Zespri increases value to growers

Zespri chairman Peter McBride with chief executive Dan Mathieson. Supplied photo.

Zespri has delivered an increase in value to growers, despite a season in which the volume of New Zealand kiwifruit sold fell by 11 per cent.

The total fruit and service payment to growers increased by six per cent to $1.47 billion. Zespri’s global kiwifruit sales for the year were also up six per cent, at $2.39 billion.

Total revenue, which includes licence income, was $2.51 billion.

Zespri chairman Peter McBride notes the uplift in value reflects strong consumer demand and excellent market performance.

“We sold a record volume of SunGold while growing returns at both per-tray and per-hectare levels. Supply of Green and Organic Green reduced considerably from the exceptionally high volume of the previous year, but very strong consumer demand more than offset the impact on per-hectare returns for Green and mitigated the impact on Organic Green per-hectare returns.

“The industry’s performance during the last season reinforces our confidence in our strategy and potential for strong and sustainable growth.”

Corporate result: licence revenues boost earnings

Zespri’s net profit after tax in 2017/18 increased by 38 per cent to $101.8 million. The result was primarily driven by revenues from the release of 400 hectares of SunGold licence in 2017, as part of Zespri’s continuing programme to fulfil strong consumer demand.

The total dividend returned to shareholders was 76 cents per share, versus 25 cents per share in the previous season. The payout included an additional interim dividend of 50 cents per share to distribute the majority of funds generated through the 2017 SunGold licence round.

Sales volumes through the non-New Zealand supply segment, essential in enabling Zespri to serve consumers with premium kiwifruit 12 months of the year, fell by eight per cent. Supply of Green was reduced because of a damaging frost in Italy. However, SunGold sales in Italy increased to offset the fall, with the Zespri Global Supply business recording total sales revenue of $264 million, up from $217 million in 2016/17.

Category result: Green and Gold returns increase

Peter says Zespri delivered a good sales result for Green. The average per-tray return for Green was considerably stronger at $6.71 (2016/17: $4.36).

“This was supported by good quality and low rates of onshore fruit loss. The average per-hectare return for Green across the industry was $59,981, a new record for the category, and the result was achieved in spite of a 27 per cent decline in average yields.”

The result for SunGold gives confidence in our long-term outlook, adds Peter.

“Zespri achieved a strong increase in returns at the same time as continued growth in volumes. Sales volume for the total Gold category rose by nine per cent to 52.1 million trays and the average return per hectare across the industry was up 16 per cent at $114,345.”

The average return per tray was $10.06 (2016/17: $8.64).

The Organic Green return per tray was $8.93 (2016/17: $6.86), reflecting increasing demand in Europe and other major markets and an improved market mix. The return per hectare fell four per cent to $52,375 (2016/17: $54,427), impacted by a 26 percent decrease in average yields.

Zespri sold just over 1.2 million trays of Sweet Green. The average per-tray return was $5.61 (2016/17: $5.79) and the average per-hectare return was $38,937 (2016/17: $45,853). The per tray result was affected by a smaller crop profile and early season quality issues. The focus for the category remains on it being an early, high-taste offering to get the Green season off to a strong start.

Industry structure: a stronger foundation 

Peter says the 2017/18 season also marked progress in strengthening the foundations of the industry, through how Zespri is funded and how Zespri is owned.

“Zespri shareholders backed changes to Zespri’s constitution in a special meeting in March 2018 to strengthen grower ownership and control of the company. The new constitution addresses a problem of misalignment between growers who supply kiwifruit to Zespri and people who own shares in Zespri and is critical for the stability of the industry structure. Shareholder support for change was an outstanding reflection of the cohesiveness of our industry and of a common interest among growers and former growers in seeing it prosper.

“The industry also agreed an enduring funding mechanism that ensures Zespri is funded appropriately, balanced against the need for cost control so that the benefits of economies of scale are shared between growers and shareholders.”

One result of the enduring funding agreement in 2017/18 is that Zespri has increased the loyalty premium paid to growers. This payment shares a portion of returns with growers who have long-term supply contracts with Zespri. The total premium last season increased by approximately three cents to 28 cents per tray supplied.

Outlook for 2018/19

Summing up, Zespri chief executive Dan Mathieson says, “The 2017/18 season represents good progress and outstanding work by the Zespri team. We are now looking forward to growth in volume. We are anticipating record production of New Zealand and non-New Zealand kiwifruit this year driven by increasing supply of SunGold and a recovery in supply of Green. 

“Our challenge is to continue to lift our performance by staying focused on improving the execution of our brand-led, consumer-focused strategy, supported by excellence in marketing and strong, connected partnerships with growers, suppliers, distributors and retail partners.”


2 Comments

Exploitation !

Posted on 24-05-2018 12:47 | By comfortablynumb

BMW and Mercedes probably parked nearby with personalised number plates, whilst packhouse workers on minimum wage with long hours of tediously hard work!

Joyousness,,

Posted on 24-05-2018 08:28 | By Marshal

Will the Kiwi fruit industry be helping to fund our clean waterways with some of that coloured paper.. Other industries do, And they don’t add anywhere near the same level of, lets say runoff..

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