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Scales raises earnings forecast

NZN 5/12/2016 Tina Morrison

Scales Corp has raised its forecast for annual earnings with the apple company citing improvement across all its divisions and a standout performance from its horticulture unit.

Earnings before interest, tax, depreciation and amortisation are expected to be between $66 million-$69 million in calendar 2016, ahead of an earlier forecast of between $55m-$62m, and representing an increase of between 7.5 and 12 per cent on the year earlier, it said.

Underlying net profit is expected to be between $37.2m-$39.4m, ahead of previous guidance of between $29.6m-$34.6m.

New Zealand's biggest apple exporter has invested in apple crops that are sought after by customers in Asia and the Middle East, where the sweeter, redder varieties fetch a premium price on average 55 per cent higher than traditional varieties.

The company said its horticulture unit had "a particularly strong performance" due to a significant uplift in export volumes, with fruit quality, particularly towards the end of the season, a highlight.

Its Mr Apple division packed a record 3.5 million trays, meeting a 2020 volume target four years ahead of schedule.

To aid future growth, Scales in January increased its stake in Hawke's Bay apple exporter Fern Ridge Produce to 72.9 per cent, and in November bought Hawke's Bay apple grower, packer and marketer Longview Group Holdings for $20.5m, adding capacity to sell fruit into the fast-growing Asian market.

Scales will pay an interim dividend of 8 cents per share in January, and will announced its final dividend in May .

Its full 2016 annual earnings will be released at the end of February.

Scales expects ebitda in the 2017 year to fall to between $55m-$62m, reflecting earnings from Longview and lower budgeted yields and revenue from its Mr Apple unit.

The company said its net debt at December 31 is forecast to be about $31m, keeping its balance sheet in a strong position even after acquisitions and investments in growth during the year.

Scales shares last traded at $3.50 and have jumped 46 per cent this year, ranking it the best performer on the benchmark index.

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