Seeka forecasts 15% drop in 2017 profit as kiwifruit harvest weaker than expected

The company warned 2017 operating profit may be up to 15% lower than the record $7.8 million in 2016.

Seeka, the largest kiwifruit grower in New Zealand and Australia, has confirmed its guidance for a 15 percent drop in operating profit in 2017 as weaker-than-expected kiwifruit crops offset growth from its avocado sector.

The company warned 2017 operating profit may be up to 15 percent lower than the record $7.8 million in 2016, with New Zealand Hayward kiwifruit volumes forecast to be between 20 and 25 percent lower than the previous year. Today, it confirmed that guidance "albeit with the expectation that the earnings will be at the 15 percent reduction end of the range" at $6.6 million.

The New Zealand kiwifruit harvest is now complete, and Seeka has seen a 21 percent drop in overall kiwifruit crops, though its Hayward harvest was lower than expected at 33 percent weaker than 2016. The SunGold harvest was 16 percent stronger than 2016, while the Australian harvest grew 3.5 percent overall, leading the company to expect Australian earnings before interest, tax, depreciation and amortisation (ebitda) above $3.5 million in 2017, from $1 million in 2016.

The 2016 year was a record for Seeka after exceptionally high kiwifruit yields. It lifted revenue 35 percent to $191.3 million in the year to Dec. 31, 2016, with net profit at $10.4 million, up 143 percent on the year earlier, and operating profit at $7.8 million once the cost of insurance settlements for grower fruit loss was included.

The company has more than doubled its trays of exported avocados in the current year, up to 487,000. Earnings per tray dropped to $24.85 from $26.86 in 2016, though Seeka said this was "an excellent result given the dramatic increase in volume" and was ahead of the $24.42 it forecast in February. The company generated $2 million in earnings from avocados in 2017, it said.

The shares last traded at $5.10, and have gained 11 percent this year.