Chris Timms.
Tegel Group Holdings reported a profit in line with the revised December expectations but at the bottom end of its guidance ranges, Craigs Investment Partners broker Chris Timms said yesterday.
The poultry producer reported earnings before tax of $47.8 million for the 53 weeks ended April 30, well up on the $16.7 million reported in the previous corresponding period.
The profit attributable to shareholders was $34.2 million, again well up on the $11.3 millon reported in the pcp.
Revenue was up 6% on the pcp to $613.98 million. The cash flow from operating activities was $45.6 million, slightly down from the $46.4 million last year.
Mr Timms said the outlook for 2018 would be well ahead of 2017 and consistent with Craigs' current estimate at $81 million for the 2018 financial year.
''Interestingly, Tegel has announced a branded product win into a major Australian retailer - we suspect Woolworths or Coles - from the second quarter.''
Capital expenditure for 2018 was set at $30 million, slightly below Craigs' current estimate of $35 million, he said.
There would likely be a modest positive effect to the shares, reflecting the stronger second-half cash flows, dividend and earnings guidance for further growth in 2018.
Management also noted domestic pricing had recently stabilised and directors expected a more rational marketplace in the future, Mr Timms said.
Tegel chief executive Phil Hand said in a conference call the group had never before grown so many birds and produced as many products for sale to its customers in New Zealand and its overseas markets.
The record volumes for 2017 were close to 100,000 tonnes and up 7.1% compared to the pcp.
Revenue exceeded $600 million for the first time.
Tegel had been consistently growing volume, revenue and underlying profit for the last five years due to continuing favourable domestic market conditions, new product development, capital investment and expanding export sales, he said.
''All of this is underpinned by a trusted and iconic brand and a reputation for producing quality products.''
There was a strong performance for the group from the Pacific Islands, and Asian market growth continued.
During the year, Tegel developed new products for its export markets and entered a new market, the Philippines, where it secured its first sales.
To reinforce the strategic focus, Tegel continued to invest in agriculture and processing assets to support sales growth, efficiency and savings.
The group invested in a new breeder farm in Christchurch and its automation and capital expenditure programme continued.
The focus on cost saving initiatives and continuous improvement programmes resulted in $12 million of savings for the year, Mr Hand said.
Research found some people still confused the egg laying industry with the broiler chickens Tegel grew for consumption.
''We have updated our labelling to clearly show either the cage free or free range stamps.
''All of our products are free of added hormones and our labels reflect this.''
Following the brand refresh, cage free awareness of Tegel products had increased by 113%, free range awareness by 137% and no added hormones awareness by 29%, he said.