Gea Process Engineering boosts 2012 profits

Gea Process Engineering, which is building the world's largest spray dryer for Fonterra, posted an 8.1 percent increase in 2012 profit after buying powder handling specialist Nu-Con.

The company, a local unit of the publicly listed German maker of food-processing equipment Gea Group, made a $7.8 million profit before hedging effects in the year ended December 31, up from $7.2 million the year earlier, according to the Auckland-based company's latest accounts filed with the Companies Office.

Dusseldorf-based Gea Group, which has annual sales of more than 5.7 billion euro, is looking to divest its heat exchangers unit to focus on growing its main business providing technologies for the foodstuffs industry.

Founded in 1881 as a metals trading company and now making milking machines and beer-brewing kits, it is facing declining revenue in its biggest market in Europe as sales advance in North America and Asia Pacific.

The New Zealand unit, which provides technology for the local dairy industry, says 2012 revenue jumped 54 percent to $196.4 million, while cost of sales increased 57 percent to $164.9 million, boosting gross profit by 40 percent to $31.5 million.

The year captured the benefits of heavy rainfall in the 2012 season, which stoked milk production to record levels. That is unlikely to continue, with drought at the start of this year keeping a lid on production for the 2013 season.

Gea's local unit is building a spray dryer for Fonterra, the world's largest dairy exporter, at Darfield in Canterbury, which is expected to be running by late August.

The dryer, which at more than 70 million euro is one of the biggest orders ever for Gea Process Engineering globally, will be able to process 30 metric tonnes of milk powder every hour, compared with the current Darfield dryer, also built by Gea, which produces up to 15.5 metric tonnes an hour.

Milk powder demand growing

The new plant will serve markets in the Middle East, South East Asia and China, where demand for milk powder is growing, Gea says.

In 2012, financing costs for Gea's local unit almost tripled to $2 million as it stepped up interest payments to its global parent after buying Nu-Con in September 2011 for $35.9 million, financed through Gea Group's existing credit facilities.

The company had its first full year of earnings in 2012 from Nu-Con, which supplies powder handling systems for makers of infant formula and other food, dairy and industrial uses.

In the previous financial year, Nu-Con added revenue of $19.9 million and a bottom line loss of $52,000 to Gea's local accounts for the four months. At the time of purchase, Nu-Con had annual revenues of about 30 million euro.

In the latest accounts, Gea Process Engineering increased the value of goodwill on Nu-Con by $1.2 million. The company closed Nu-Con's Malaysian business last year, having made a $65,000 provision for social plan and redundancy payments in 2012 and a $560,000 provision in 2011.

Gea aims to acquire companies that provide it with entry into new markets or that selectively expand its range of offerings in existing markets, the company says in its 2012 group annual report. That enables it to better provide customers with a single-source solution for a broader range of products and services.

In November, the group's farm technologies segment paid 9.6 million euro for Hamilton-based Milfos International, a leading developer and manufacturer of innovative dairy technologies whose products are exported to more than 20 countries.

That follows the purchase of Mt Maunganui-based Farmers Industries in 2010, which develops and manufactures chemical and consumables for the dairy industry.

In April, Gea Process Engineering's local operations manager Clint Brown took over as chief executive from David Bower.

(BusinessDesk)