New Zealand-based produce company T&G Global Limited (NSX: TGG) is considering options to exit the processed foods business through the potential sale of ENZAFoods, which has been trading as T&G Foods.
The company said the decision was due to its strategy to focus on its core business of growing, sourcing, packing and marketing fresh produce to customers around the world.
“In line with this strategy, T&G has reviewed the operations of T&G Foods and determined that the fruit processing business is non-core and consequently should be either sold, rationalised or closed,” it said in an NZX announcement.
T&G’s pipfruit division, formerly known as ENZA and Apollo Apples, is not part of ENZAFoods.
T&G Foods has the capacity to process up to 200,000 metric tons (MT) of apples and other fruit at its two manufacturing sites in Hastings and Nelson.
The business processes apples into apple juice and has also diversified into the production of higher margin fruit ingredient products including diced apple for the food services industry, apple sauce in bulk and small format pouches for retail consumers.
T&G said the apple industry had been converting orchards to new apple varieties and in the last five years had added more than 2,500 hectares of orchards in New Zealand.
“While this has been positive for T&G’s pipfruit division, with more whole fruit being exported, the volume of apples available and suitable for processing has been in significant decline and has negatively impacted T&G Foods trading,” it said.
“The strong New Zealand dollar and a decline in apple juice concentrate prices worldwide have also contributed to T&G Foods recent trading losses.”
It explained the company may incur a “significant after-tax loss” due to a write-down in the net book value of T&G Foods’ assets and other associated costs. At this stage the negative impact to the T&G Group is estimated to be in the vicinity of NZ$14 million (US$10 million).
However, it said any such negative impact will be largely offset by a fair value gain of approximately NZ$14m from T&G Group’s investment in the U.S. joint venture Grandview Brokerage LLC (GB LLC) announced on 3 March 2017.
Consequently T&G does not expect a material income statement impact to arise for the year ended Dec. 17 2017.
“T&G Foods, and its people, need certainty and would benefit from an owner focused on fruit processing who is willing to invest for the long term,” T&G Global CEO Alastair Hulbert said.
“Despite the best efforts of T&G Foods’ management and staff, the business has struggled to counter the current impact of the significant decline in the volume of fruit for processing in New Zealand and the continued worldwide decline in the commodity price of apple juice concentrate.”
Expressions of interest are welcome by Nov. 15 2017.