Zespri lowers profit forecast on poor fruit quality, confirms listing plans

17:37, Feb 27 2023
Kiwifruit growers have been told they will be getting less money for their fruit.
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Kiwifruit growers have been told they will be getting less money for their fruit.

Kiwifruit exporter Zespri warned its profit may fall as much as 40% as it struggles with fruit quality.

The Mt Maunganui-based company forecast profit of $217 million to $227m in the year to March 31, down from its November forecast of $225m to $235m, and below last year’s $361.5m profit.

Kiwifruit is New Zealand’s largest horticultural export and Zespri handles about a third of the fruit’s global trade, selling into more than 59 countries. It has been beset with fruit quality issues, which is weighing on grower payments and impacting the company’s reputation for supplying consistent fruit quality.

“The latest February forecast reflects the challenges our industry has experienced in the 2022 season with fruit quality,” Zespri chairperson Bruce Cameron said in an industry update. Volumes from its growers in other countries were also down, he said.

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Cameron said that together with other industry representatives, he had visited Gisborne and Hawke’s Bay last Tuesday where they saw first-hand the devastation from Cyclone Gabrielle and met with a number of growers.

Hawke’s Bay grew about 1.5% of the national kiwifruit crop, and Gisborne about 4%.

“The board acknowledges this has been a tough start to the year for many growers and wishes the industry the best for the rest of the 2023 harvest and season ahead,” Cameron said.

The kiwifruit harvest generally starts in February, traditionally peaking in mid-April and running through until June. The poor fruit quality has been attributed to inexperienced staff due to a labour shortage, frost, and other reasons.

HENRY COOKE/STUFF
Jacinda Ardern opens the Kiwifruit season in Japan by doing a calligraphy challenge (video published April 2022).

Zespri has also cut its forecast payments to growers for their fruit.

In its final forecast for the season, the co-operative said it expects to pay $5.55 per tray for green kiwifruit, down from its November forecast of $6.13. For organic green kiwifruit, the payment would drop to $8.04 from $8.83. A tray held 30 fruit.

“While we’ve seen some upside from favourable foreign exchange movements and lower spend across key markets, returns for each of the major pools are down from November’s forecast, other than for Organic SunGold Kiwifruit,” Cameron said.

Based on the forecast, Zespri has halted some progress payments to growers. To help with short-term grower cashflow, it undertook to pay its full loyalty premium, foregoing its option to reduce the payments, and pay earlier.

Separately, Zespri confirmed the company planned to list on the NZX later this year, although its share ownership will remain restricted to New Zealand growers. It is currently listed on the Unlisted Securities Exchange, USX.

Zespri believes the NZX listing will help unshared and under-shared growers become shareholders.

Its shares last traded on the USX on February 16 at $6.50, valuing the company at $1.19 billion. The shares have lost a quarter of their value over the past year.