Ātihau told shareholders the increase in revenue of $1.1m from last year to $24.5m was a solid result during a challenging period.
Chief executive Andrew Beijeman told the Annual General Meeting in Whanganui that as the world economy responded to Covid-19, there was good demand and good prices for Ātihau beef, lamb and milk.
But higher costs, particularly for maintenance fertiliser, drove down end-of-year results.
The farms faced a number of climatic challenges during the year.
“Spring was very wet, which meant crops were late being sown. When it turned dry in summer, some of those crops failed.
“We had porina on some of the farms, and that hot, dry summer which lasted all the way through until April needed to be carefully managed on our sheep and beef and our dairy farm in order to maintain production.”
The hot, dry summer also resulted in a record production of 103 tonnes of honey from 3600 hives, which led to a profit before revaluation of $800,000. However, sales were down due to an oversupply of honey within the New Zealand honey industry.
“Put simply, this is because, for a period of time, more honey has been produced than has been sold. There’s a lot sitting in sheds. Particularly in the 2020 season - an extra 7000 tonnes of honey across New Zealand was produced compared to normal years,” Beijeman said.
“This has resulted in a decrease in the price of honey, and because we have some honey sitting in our shed unsold, we have revalued it, and that took $2.7m out of our profit for this year.”
In response to this oversupply issue, the industry was going through a correction.
“The big correction is happening in hive numbers. In 2019 there were close to a million hives in New Zealand. That number has dropped down to the levels last seen in 2015 and is now below 600,000 hives. That is eventually going to correct the imbalance between supply and demand.
“At home, we’ve made the decision to pause the growth in our apiary business, and to leave numbers at what they were last year.”
Development of the apiary business would remain on hold until honey markets recover.
“The apiary business will not grow until guaranteed markets are found for the honey,” Beijeman said.
“We anticipate the recovery of the honey market to occur over the next few years, as the market consolidates.”
The incorporation was fortunate to be in a better position than most apiary businesses, he said.
“We have a diversified business and a strong balance sheet. Others are having to sell up and move out of the industry.”
Ātihau would use the time to focus on optimising the apiary business and reducing costs.
Risk management would centre on maintaining relationships with buyers and considering alternative sales channels, which could include joint-venture arrangements. There would also be a more conservative approach to the valuation of honey in the future.
“A key focus at the moment is selling. Since [the end of June] we have sold 40 tonnes, about $1.2m worth. Our target is to sell another $2.5m between now and June 30 next year, and we’re working really hard on a number of potential avenues for that honey.”
In the meantime, cash returns into the business continue to be gained from external beekeepers as access to surplus mānuka is sub-contracted for hive placement.
For the year ahead, Ātihau was forecasting an increase in farm production, including 93,000 lambs and 3580 calves, due to ongoing improvements in farm infrastructure, better soil fertility and fewer pasture pests.
The dairy farm was forecast to produce 255,000kg MS (milk solids), while total honey production was expected to increase to 110,000 kilograms as the team focuses solely on production rather than growth.
Total revenue was expected to be $29.5m because the write-down of honey values was unlikely to be repeated. However, total expenses were also expected to increase to $24.6m because of inflationary pressures.
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