Seeka's profit plunges as challenging year beckons

The company, which has operations in New Zealand and Australia, saw a sharp drop in net profit for year ending December 31, 2022 - net profit plunged 56% to $6.5 million.

Gross profit was down 19% compared to 2021. However, total revenue rose 13% to $348m.

"In this challenging environment the Board has determined that no dividend is payable as Seeka focuses on prudent financial ratios," says chief executive Michael Franks.

He says Seeka and its supplying growers experienced a very difficult year with Covid-19, extreme labour shortages, shipping disruptions, lower kiwifruit yields and poor fruit quality all impacting returns.

"Harvest 2022 kiwifruit yields were down across the industry, impacting revenues from Seeka's core post harvest business. 

"Kiwifruit storage performance, both onshore and offshore, further impacted returns to Seeka's orchard operations," he says.

Despite the challenging season, Seeka achieved an increase in revenues to $348 million by attracting new growers to the business.

Packing operations, however, peaked during the Omicron wave and the industry was severely short staffed: this led to higher labour costs.

Lower yields impacted margins, contributed to drops in gross and net profits.

Franks says, since the harvest, Seeka has fully reviewed its supply chain operations from the orchard to loadout.

It is now focused on achieving excellence in fruit handling in 2023.

Franks anticipates an improved labour supply with a large increase in RSE workers from the Pacific and Malaysia, and a normalisation of travel.

"The completion of a highly-automated packline in the Bay of Plenty, and automation projects at Gisborne and at our largest site near Te Puke wil lift post harvest capacity, improve fruit handling and significantly reduce the demand for packhouse labour."

As part of delivering an excellent service, Seeka is implementing a range of decarbonisation initiatives that support and health and wellbeing of its communities.

Franks says Seeka has set a target to become net zero carbon by 2050.

"We are installing solar panels on our post harvest facilities and rolling out regenerative horticulture practices.

"This includes operating our own commercial worm farm that recovers a nutrient-rich soil conditioner from organic packhouse waste."

Cyclone Damage Update

Seeka says Cyclone Gabrielle it has been inspecting post harvest sites and supplying orchards to assess the potential impact on harvest 2023.

Chief executive Michael Franks says while it did not see any significant damage to post harvest facilities, he anticipates that the full impact on the crops will remain unknown until the fruit is harvested.

"Seeka's core Bay of Plenty kiwifruit growing region was spared the worst of the weather and was not materially impacted.

"The Hawke's Bay, Gisborne, Coromandel and Kerikeri regions had varying degrees of impact, with Hawke's Bay being worst hit.

"Approximately 5% of Seeka's kiwifruit supply is grown in the Hawke's Bay region.

"We will continue to assess the situation and will update the market if Seeka identifies a material loss."

On harvest 2023, he says kiwifruit volumes are expected to be lower than 2022 due to an early season frost, variable bud break and the cyclone.

Seeka's response includes a reduction to the 2023 capital expenditure programme and reducing costs in line with the lower crop expectation.