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Seeka Kiwifruit Industries [NZX: SEK], the fruit grower and coolstore and packhouse operator, has agreed to sell back its 20 percent stake in Opotiki Packing and Cool Storage as part of its response to the PSA outbreak that devastated the industry.
The $3.2 million, or $3.76 per share conditional sale needs approval from Opac's shareholders. Te Puke-based Seeka bought the shares in 2005 for $3.7 million and had intended to take 100 percent ownership before PSA changed the company's priorities. Seeka chief executive Michael Franks told BusinessDesk the sale price is "satisfactory" and "higher than book value".
"Times have moved on," Franks said. "We've had PSA, which actually wiped out Opac's investment in Italy, and now in the cold light of day we've taken a breath and thought about things and figured that perhaps it's not consistent anymore."
Local kiwifruit growers have been struggling with the outbreak of Pseudomonas syringae PV actinidiae since 2010, which infected about 40 percent of the nation's orchards, with gold fruit varieties hardest hit. The sale of Opac is part of Seeka's post-PSA strategy, which has included selling off non-core assets, reducing debt, restructuring operations and limiting capital spending.
"It's more a strategy-based sale than a profitability-based decision," Franks said. "They've got to bring value to our shareholders, they've got to earn their cost of capital, they've got to be consistent with our strategy, and we've got to be able to add value to those companies or those investors. If we can't see ourselves doing those things, then we're better off selling."
"To put it this way, there's a more natural owner for those companies than us, and that's what this has been about," he said.
Seeka reported a 55 percent decline in net profit of $2.7 million in calendar 2013. Sales slipped 10 percent to $97.3 million. Post-harvest earnings before interest, tax, depreciation and amortisation fell 22 percent to $12.4 million while orchard EBITDA fell 54 percent to $3.3 million. In 2012 sales dropped 22 percent, reflecting the impact of PSA.
"We've weathered the storm and now we've put ourselves back onto the growth path," Franks said.
"We see ourselves as being a produce company, Kiwifruit is our foundation and it's the main game in town for us but it's not the only game, and we're looking for ways to clip on complimentary aspects to our business to grow."
Opac, which packs and coolstores kiwifruit, recorded an 81 percent slide in 2013 net profit to $610,000 compared to a year earlier as sales dropped 31 percent to $24 million, according to Seeka's end of year financial statements.
Seeka was "comfortable" with its crop volume for the year ahead, and Franks said the company would give more specific guidance in September.
The company's share price was unchanged at $2.37. The tightly held stock has traded 15 times this year, and climbed 58 percent in the past 12 months, compared to an 8.9 percent gain in the NZX SmallCap Index.