia last year were well below previous levels because of a difficult growing season and management restructuring has been done.

The NZ avocado business has struggled with the export mechanism into Australia. The earlier pre-clearance system for fruit in NZ has been removed, with all fruit now inspected in Australia, and delays causing more fruit to fail the testing, Franks said. 

The NZ retail business (3% of assets and 6% of revenue) has also been difficult with the banana import and sale operations a constant headache.

The retail business has a nutritionals focus and though small is important for the group’s connections to markets.

The capital-raising late last year was important for Seeka because increased domestic shareholdings taken up have reduced foreign ownership from just above 25% to just over 13% now.

That took the company away from the 25% threshold at which it is subject to Overseas Investment Office rules, Franks said. The two major holders, Farmind of Japan and banana specialist Sumifru Singapore (an associate of Japan’s Sumitomo group) have reduced their holdings to 5.63% from nearly 16% and to 7.14% from 11.95% respectively. 

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