Poor quality erodes profits

One of NZ’s biggest apple exporters, T&G Global, is now forecasting a loss for the 2022 financial year, partly caused by the poor quality of NZ apples.

T&G Global is blaming apple quality and worsening economic conditions in Europe and the UK, where it has operations for its profit downgrade.

The company, owned by German conglomerate BayWa Ag, is now forecasting a loss of between $1m and $5m for the financial year – compared to $9.8m gross profit last year.

In a statement to the NZX, the company says there has been a rapid deterioration in the quality of T&G’s premium New Zealand Envy apples, particularly those apples exposed to the unusually heavy rains during the 2022 harvest

“This, combined with the late arrival of fruit into markets as a result of global supply chain disruptions, has unfortunately resulted in crop quality issues, with fruit rapidly deteriorating and consumers having an inconsistent eating experience,” the company explained.

“As a result, inventories are higher at this stage of the year than normal, resulting in provisioning for fruit losses as the fruit ages.”

T&G Global says its operations in Europe and the UK have reduced their forecasts due to worsening economic conditions in their respective markets.

“This forecast also includes the impact of a number of projected oneoff items, including property disposal and the costs of exiting the company’s Peru grape farming operation,” it says.

For the kiwifruit sector, the story is the same.

Major exporter Seeka says that following a challenging kiwifruit season in New Zealand, it now expects to post a net profit before tax of between $6.5m and $9m. This is a downgrade from the previous market guidance range between $9m and $11m.

Seeka says the reduction in earnings reflects a later shipping season, challenging fruit quality across the industry and expected reduced fruit earnings from the global market.

New Zealand Apples and Pears Incorporated (NZAPI) reports that export volumes are below mid-season forecasts. Chief executive Terry Meikle says exports were negatively affected by “a perfect storm of unfavourable weather conditions during the growing season, labour shortages, weak demand, inflation hitting consumer spending, shipping and logistics issues and reduced demand from European and UK markets”.

Labour shortages and weather events impacted fruit quality, Meikle told Hort News.

He warns that a reduction in export volumes, together with significantly increased production and post-harvest costs will have seriously impacted the profitability of most New Zealand apple and pear growers in 2022.

Next year’s harvest could also be affected.

“It is still too early to ascertain the impact on next year’s harvest of one of the wettest springs on record in the Hawke’s Bay,” says Meikle. “Nelson also experienced unseasonably high rainfall in the late winter and early spring.”

He adds that growers will be hoping for more settled weather in the coming months and also the prospect of a close to full seasonal labour workforce.

“These two elements will help to ensure the harvest brings improved returns.”