Ann: HALFYR: SEK: Seeka Half Year Review to 30 Ju

• Release Date: 28/08/12 18:17
• Summary: HALFYR: SEK: Seeka Half Year Review to 30 June 2012
• Price Sensitive: No
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SEK
28/08/2012 16:17
HALFYR

REL: 1617 HRS Seeka Kiwifruit Industries Limited

HALFYR: SEK: Seeka Half Year Review to 30 June 2012

HALF YEARLY REVIEW FOR THE SIX MONTHS ENDED 30 JUNE 2012 [UNAUDITED]

Half year review;
Seeka is pleased to provide financial results for the six months to 30 June
2012. It has been a difficult and uncertain period for the company and wider
kiwifruit industry due to the Psa disease.
Since the outset of the outbreak, Seeka implemented a strategy to weather the
company through the period and position it for redevelopment once a resistant
cultivar is found. Actions included selling surplus assets, reducing debt,
restructuring operations to reduce costs, the continuing suspension of the
dividend and limiting capital expenditure. Steps have been taken to
renegotiate long-term orcharding assets. Interest bearing debt has been
significantly reduced.

Operating Performance;
Operating revenue totalled $79.5m, down by 18.9% from the previous
corresponding period (pcp).
EBITDA of $14.6m excluding any extraordinary items was 19.7% down from $18.2m
in the pcp. There were no significant impairments required in the reported
period.
NPAT totalled $8.5m compared to $9.2m in the pcp.
Negative operating cash flows of $1.2m reflect the early close to the 2012
harvest season. This enabled an earlier repayment of seasonal trade creditors
than in the pcp. As with prior years, operating cash flows are expected to
become strongly positive in the second half of the year.
Careful cash management enabled Seeka to reduce total interest-bearing debt
to $31.5m, down from $40.6m at the same time last year (noting that Seeka
operates in a seasonal business.

Review of Operations;
Overall harvest volumes were down by 13.5% from the pcp. Total trays handled
was 21.3m, compared to 24.7m in the pcp.
Gold fruit volumes were halved as Psa-V ravaged the local Te Puke crop - the
heartland of Seeka's grower catchment. Seeka packed some 3.3m trays of gold
compared to last year's 6.3m trays. Positively, Seeka was able to harvest
674k gold trays from infected long-term lease orchards (in 2011 these
orchards produced some 1.5m trays, delivering more than $5.5m EBITDA.)
Green fruit volumes were affected by the Psa-V management regime. Orchards
were sprayed with copper and elicitors, which reduced crop yields, size and
overall volumes. Green volumes totalled 16.6m trays (the same hectares
produced 18.5m trays last year).
The company was well prepared for the lower crop volumes. It had restructured
staffing and operating facilities to achieve a timely harvest for growers and
to maximise plant efficiency. Volumes were reallocated to the most locally
efficient sites and machines. The harvest of gold crops in Psa-V regions was
prioritised to minimise the added risk from fruit hanging in a Psa-rich
environment. The number of leased coolstores was reduced to match capacity to
the reduced volumes.
Competition within the post-harvest sector increased significantly as
operators sought to fill vacant packing and coolstore capacity. Prices
charged to growers decreased across the industry despite increasing costs.
The outlook is for an increasingly competitive post-harvest market, with
further price refinement likely.

Post Harvest Operations;
The post harvest division co-ordinates the harvest, packing, coolstore, and
logistics operations for kiwifruit and avocados.
EBITDA for the six months totalled $12.5m, down from$16.9m in the pcp.
Total kiwifruit volumes fell from 24.7m trays in 2011 to 21.3m in 2012 (down
13.5%). Harvest teams prioritised gold fruit in order to reduce the risk of
disease. The harvest of gold fruit was completed on 26 May; earlier in the Te
Puke catchment.
Green volumes were lower than expected. An average fruit size of 34.2 was
smaller than previous years, and orchard yields reduced from 8,950 trays per
hectare in 2011 to 8,260 in 2012. This meant Seeka handled 16.6m green Class
1 trays (the same hectares produced 18.5m trays last year).
Seeka invested in Near-Infra-Red (NIR) technology, which was installed at
Oakside. This technology segregates soft fruit or lines with differing
internal flesh colours, and assists the company to better process the new
Zespri G9 variety. This variety has a wider internal colour variation and NIR
enables the fruit to be sorted into differing and appropriate management
regimes.
Packing operations were rationalised for maximum efficiency, and closed sites
were used for cool storage or sold. Bayliss, MacLoughlin, Waimapu, KCG and
Rea Road were closed. In the case of Rea Road, a conditional sale agreement
was entered into and subsequently went unconditional after balance date.
Waimapu is for sale.
Seeka continues to assess future crop volumes so packing and coolstore
capacity can be adjusted accordingly. Detailed planning continues to optimise
sites and packing efficiencies for 2013, including the scenario where the new
varieties are successful and volumes rebuild rapidly.

Orchard Operations;
This division handles all growing and orchard management services for the
company's own long-term lease orchards and for short-term leased and managed
orchards.
EBITDA of $5.6m compares to $4.4m in the pcp and reflects a higher-than-
anticipated return on the company's orchards.
Gold trays harvested from the long-term leased orchards totalled 674k, down
from 1.5m in 2011. Seeka entered into negotiations to reset long-term leases
infected with Psa-V. The standard long-term lease allows Seeka to reduce or
exit the lease where there is partial or total destruction to Seeka's
improvements on the land. Seeka's right to terminate the lease was confirmed
via arbitration. Importantly, there needs to be enough time for Seeka to
recoup its investment and earn a commercial return should it choose to
replant.
Two gold orchard leases totalling 4.09 hectares expired during the six months
and a further 3.62 hectares were relinquished by agreement with the land
owner (to be redeveloped by them, with the fruit to be handled by Seeka).
At 30 June negotiations had been substantially completed to redevelop seven
orchards totalling 46.75 hectares. These orchards will be regrafted or
replanted as appropriate with either the Zespri new varieties or Hayward as
the targeted cropping variety. Negotiations to replant or regraft two
orchards, covering some 34.95 hectares, were continuing at balance date.

SeekaFresh and AvoFresh;
SeekaFresh handles all the non-Zespri supplied fruit sales. These include
kiwifruit sales programmes for class 2 fruit to Australia and avocado sales
supplied by its avocado operation, AvoFresh.
SeekaFresh continues to expand its operations and contribution to the
business. New avocado programmes in 2012 included Korea and Japan in
conjunction with Fresh MD Holdings. These programmes help reduce growers'
reliance on the Australian market, which has been the largest market for New
Zealand avocados but which also has a rapidly increasing local supply.
The outlook for the SeekaFresh and AvoFresh business remains positive.

Psa-V;
The kiwifruit industry has been rocked since the outbreak of Psa-V in
November 2010. The release of the Zespri tolerant varieties gives rise to
some fragile optimism of a pathway to recovery. Over 2,000 hectares of
orchards have been grafted to the new G3 variety alone. Hayward, the dominant
variety within the industry, has shown good tolerance to the disease to date.
The spring period will be a critical time for the industry as it monitors
orchards for any signs of deterioration. Seeka continues to exercise caution
in all facets of its operation.

Close;
This remains a testing time for the industry and Seeka. The pressure of the
Psa-V outbreak alongside a challenging harvest and grower uncertainty has
again demonstrated how Seeka's dedicated leadership, dedicated people and its
strategy, position the company well to deliver the best outcome to growers
and shareholders in the current environment.

Financial Summary: Unaudited
For the six months ended 30 June 2012 compared to the 6 months ended 30 June
2011 - see note below

Revenue from ordinary activities ($000) $79,540 down 18.9%

Profit from ordinary activities before tax attributable to security holders
($000) $11,424 down 5.1%

Profit from ordinary activities after tax attributable to security holders
($000) $8,471  down 8.1%

Net Profit attributable to security holders ($000) $8,471  down 8.1%

EBITDA before non-recurring items ($000) $14,642  down 19.7%

Earnings Per Share:
Six months ended  30-Jun-12 /   Six months ended  30-Jun-11

Basic earnings per Share   $0.59    /  $0.65

Diluted earnings per Share   $0.59    /  $0.65

An explanation of the figures reported above is provided in the attached
unaudited half year financial statements.

Release Ends

For further information contact:
Michael Franks
Chief Executive
021 356 516

Stuart McKinstry
Chief Financial Officer
021 221 5583
End CA:00226561 For:SEK    Type:HALFYR     Time:2012-08-28 16:17:33