Chipmaker hit by hunger for products

Vegetable processor Mr Chips Holdings Ltd has reported a 40 per cent drop in profit for the first half of its financial year, ironically due to high demand.

The company made $531,000 for the six months to September 30, a 40 per cent drop compared with $894,000 last year.

It would pay a fully imputed dividend of 2c per share.

Chairman Graeme Edwards said the company's plant was operating at capacity and it had had to subcontract significant business with a consequent loss of profit margin.

Hungry for expansion, the company was to build a new french fry plant adjacent to its existing East Tamaki factory.

"Negotiations are at an advanced stage for a share placement to a strategic party, which will be followed by a cash issue to all shareholders in the first quarter of 2002. The major shareholders have indicated their support for the cash issue."

The company had also discussed an alliance with Australian firm Simplot but Simplot had scaled the relationship down after the events of September 11. The two companies were still working together on an arrangement involving co-packing and technical assistance.

Despite the lower profit, sales revenue for Mr Chips grew by more than 9 per cent to $10.4 million.

Mr Edwards said recent consolidation in the industry had resulted in a number of new opportunities for Mr Chips, in particular a long term supply contract with Restaurant Brands.

That, plus existing domestic and growing export demands, had placed the company under considerable pressure had resulted in "lower than normal yields and higher operating expenses compounded by a number of increased input costs".