Scales (NZX:SCL): What is its full-year outlook for 2021?

Highlights

• Scales Corporation delivered a strong performance in H1 2021.
• The Group’s horticulture and food & ingredients business reported excellent results.
• Scales upgraded its FY21 guidance on the back of a strong 1H21.

Scales Corporation Limited (NZX:SCL) is a diversified agribusiness group that has 3 operating segments: Logistics, horticulture and Food ingredients.

Scales business occupies a position of essential business and due to its preparedness, it has effortlessly transitioned despite COVID-19 lockdowns wreaking havoc in the market.

The Group’s businesses across all 3 segments have given an exceptional performance in both operational and financial terms despite obstacles arising due to COVID-19 faced by divisions.

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SCL reported a 15.4% and 11% increase in underlying NPAT and EBITDA to $33.3 million and $54.8 million, respectively, for the 6 months ended 30 June 2021.

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Scales expects disruptions to domestic and international operations, including labour availability, global markets and supply chains due to ripple effects of the COVID-19 pandemic amid the current lockdown in New Zealand.

Divisional Performance

The Group’s horticulture and food ingredients division delivered excellent results. Horticulture division volumes remained affected by stormy weather in the main growing season. However, higher pricing compensated the lower volumes and increased labour as well as shipping costs.

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The Food Ingredients division witnessed a 30% rise in volumes sold in 1H21 compared to 1H20 amid sustained demand for petfood globally and changes in product mix and margin.

However, the Group’s Logistics division was affected by lower export volumes in the period, majorly in stonefruit. Division profitably steered a domestic scarcity of refrigerated containers to ensure all its horticulture customers were able to ship their 2021 harvest.

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On 22 October, at the time of writing, SCL was trading at $5.49, down 0.18%.

Outlook

Scales continues to expect disruptions to domestic and international operations including labor availability, global markets and supply chains due to disruptions arising from the COVID-19 pandemic.

Scales Corporation Chair Tim Goodacre noted that the Group’s diversified effort could help in resolving these issues.

Scales expects its underlying net profit to be between $32 million and $37 million and an underlying EBITDA of between $65 million and $72 million for the full year.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)