Cyclone-ravaged orchardists facing balance sheet woes
Many companies are financially mortally wounded by the effects of Cyclone Gabrielle and may have to sell up because of their high debt levels.
John Paynter, the executive chair of the Yummy Fruit Company, one of the largest family-owned orcharding companies in the region, says behind the scenes everyone - large and small - is worried about cashflow and their ability to borrow more capital to get their businesses back on track.
He says while horticulture is a great mechanism to get value from the land, it requires significant investment. He notes that if you have borrowed money to invest in crops or fruit and you lose them, there is a challenge to borrow again, depending on your asset base.
"I would say in Hawke's Bay there are significant holes in big horticultural operators' revenue lines and that will actually hurt," Paynter told Rural News. "Behind the scenes a lot of peple won't be bankable or marginally bankable and their situation could well continue to deteriorate."
He says the rule that trading banks operate under in NZ are not conducive to the present needs of the agriculture sector. He discovered that there is a lot of truth in the claim that banks are 'fair weather friends'.
Paynter claims banks are fine if you don't have debt, but don't appear to have the appetite to deal with the sort of situation that orchardists and growers are facing in Hawke's Bay at present.
According to Paynter, a lot of companies like his have been in development mode over a number of years at considerable cost and debt. But he says Yummy Fruit have lost 45 hectares of trees - many new plantings in the Esk Valley - which will put his company under financial pressure going forward.
He says it's not only orchardists that have been hit by the cyclone. Paynter knows of cropping farmers who planted squash, which was wiped out in the springs rain last year and their maize crops were destroyed by Cyclone Gabrielle.
"The cyclone has certainly kneecapped a lot of businesses in the Bay," he told Rural News.
Paynter says, in theory, people should not be able to recover from an event of this magnitude. However, he reckons they have taken the view to "farm themselves out of the crisis".
To that end, his company is applying for the Kanoa fund for assistance. This is a $250 million fund set up by government to help people affected by the adverse weather events in the North Island.
What has surprised Paynter is that, so far, there have been only 17 applications lodged for Kanoa assistance. He believes that while the Kanoa money contains sweeteners such as interest free until a company gets back on its feet, it is still ultimately a debt that has to be paid back.
"One of the reasons for the lack of applicants is that people don't have an appetite for more debt."
A Different Tack
Paynter says the long-term financial implications of Cyclone Gabrielle may see many of the larger businesses like his break with tradition and seek outside capital to put themselves in a stronger financial position.
Paynter believes that the recovery for Yummy Fruit will be long. He says they made a loss last year and expect to do the same again this year but he is hopeful of being in the black in 2025.
As well as getting the company back on its feet financially, the company is heavily focused on looking after their staff and keeping them in a positive and enthusiastic state of mind as Yummy Fruit climbs back into profit mode.
Paynter is full of praise for the efforts of Apple and Pears NZ, who he says have done a great job for local growers. He is less impressed with other organisations and he says the time has come for a review to get organisations to define their respective roles and deliver.
"This all comes down to leadership at all levels," he told Rural News.
"Right now, we need the best possible leadership from central and local government, industry, business and all those involved in the sector. It's a time for all of us - young and old - to step up."
