Friday, March 29, 2024

Scales avoids 2020 minefields but harvest down

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Horticultural giant Scales Corporation traded well throughout a difficult 2020, without setting any milestones or making major moves with its sizable cash reserves.
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Earnings per share were 15c, from which it is expected that directors will declare in May a profit similar to the 19c paid from FY2019.

Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) were $53.9 million, up 2%, and underlying net profit after tax (Npat) was $33.8m, down 7%.

The crop volume for the Mr Apple subsidiary was 3.915m tray carton equivalents (tce), up 2%, and the horticulture division had Ebitda of $31.4m, down from $39.7m in 2019.

The food ingredients division reported an Ebitda of $23m and the logistics division $3.4m.

The basis of the 12% increase in revenues and 70% increase in Ebitda for food ingredients was a strong global demand for pet food as pet ownership and adoption increased during the covid-19 pandemic.

Company revenue was down slightly at $470m and total apples exported were 5.74m tce compared with 5.95m in the prior year.

Scales had net cash at December 31 of $97.6m and managing director Andy Borland says this was a solid base on which to build future growth or acquisitions.

Along with chair Tim Goodacre, Borland paid tribute to the hard work and unity of staff members that enabled Scales to trade through lockdowns, without wage subsidies, and deliver a profit consistent with the previous guidance.

Mr Apple had finished phase two of its orchard replanting, an upgrade of its seasonal worker accommodation and completed the new Whakatu cool store.

Borland says further automation in the packing houses would be a priority in the current year.

Over 140ha of orchard has been renewed during the past three years, mainly with the new proprietary Dazzle variety.

These two-dimensional orchards enabling savings in pruning, thinning and picking, will reach commercial scale from 2023 onwards.

Premium varieties accounted for 57% of Mr Apple’s own-grown volume in 2019 and this ratio is forecast to increase to 62% in 2025.

The updated guidance for the current financial year is a net profit between $27.5m and $33.5m on the back of underlying Ebitda of $46.5m to 53.5m.

Stone fruit exports out of Central Otago were reduced, the Tasman region apples have been impacted and Mr Apple will drop its own-fruit production.

“Delays in shipping and higher portside charges will affect all divisions,” the directors said.

“The ripples from the covid-19 lockdowns are having a greater impact on our results for 2021 than they did for 2020.”

SCL share price has put on 50c over the past year, but the price was as high as $5.20 at times before sinking back to $4.60 presently.

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