ZESPRI Results Signal Solid Returns for Growers

Media Release - 22 May 2009

ZESPRI today announced the indicative range of returns growers could expect for the 2009/10 season, following a strong performance for the 2008/09 year.

The forecast returns for ZESPRI® GREEN Kiwifruit are expected to hold steady against last year while ZESPRI® GOLD Kiwifruit returns continue their upward trend.

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The ZESPRI Board also expect to pay 15 cents per tray loyalty payment in the 2009/10 Season.

Chief Executive Lain Jager said the forecast returns reflect the different markets for ZESPRI® GREEN and ZESPRI® GOLD Kiwifruit.

“Due to the global economic environment, we are not seeing the usual year on year growth for ZESPRI® GREEN Kiwifruit, the largest category in our portfolio, with demand at about the same level as last year and weaker pricing in fruit markets generally. Obviously ZESPRI is not immune to market conditions but it is important to note that ZESPRI® GREEN and GREEN ORGANIC Kiwifruit continue to maintain a significant price premium over the competitor fruit reflecting our quality offering.”

Mr Jager said that we can expect a greater supply of competitor products this year, and there has been an overhang of domestic kiwifruit in some markets.

“Traditionally at this time of the year, the northern hemisphere kiwifruit sales have finished, leaving a clear run for New Zealand ZESPRI® Kiwifruit. This year however there is still Italian kiwifruit in the market in Europe and domestic kiwifruit on retail shelves in Japan.”

On the positive side, Chief Financial Officer Mervyn Dallas said that a 53 percent decrease in oil prices and more favourable foreign exchange rates in the key GREEN markets had helped offset the reduction in pricing.

The story for ZESPRI® GOLD Kiwifruit was quite different, he said. The indicative returns for GOLD reflect the success of this product since its launch ten years ago. It has established an entirely new, premium category and its flavour profile targets a unique set of consumers who prefer a sweeter more tropical taste. Demand is growing year on year and this season exceeds supply, meaning ZESPRI® GOLD Kiwifruit has been able to maintain pricing levels in local currencies. The range of indicative returns is expected to increase by $1.50 to $2.00 on last year.

The ZESPRI® GREEN ORGANIC Kiwifruit indicative returns reflect the difficult market conditions for the organic category and an increase in supply volumes.

Mr Jager said that sales have started solidly in all markets but obviously it is still very early in the season to be forecasting returns in a global environment characterised by significant volatility. He also cautioned there is potential for the New Zealand dollar to strengthen during the year which may also impact returns.

The recent hailstorm which struck some crops in Te Puke, Opotiki and Whakatane on 11 May 2009 will impact on the forecast, he said. However this should be covered within the current range of indicative returns.

Financial results for the year ended 31 March 2009

The indicative returns forecast comes as ZESPRI announced its results for the year ending 31 March 2009, a year which saw the company over-deliver on its promise to growers of increased returns.

Chairman John Loughlin said that in June 2008 incoming Chief Executive Lain Jager promised growers that ZESPRI would deliver at least 65 cents per tray above the previous year’s average return per tray.

“The ZESPRI Team has done a very good of job to exceed this promise. ZESPRI has increased returns by 76 cents on average across all pools, with total fruit and service payments (excluding the loyalty premium) of $7.59 per tray supplied. This is an increase of 11 percent on the previous year.”

ZESPRI reported a consolidated net profit after tax of $23.9 million for the year ended 31 March 2009, compared with $19.7 million the year prior. This 21 percent increase on the previous period is due to the increase in global kiwifruit sales.

With oil prices at record highs of US$798 per tonne during 2008, New Zealand-sourced freight costs increased by $26.9 million. The bulk of ZESPRI’s shipping occurred during the peak in oil prices, resulting in an average per tonne rate of US$667 for the season, up from US$389 in the prior year. The movement in exchange rates had a significant impact over the previous year, leading to an increase of $52.8 million in returns to growers.

Net global kiwifruit sales increased 25 percent from $1.164 billion in 2007/08 to $1.451 billion in 2008/09. New Zealand-sourced kiwifruit volumes sold increased by 8 percent to a record 100 million trays. This increase was due to average orchard yields increasing by 6 percent, along with improved size profiles and increased pricing.

Chief Executive Lain Jager said that ZESPRI generated record returns in its key markets.

“Europe remained our largest market, with record sales of 60 million trays of kiwifruit which is a tremendous achievement for the ZESPRI Europe Team. The European market experienced increased demand for both ZESPRI® GREEN and ZESPRI® GOLD Kiwifruit. The emerging markets of China, South East Asia and North America showed the strongest year-on-year performances, growing from 10.8 million trays to 13.7 million trays. These markets currently account for over 14 percent of the total New Zealand crop sold and will remain very important for the future growth of the business.”

The company intends to declare a final dividend for payment in August 2009 of 56 cents per fully paid share, in addition to the interim dividend (paid in December 2008) of 35 cents per share. A special dividend of 7.41 cents was paid in March 2009, this being the company’s 50 percent share of the proceeds from the ZESPRI® GOLD Kiwifruit licence tender. This brings the total dividend for the 2008/09 year to 98.41 cents per share, representing 100 percent of available profits.

Mr Jager said that he is positive about ZESPRI’s ability to continue to grow strongly. “This growth will come from increased consumer penetration, strong growth in developing and emerging markets, new cultivars and investment in innovation.”

Mr Loughlin said maintaining the industry structure is essential to ensure future growth. “The integrated structure of our industry underpins our future growth strategy and is clearly in the best interests of New Zealand Kiwifruit growers, the kiwifruit category globally and the broader New Zealand economy.”

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