Although they had a higher turnover, T&G's management describes the past year as "difficult". They came to this conclusion because of the various challenges in the international market. This New Zealand company's revenue rose by $120 million to $1.2 billion in 2018. Profit margins were, however, lower than the previous year.
“We crossed the $1 billion turnover threshold in 2017. This upward trend that had started five years before, continued," writes the company's CFO, Bastian von Streit. While revenues are on the rise, operating profit is under pressure. Operating profit was $11.5 million lower than the previous year.
This is due to various factors, such as lower sales and prices for certain prices. Then there was also higher promotional and quality control costs, among others. In 2017, $27.1 million was booked for this item. Last year, it was $15.6 million.
Difficult international market
The North American market, in particular, was difficult. Here, prices were under pressure. That was also the case on a few other markets. There was a high demand for apples in Europe.
This was due to this region's disappointing harvest. The top fruit segment benefited from this and reported a good result. With this, Europe partially compensated for the losses experienced in North America.
Closer to home, Australia had a low cherry harvest. This was due to the bad weather experienced there. The weather in Peru affected that country's grapes too. "Despite this, our International Trading Division saw its operating profit climb by $3.1 million compared to 2017," continues the CFO.
"This was thanks to the favorable conditions in many markets, especially those in the Pacific," he says. Import tariffs had an impact on the results in the Chinese market.
Surplus of New Zealand tomatoes
On the domestic market, T&G's New Zealand Produce division had its own challenges to face. 2017 was a record year, but 2018 painted a different picture. Although they had only $0,9 million less, the division's operating profit was $8.2 million less than in 2017.
This was a result of the tomato market. The first half of the year began with a problematic production period. This was followed by a surplus of tomatoes in the second half of the year.
However, T&G saw their income increase outside of their trade divisions. In 2017, they earned $0.4 million, last year this was $2,5 million. This increase was mostly as a consequence of the Grandview Brokerage LLC (The Oppenheimer Group) takeover. These results were included for the first full financial year.
Under the line, T&G retains $10.4 million as net profits, after tax. Thisis a sharp decline compared to their $40.2 million profit recorded in 2017. The company is committed to strengthening the Jazz and Envy apples' positions.
Here, the focus lies on increasing supply on the one hand. On the other hand, the company wants to strengthen relations with their consumers. Internationally, the focus is also on a number of categories. "We will build up a solid, differentiated position in grapes and blueberries," concludes von Streit.