2022 Annual Results Announcement
Scales Corporation Limited
Head Office: 52 Cashel Street | Christchurch 8013 | New Zealand
Postal: PO Box 1590 | Christchurch 8140 | New Zealand
Phone: +64 3 379 7720
scalescorporation.co.nz
NZX & Media Release
23 February 2023
STRONG GROUP PERFORMANCE DRIVEN BY RECORD GLOBAL PROTEINS RESULT
Highlights – 12 months to 31 December 2022
Diversif ied agribusiness group Scales Corporation Limited (NZX:SCL) today reported its FY2022 f ull
year results. Reported NPAT
1
Attributable to Shareholders was $19.4 million (FY2021: $26.9 million).
Earnings per share f or FY2022 were 13.7 cents per share (FY2021: 19.1 cents per share).
Underlying
2
NPAT Attributable to Shareholders of $27.6 million (FY2021: $29.8 million) was towards
the top end of market Guidance.
A dividend of 3.5 cents per share is being paid on 31 March 2023. This is the second instalment of
the FY2022 total dividend.
• Group FY2022 f inancial results:
o Reported NPAT of $38.2 million, up 3 per cent (FY2021: $36.9 million)
o Underlying NPAT of $46.4 million, up 17 per cent (FY2021: $39.8 million)
o Underlying EBITDA of $77.9 million, up 6 per cent (FY2021: $73.8 million)
o Revenue of $619.2 million, up 20 per cent (FY2021: $514.6 million)
• Divisional summary:
o Further outperf ormance by Global Proteins, with a record result, complemented by strategic
investments made in Australia
o Lockdowns in China resulted in material reductions in market prices during critical sales
windows, especially during the latter parts of the season, adversely impacted Horticulture
results
o Logistics continued its growth trajectory, and provided vital support to both internal and
external customers
1
Net Profit After Tax
2
Underlying results exclude some New Zealand International Financial Reporting Standards (NZ IFRS) non-cash and other
adjustments. In line with current market practice, “Underlying” includes the effects of NZ IFRS 16 Leases. A reconciliation
between Net Profit and Underlying Net Profit, EBITDA and Underlying EBITDA is provided in Appendix A of our annual results
presentation pack.
2
Tim Goodacre, Chair of Scales Corporation, commented: “We are pleased to report excellent Group
prof itability for FY2022. Global Proteins and Logistics produced outstanding results, with Horticulture
dealing admirably with a number of challenges throughout the year. As ever, exceptional leadership
and extraordinary ef f ort from the Scales team were instrumental in delivering these results.”
“Our strategy of diversification has continued to prove important, with the Global Proteins division
reporting signif icant growth, both organically and through investment. Its organic growth has been
driven by strong market conditions and new product development, leading to improved volumes, mix
and margin.”
“The Horticulture division was impacted by lockdowns in China together with lower volumes, higher
shipping costs and labour availability. However, strong leadership and management kept the impacts
of these events to a minimum.”
Andy Borland, Managing Director of Scales Corporation, stated: “Each year I am indebted to the
Scales team f or their ef f ort and hard work, and this year has been no dif f erent. We were especially
saddened to see the devastation caused to Hawke’s Bay during the recent Cyclone. Whilst we are
very pleased to report that all of our staf f are saf e and well, many have experienced signif icant loss or
disruption as a result of this event. The Hawke’s Bay community, its people, and culture, are an
integral part of Scales. Accordingly, Scales is making a donation of $250,000 to the recovery. We will
also be providing tailored assistance to those staf f members who have been particularly af f ected.”
“Sustainability also plays a huge part in the f uture of our businesses, and we remain committed to
maximise our ef f orts in this area and accomplish as much as we can. We have made signif icant
strides in our Sustainability strategy and reporting this year and we look f orward to sharing details of
that with you in our Annual Report.”
“We were pleased to welcome our Australian partners f rom Fayman International and ANZ Exports
(together ‘Fayman’) to the Group towards the end of the year and are excited to work with them going
f orward. Our f inancial position remains strong, with net cash at 31 December 2022 of $27.0 million,
providing us with the ability to rebuild f rom the damage as well as to continue to invest in f urther
growth opportunities.”
During the year Scales declared dividends of 15.5 cents per share
3
. As previous announced, our
dividend payments will be in 3 instalments this year. The f irst instalment, of 6.0 cps, was paid in
January and we will pay the second instalment, of 3.5 cps, on 31 March 2023. We will review, and
advise on, the third instalment in respect of FY2022 in early May 2023. Directors advise that the
dividend policy will revert to 50 per cent to 75 per cent of Underlying NPAT Attributable to
Shareholders f rom FY2023.
3
Scales declared a final dividend of 9.5 cents per share for FY2021 on 28 April 2022, which was paid on 8 July 2022 and
declared an interim dividend of 6.0 cents per share for FY2022 on 9 December 2022, which was paid on 16 January 2023.
3
Divisions
Global Proteins
Underlying EBITDA f or Global Proteins was a record $60.2 million (FY2021: $33.4 million), an
increase of 80 per cent
4
.
Mr Borland noted “Global Proteins continued to outperf orm expectations with its signif icant growth
over the year. Petf ood ingredient volumes sold increased by 6 per cent
5
compared to FY2021, with
revenue increasing 46 per cent over the same period.”
“The leadership and management of the division contributed to the division’s performance, underlined
by strong, long term customer relationships built on trust and a track-record of consistent delivery of
our high quality ingredients. Operational improvements, new products and changes in mix, together
with a 2-month contribution f rom Fayman, also supplemented the division’s growth.”
“We continue to believe there is signif icant opportunity within the proteins market and we have global
growth aspirations f or the division over the short to medium term.”
Horticulture
The Horticulture division produced an Underlying FY2022 EBITDA of $17.0 million (FY2021:
$40.8 million).
Mr Borland commented “FY2022 was a very challenging year f or the Horticulture division as well as
the overall horticulture industry. In addition to adverse weather at the start of the season, earnings
and volumes were impacted by lockdowns in China, particularly during critical sales windows including
during the latter parts of the season. Lower volumes, higher shipping costs and labour availability also
contributed to the results.”
“Mr Apple’s own-grown export volume was 3,324k TCEs
6
(FY2021: 3,651k TCEs), with both Premium
and Traditional volumes decreasing compared to the prior year. However, demand f or Premium
varieties remained strong. Overall prices were af f ected by the slow sales rates, although
encouragingly many Premium prices were in line with, or slightly above, the prior year, substantiating
our strategy of investing in Premium varieties.”
“Progress was made on Mr Apple’s Whakatu packhouse automation programme together with the
ongoing orchard redevelopment programme. However, taking into account the ef f ects of Cyclone
Gabrielle, f uture investment will be prioritised towards other projects both within the Horticulture and
Global Proteins divisions.”
4
Note that, due to the change in strategic focus of the Global Proteins division, Profruit earnings have been reclassified to the Horticulture
division for 2022 and 2021.
5
Excludes volumes sold by Fayman
6
Tray carton equivalent, a measure of apple and pear weight, defined as 18.6kg packed weight which equates to 18.0kg sale weight.
4
Logistics
Logistics also delivered a record Underlying EBITDA, of $6.6 million (FY2021: $4.9 million), an
increase of 33 per cent.
Mr Borland stated “Logistics experienced signif icant growth in airf reight volumes, which of f set a small
decline in ocean f reight volumes, partly due to lower horticultural production. An excellent increase in
prof itability was also accompanied by a 51 per cent increase in revenue.”
“Once again, Scales Logistics proved its ability to navigate complex supply-chain disruptions to ensure
timely delivery of perishable products to its customers, and the skill and expertise of the Logistics
team remains a key advantage f or both internal and external f reight customers.”
Outlook
Mr Goodacre noted: “As previously advised, due to the wide ranging impacts of Cyclone Gabrielle on
Hawke’s Bay, we have withdrawn our FY2023 prof it Guidance at this time. However, we expect to
provide updated Guidance as soon as practicable once the f inancial impacts of the cyclone are f ully
understood.”
“As we embark on our journey to restore our orchards f ollowing the ef f ects of Cyclone Gabrielle, I
would like to of f er my heartf elt thanks and appreciation to the ef f orts of the each and every Scales
team member. Their dedication and commitment is remarkable, and Scales would not be the Group it
is without them.”
Contact
Andy Borland, Managing Director, Scales Corporation Limited, Mob: 021 975 999,
email: andy.borland@scalescorporation.co.nz
About Scales Corporation
Scales Corporation is a diversif ied agribusiness group. It comprises three operating divisions: Global
Proteins, Horticulture and Logistics. The company’s diverse spread of activities gives Scales broad
exposure to the agribusiness sector. Scales Corporation was f ounded in 1897 as a shipping business
by George Herbert Scales. Today it has operations across New Zealand, Australia and the United
States. Find out more at www.scalescorporation.co.nz.
---
Scales Corporation Limited
consolidated financial statements
for the year ended 31 December 2022
Scales Corporation Limited
Contents
Directory3
Consolidated statement of comprehensive income4
Consolidated statement of changes in equity6
Consolidated statement of financial position7
Consolidated statement of cash flows8
Notes to the consolidated financial statements10
Independent auditor's report51
2
Scales Corporation Limited
Directory
Board of DirectorsAuditor
Tim Goodacre (Chair)Deloitte Limited
Andrew Borland (Managing Director)Level 4
Miranda Burdon (appointed 31 August 2022)151 Cambridge Terrace
Nick HarrisChristchurch 8013
Mark Hutton
Alan IsaacBankers
Nadine TunleyANZ Bank New Zealand Limited
Qi XinLevel 3
ANZ Centre
Audit and Risk Management Committee267 High Street
Alan Isaac (Chair)Christchurch 8011
Nick Harris
Mark HuttonCoöperatieve Rabobank U.A., New Zealand Branch
Level 4
Nominations and Remuneration Committee32 Hood Street
Mark Hutton (Chair)Hamilton 3204
Tim Goodacre
Westpac New Zealand Limited
Finance and Treasury CommitteeLevel 4
Mark Hutton (Chair)The Terrace
Andrew Borland83 Cashel Street
Christchurch 8011
Health & Safety and Sustainability Committee
Nadine Tunley (Chair)Solicitors
Andrew BorlandAnthony Harper
Miranda BurdonLevel 9
Anthony Harper Tower
Registered Office62 Worcester Boulevard
52 Cashel StreetChristchurch 8013
Christchurch 8013
New ZealandChapman Tripp
15 Customs Street West
Postal AddressAuckland 1010
PO Box 1590
Christchurch 8140Corporate Advisor
New ZealandMaher & Associates
17 Albert Street
TelephoneAuckland 1010
+64 3 379 7720
Share Registry
WebsiteComputershare Investor Services Limited
www.scalescorporation.co.nzLevel 2
159 Hurstmere Road
Takapuna
North Shore City
Auckland 0622
3
Scales Corporation Limited
Consolidated statement of comprehensive income for the year ended 31 December 2022
20222021
Note$000's$000's
RevenueB1619,173514,551
Cost of salesB2(492,547)(400,663)
126,626113,888
Administration and operating expensesB2(53,003)(47,241)
Reversal of impairment (impairment) on revaluationC1(3,729)1,650
Share of profit of entities accounted for using the equity methodC34,6243,162
Other incomeB3676,022
Other lossesB3(6,069)(5,862)
EBITDA68,51671,619
Amortisation(379)(342)
DepreciationC1(10,220)(10,443)
Depreciation of right-of-use assetG2(9,087)(8,760)
EBIT48,83052,074
Finance revenue1,0451,203
Finance costB4(1,284)(1,786)
Finance cost of lease liabilityG2(2,953)(2,964)
PROFIT BEFORE INCOME TAX EXPENSE45,63848,527
Income tax expenseB5
(7,407)(11,577)
PROFIT FOR THE YEAR38,23136,950
Profit for the year is attributable to:
Equity holders of the Company19,41226,925
Non-controlling interests18,81910,025
38,23136,950
EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
Basic earnings per share (cents)D513.719.1
Diluted earnings per share (cents)D513.719.1
The notes to the financial statements on pages 10 to 50 form part of and should be read in conjunction with this statement.
4
Scales Corporation Limited
Consolidated statement of comprehensive income for the year ended 31 December 2022 (continued)
20222021
Note$000's$000's
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Loss on cash flow hedges(10,704)
(20,730)
Income tax relating to cash flow hedges2,997
5,804
Share of other comprehensive income of joint venturesC3817
(1,015)
Income tax relating to share of other comprehensive income of joint ventures(229)
284
Foreign exchange gain (loss) on translating foreign operations330
692
(6,789)(14,965)
Items that will not be reclassified to profit or loss:
Revaluation of land and buildings10,355
22,362
Income tax relating to buildings(331)
(1,647)
Revaluation of apple trees(3,873)
3,048
Income tax relating to apple trees1,084
(854)
Remeasurement of net defined benefit liability372
318
Income tax relating to remeasurement of net defined benefit liability(44)
-
7,56323,227
OTHER COMPREHENSIVE INCOME FOR THE YEAR7748,262
TOTAL COMPREHENSIVE INCOME FOR THE YEAR39,00545,212
Total comprehensive income for the year attributable to:
Equity holders of the Company20,03735,060
Non-controlling interests18,96810,152
39,00545,212
The notes to the financial statements on pages 10 to 50 form part of and should be read in conjunction with this statement.
5
Scales Corporation Limited
Consolidated statement of changes in equity for the year ended 31 December 2022
Share
capital
ReservesRetained
earnings
Attributable
to owners
of the
Company
Non-
controlling
interests
Total
Note$000's$000's$000's$000's$000's$000's
Balance at 1 January 2021
96,371 86,774190,622 373,7674,638
378,405
Profit for the year--26,92526,92510,02536,950
Other comprehensive income for the year-8,135-8,1351278,262
Total comprehensive income for the year-8,13526,92535,06010,15245,212
Reclassification of revaluation reserveD2-(2,224)
2,224-
--
Recognition of share-based paymentsD2-
726
-
726-
726
Shares soldD1
347--347-
347
Shares fully vestedD1, D2
2,870 (1,251)(295)1,324-
1,324
DividendsD3
--(26,832)(26,832)(8,868)
(35,700)
Balance at 31 December 202199,58892,160192,644384,3925,922390,314
Profit for the year--19,41219,41218,81938,231
Other comprehensive income for the year-625-625149774
Total comprehensive income for the year-62519,41220,03718,96839,005
Recognition of share-based paymentsD2
-609-609-
609
Shares soldD1
116--116-
116
Shares fully vestedD1, D2
2,271(804)(234)1,233-
1,233
DividendsD3
--(21,947)(21,947)(17,516)
(39,463)
Balance at 31 December 2022101,97592,590189,875384,4407,374391,814
The notes to the financial statements on pages 10 to 50 form part of and should be read in conjunction with this statement.
6
Scales Corporation Limited
Consolidated statement of financial position as at 31 December 2022
20222021
Note$000's$000's
EQUITY
Share capitalD1
101,97599,588
ReservesD2
92,59092,160
Retained earnings
189,875192,644
Equity attributable to Scales Corporation Limited shareholders384,440384,392
Equity attributable to non-controlling interests7,3745,922
TOTAL EQUITY391,814390,314
CURRENT ASSETS
Cash and bank balances
68,14435,398
Term deposits
-85,000
Trade and other receivablesE1
42,10228,658
Current tax assets
5,334-
Other financial assetsE2
4,9385,923
Unharvested agricultural produceC2
25,14924,561
InventoriesC5
42,64729,641
Prepayments
4,7834,056
TOTAL CURRENT ASSETS193,097213,237
NON-CURRENT ASSETS
Property, plant and equipmentC1
221,204213,869
Investments accounted for using the equity methodC3
54,74326,051
GoodwillC4
45,52743,392
Other financial assetsE215,51111,074
Computer softwareC7
1,332717
Right-of-use assetG2
49,04476,431
TOTAL NON-CURRENT ASSETS387,361371,534
TOTAL ASSETS580,458584,771
CURRENT LIABILITIES
Bank overdrafts
2,3682,196
Trade and other payablesE3
37,22623,466
Dividend declaredD3
8,50313,419
Current tax liabilities
-479
Other financial liabilitiesE515,4457,410
Lease liabilityG2
10,92510,237
TOTAL CURRENT LIABILITIES74,46757,207
NON-CURRENT LIABILITIES
BorrowingsE4
38,73236,060
Deferred tax liabilitiesB5
17,82122,944
Defined benefit plan net liability
170427
Other financial liabilitiesE513,3888,338
Lease liabilityG2
44,06669,481
TOTAL NON-CURRENT LIABILITIES114,177137,250
TOTAL LIABILITIES188,644194,457
NET ASSETS391,814390,314
The notes to the financial statements on pages 10 to 50 form part of and should be read in conjunction with this statement.
7
Scales Corporation Limited
Consolidated statement of cash flows for the year ended 31 December 2022
20222021
Note$000's$000's
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Receipts from customers606,293505,854
Dividends and distributions received1,8762,251
Interest received1,3931,416
609,562509,521
Cash was disbursed to:
Payments to suppliers and employees(545,477)(453,109)
Interest paid(4,237)(4,750)
Income tax paid(14,983)(11,823)
(564,697)(469,682)
NET CASH PROVIDED BY OPERATING ACTIVITIES44,86539,839
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Proceeds from maturing term deposits85,00019,632
Advances repaid1121,231
Sale of property, plant and equipment and computer software1613,773
85,27324,636
Cash was applied to:
Purchase of property, plant and equipment(14,592)(15,822)
Purchase of computer software(994)(705)
Purchase of financial instruments-(325)
Puchase of non-controlling shareholding(2,180)-
Acquisition of interest in joint ventures(25,968)-
Advances to joint ventures(2,818)-
(46,552)(16,852)
NET CASH PROVIDED BY INVESTING ACTIVITIES38,7217,784
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Treasury stock sold116347
116347
Cash was applied to:
Dividends paid(26,863)(26,772)
Dividends paid to non-controlling interests(17,516)(8,868)
Repayments of lease liabilities(8,281)(7,839)
Repayments of term facility borrowingsE4-(18,000)
(52,660)(61,479)
NET CASH USED IN FINANCING ACTIVITIES(52,544)(61,132)
NET INCREASE (DECREASE) IN NET CASH31,042(13,509)
Net foreign exchange difference1,532677
Cash and cash equivalents at the beginning of the year33,20246,034
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR65,77633,202
Represented by:
Cash and bank balances
68,144
35,398
Bank overdrafts
(2,368)
(2,196)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR65,77633,202
The notes to the financial statements on pages 10 to 50 form part of and should be read in conjunction with this statement.
8
Scales Corporation Limited
Consolidated statement of cash flows for the year ended 31 December 2022 (continued)
20222021
Note$000's$000's
NET CASH GENERATED BY OPERATING ACTIVITIES
Reconciliation of profit for the year to net cash generated by operating activities:
Profit for the year38,23136,950
Non-cash items:
Depreciation (including on right-of-use asset)19,30719,203
Loss on lease modification1,854-
Impairment (reversal of impairment) on revaluation3,729(1,650)
Amortisation379342
Share of equity accounted results(4,624)(3,162)
Hedging instruments192358
Government grant-(879)
Gain on disposal of property, plant and equipment(66)(1,132)
Share-based payments609726
Change in gross liability on put options4,2151,852
Deferred tax(1,774)871
Interest capitalised into loans(24)-
Operating cash receipts not included in profit for the year:
Dividends received from equity accounted entities1,8752,250
Changes in net assets and liabilities:
Trade and other receivables(12,812)(8,828)
Unharvested agricultural produce(588)(539)
Inventories(12,553)(3,498)
Prepayments(712)(148)
Trade and other payables13,429(1,760)
Current tax assets and liabilities(5,802)(1,117)
NET CASH PROVIDED BY OPERATING ACTIVITIES44,86539,839
Statement of cash flows
For the purpose of the statement of cash flows, cash and cash equivalents include cash and bank balances and
bank overdrafts.
The following terms are used in the statement of cash flows:
Operating activitiesare the principal revenue producing activities of the Group and other activities that are not
investing or financing activities.
Investing activitiesare the acquisition and disposal of long-term assets and other investments not included in cash
equivalents.
Financing activitiesare activities that result in changes in the size and composition of the contributed equity and
borrowings of the Group.
For and on behalf of the Board of Directors who authorised the issue of the financial statements on 22 February 2023.
Tim Goodacre, ChairAndy Borland, Managing Director
The notes to the financial statements on pages 10 to 50 form part of and should be read in conjunction with this statement.
9
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
ABOUT THIS REPORT
IN THIS SECTION
The notes to the financial statements include information which is considered relevant and material to assist the
reader in understanding the financial performance and financial position of the Scales Corporation Limited Group
("Scales" or the "Group"). Information is considered relevant and material if:
• the amount is significant because of its size and nature;
• it is important for understanding the results of Scales;
• it helps to explain changes in Scales’ business; or
• it relates to an aspect of Scales’ operations that is important to future performance.
Scales Corporation Limited (the "Company") is a for-profit entity domiciled and registered under the Companies
Act 1993 in New Zealand. It is an FMC reporting entity for the purposes of the Financial Markets Conduct Act
2013. The Group consists of Scales Corporation Limited, its subsidiaries and joint ventures. The principal activities
of the Group are to grow apples, provide logistics services, export products, manufacture and trade food ingredients,
provide insurance services to companies within the Group and operate processing facilities.
The financial statements have been prepared:
• in accordance with Generally Accepted Accounting Practice (GAAP), International Financial Reporting Standards
(IFRS), the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable
financial reporting standards, as appropriate for a Tier 1 for-profit entity;
• in accordance with the requirements of the Financial Markets Conduct Act 2013;
• in accordance with accounting policies that are consistent with those applied in the previous year;
• on the basis of historical cost, except for certain assets and financial instruments that are measured at fair
values; and
• in New Zealand dollars with all values rounded to the nearest thousand dollars.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree
to which the inputs to the fair value measurements are observable. The levels are described as:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Key judgements and estimates
In the process of applying the Group’s accounting policies and the application of financial reporting standards,
Scales has made a number of judgements and estimates. The estimates and underlying assumptions are based on
historical experience and various other factors that are considered to be appropriate under the circumstances.
Actual results may differ from these estimates.
10
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
ABOUT THIS REPORT (CONTINUED)
Key judgements and estimates (continued)
Judgements and estimates which are considered material to understanding the performance of Scales are
explained in the following notes:
• Apple trees in note C1;
• Unharvested agricultural produce in note C2;
• Assessment of Group goodwill for impairment in note C4.
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and its subsidiaries (being
entities controlled by Scales Corporation Limited), and the equity accounted result, assets and liabilities of the
joint ventures.
The financial statements of members of the Group, are prepared for the same reporting period as the parent
company, using consistent accounting policies.
In preparing the Group financial statements, all material intra-group transactions, balances, income, expenses and
cash flows have been eliminated. Subsidiaries are consolidated from the date on which control is obtained to the
date on which control is lost.
Other accounting policies
Other accounting policies that are relevant to an understanding of the financial statements are provided
throughout the notes to the financial statements.
Adoption of new and revised standards and interpretations; standards and Interpretations issued but not yet effective
All mandatory amendments and interpretations have been adopted in the current year. None had a material impact
on these financial statements.
The Group has reviewed the standards, interpretations and amendments to existing standards
issued but not yet effective and does not expect these standards to have a material effect on the
financial statements of the Group when adopted.
11
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
A. SEGMENT INFORMATION
IN THIS SECTION
This section explains the financial performance of the operating segments of Scales, providing additional
information about individual segments, including:
• total segment revenue and revenue from external customers;
• segment profit before income tax; and
• total segment assets and liabilities.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker, being the Managing Director. The Managing Director monitors the operating
performance of each segment for the purpose of making decisions on resource allocation and strategic direction.
Inter-segment pricing is determined on an arm’s length basis. Segment results include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
No single external customer’s revenue accounts for 10% or more of the Group’s revenue.
Change in segments:
The Food Ingredients segment has been changed to Global Proteins, which includes the new entities acquired during
the year and shifting Profruit (2006) Limited to the Horticulture segment. This impacts the share of profit in entities
accounted for using the equity method and the carrying value of investments accounted for using the equity method.
The prior year figures have been restated to reflect this change in segments.
The Group comprises the following operating segments:
Global Proteins: processing and marketing of proteins such as pet food ingredients, edible meat and offal products.
Meateor Foods Limited, Meateor Foods Australia Pty Limited, Meateor Group Limited, Meateor US LLC,
Shelby JV LLC Group (Shelby Cold Storage LLC, Shelby Exports Inc, Shelby Foods LLC, Shelby JV LLC, Shelby Properties LLC,
Shelby Trucking LLC), Meateor GP Limited, Meateor Pet Foods Limited Partnership, Scales FI Group Holdings Pty Limited,
Meateor Australia Pty Limited, FI Group Holdings Pty Limited Group (FI Group Holdings Pty Limited,
Fayman International Group Pty Limited and Fayman New Zealand Limited) and ANZ Exports Pty Limited.
Horticulture: orchards, fruit packing, juice concentrate processing and marketing. Mr Apple New Zealand Limited,
New Zealand Apple Limited, Fern Ridge Produce Limited, Longview Group Holdings Limited and Profruit (2006) Limited.
Logistics: logistics services. Scales Logistics Limited and Scales Logistics Australia Pty Ltd.
Other: Scales Corporation Limited, Geo. H. Scales Limited, Scales Employees Limited, Scales Holdings Limited
and Selacs Insurance Limited.
Global Proteins HorticultureLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
2022
Total segment revenue319,923228,854123,3382,893(55,835)619,173
Inter-segment revenue--(52,894)(2,941)55,835-
Revenue from external customers319,923228,85470,444(48)-619,173
Gain on sale of non-current assets-66---66
Share of profit of entities accounted for3,5561,068---4,624
using the equity method
Reversal of impairment (impairment) on revaluation-(3,729)---(3,729)
Loss on lease modification-(1,854)---(1,854)
12
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
SEGMENT REPORTING (CONTINUED)
Global Proteins HorticultureLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
EBITDA58,91310,3326,595(7,324)-68,516
Amortisation expense-(361)(18)--(379)
Depreciation expense(747)(9,285)(176)(12)-(10,220)
Depreciation of right-of-use asset(64)(8,393)(572)(58)-(9,087)
Finance revenue362018971-1,045
Finance costs(25)(62)(39)(1,158)-(1,284)
Finance cost of lease liability(14)(2,664)(264)(11)-(2,953)
Income tax expense(11,012)2,871(1,615)2,32326(7,407)
Segment profit (loss) after income tax47,087(7,542)3,929(5,269)2638,231
Global Proteins HorticultureLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
Segment assets169,018345,09629,03237,312-580,458
Segment liabilities46,398107,85015,96718,429-188,644
Segment carrying value of investment47,8856,858---54,743
accounted for using the equity method
Segment acquisition of property, plant and3,49111,89816826-15,583
equipment and computer software
Segment acquisition of right of use assets426,61433-6,689
2021
Total segment revenue218,852243,42281,8783,453(33,054)514,551
Inter-segment revenue--(30,166)(2,888)33,054-
Revenue from external customers218,852243,42251,712565-514,551
Gain on sale of non-current assets-1,132---1,132
Share of profit of entity accounted for1,4471,715---3,162
using the equity method-
Reversal of impairment (impairment) on revaluation-1,650--1,650
-
EBITDA32,93341,2394,942(7,495)-71,619
Amortisation expense-(298)(33)(11)-(342)
Depreciation expense(733)(9,522)(177)(11)-(10,443)
Depreciation of right-of-use asset(58)(8,047)(596)(59)-(8,760)
Finance revenue---1,203-1,203
Finance costs(24)(18)(31)(1,713)-(1,786)
Finance cost of lease liability(14)(2,666)(271)(13)-(2,964)
Income tax expense(6,485)(5,470)(1,170)1,47672(11,577)
Segment profit (loss) after income tax25,61915,2182,664(6,623)7236,950
13
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
SEGMENT REPORTING (CONTINUED)
Global Proteins HorticultureLogisticsOtherEliminationsTotal
$000's$000's$000's$000's$000's$000's
Segment assets105,866354,04022,382102,483-584,771
Segment liabilities27,064126,00512,96128,427-194,457
Segment carrying value of investment19,3876,664---26,051
accounted for using the equity method
Segment acquisition of property, plant and54215,921584-16,525
equipment and computer software
Segment acquisition of right of use assets-6,94133934-7,314
Non-current assets other than financial instruments by geographical location
New ZealandAustraliaUSATotal
20222021202220212022202120222021
$000's$000's$000's$000's$000's$000's$000's$000's
Property, plant and equipment213,614210,07431347,5593,761221,204213,869
Investments accounted for27,67426,05127,069---54,74326,051
using the equity method
Goodwill16,18916,188--29,33827,20445,52743,392
Computer software1,332717----1,332717
Right-of-use asset48,57875,89714918031735449,04476,431
14
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
B. FINANCIAL PERFORMANCE
IN THIS SECTION
This section explains the financial performance of Scales, providing additional information about individual items
in the statement of comprehensive income, including:
• accounting policies, judgements and estimates that are relevant for understanding items recognised in the
statement of comprehensive income; and
• analysis of Scales’ performance for the year by reference to key areas including revenue, expenses and taxation.
B1. REVENUE
20222021
$000's$000's
By nature:
Revenue from the sale of goods
525,298 428,738
Revenue from the rendering of services
88,990 69,082
Fees and commission
1313
Net foreign exchange loss/(gain)
(544)12,268
Rental revenue
5,4164,450
619,173 514,551
By market:
New Zealand
95,627 96,972
Asia
162,097 140,261
Europe
32,262 45,668
North America
325,855 224,301
Other
3,3327,349
619,173 514,551
By segment and type:
Horticulture - sale of agricultural produce214,084226,606
Horticulture - agricultural produce related services9,36312,375
Horticulture - other5,4074,441
Global Proteins - sale of pet food ingredients310,517213,416
Global Proteins - other9,4065,436
Logistics services70,44451,712
Other(48)565
619,173 514,551
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service
to a customer.
15
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
B1. REVENUE (CONTINUED)
Sale of agricultural produce
The Group sells apples to more than 160 customers in 40 countries. Sales-related quality claim provisions are
recorded in accordance with NZ IAS 37Provisions, Contingent Liabilities and Contingent Assets. Revenue is
recognised when control of the goods has transferred, being when the goods have been shipped to the customer
("outright sales") or when the goods have been sold by the customer ("consignment sales"). In addition, the apple
season finishes before the end of the calendar year, with performance obligations under both sales types satisfied
for all sales made during that season.
Outright sales
Following shipment, revenue is recognised when the customer obtains control as it has full discretion over the
manner of distribution and price to sell the goods, has the primary responsibility when onselling the goods and
bears the risks of loss in relation to the goods. A receivable is recognised by the Group when it loses control,
which is when the goods are delivered on the ship at the port of shipment as this represents the point in time at
which the right to consideration becomes unconditional, as only the passage of time is required before the
payment is due. Terms of payment are up to 45 days on arrival.
Consignment sales
Revenue is recognised by the Group when it loses control, which is when the goods are confirmed to be on-sold
to the ultimate customer as this represents the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before the payment is due. Terms of payment are
immediate upon on-sale.
Sale of petfood ingredients
The Group sells petfood ingredients to a number of international and domestic customers. Revenue is recognised
when control of the goods has transferred, being when the goods have been delivered to the customer ("delivered
to destination sales") or when shipped to the customer ("outright sales"). Terms of payment are up to 120 days.
Delivered to destination sales
Following delivery, revenue is recognised when the customer obtains control as it has full discretion over the
manner of distribution and price to sell the goods, has the primary responsibility when onselling the goods and
bears the risks of loss in relation to the goods. A receivable is recognised by the Group when it loses control, which is
when the goods are delivered to the destination named by the customer as this represents the point in time at
which the right to consideration becomes unconditional, as only the passage of time is required before the
payment is due.
Outright sales
Same as above under "Sale of agricultural produce - outright sales".
Agricultural produce related services
The Group provides a number of agricultural produce related services to external apple growers, including
packaging, cartage, export documentation and export services. Each of those services is considered to be a distinct
service as it is both regularly supplied by the Group to customers on a stand-alone basis and is available for
customers from other providers in the market.
A receivable is recognised by the Group when the service performance has been completed, and the performance
obligation is satisfied as this represents the point in time at which the right to consideration becomes unconditional,
as only the passage of time is required before the payment is due. Terms of payment are up to 45 days.
Logistics services
The Group provides marine and air logistics services to domestic customers. Revenue is recognised by the Group
at a point in time, which is when the shipment is organised and the goods are on the ship or the aeroplane. The
performance obligation is satisfied at the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before the payment is due. Terms of payment are up to 60 days.
16
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
B2. COST OF SALES, ADMINISTRATION AND OPERATING EXPENSES
20222021
$000's$000's
Auditor's remuneration:
Deloitte Limited (New Zealand):
Audit of the financial statements:
Audit of the annual financial statements
285232
Review of interim financial statements
-48
Other assurance services:
Audit of solvency certificate for Selacs Insurance Limited
77
Sheehan & Company CPA, PC (United States):
Group reporting audit
11588
Review of subsidiary financial statements
3528
Bad debts (recovered) incurred
(112)14
Change in fair value adjustment to unharvested agricultural produce
(131)932
Change in inventories
(12,688)(3,743)
Direct expenses
99,408 71,145
Directors' fees
677596
Donations
102
Electricity
3,5832,899
Employee benefits expense:
Post employment benefits - defined contribution plans
1,2651,339
Post employment benefits - defined benefit plans
689438
Salaries, wages and related benefits
94,037 83,363
Other employee benefits
609726
Grower payments
31,568 47,803
Insurance
4,1903,946
Management fees
4448
Materials and consumables
182,046 136,854
Ocean and air freight
118,136 76,414
Operating lease expenses
2,2182,319
Packaging
14,029 16,487
(Reversal of) provision for write-down of inventories
(107)405
Repairs and maintenance
5,6375,514
545,550 447,904
Disclosed as:
Cost of sales492,547400,663
Administration and operating expenses53,00347,241
545,550 447,904
Employee benefits
An accrual is made for benefits due to employees in respect of wages and salaries, annual leave and long service
leave when it is probable that settlement will be required and they are capable of being measured reliably.
Accruals are measured at their nominal values using the remuneration rate expected to apply at the time of
settlement.
Contributions to defined contribution plans are recognised as an expense when employees have rendered service
entitling them to the contributions.
The costs relating to shares issued in accordance with the Senior Executive Share Scheme are explained in note D2.
17
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
B3. OTHER INCOME AND LOSSES
20222021
$000's$000's
Dividends
11
Gain on disposal of property, plant and equipment
661,132
Loss on lease modification
(1,854)-
Government grants
-879
Insurance claims expense paid (Note G4)
-(4,010)
Reinsurance income (Note G4)
-4,010
Remeasurement of gross liability to non-controlling interest
(4,215)(1,852)
(6,002)160
Disclosed as:
Other income676,022
Other losses(6,069)(5,862)
(6,002)160
B4. FINANCE COST
Interest on loans
1,1401,281
Other interest
73443
Bank facility fees
7162
1,2841,786
Finance costs consist of interest and other costs incurred in connection with the borrowing of funds. Interest
expense is accrued on a time basis using the effective interest method.
B5. TAXATION
Income tax recognised in profit or loss
Income tax expense comprises:
Current tax expense
9,324 10,353
Adjustments recognised in the current year in relation to the current tax of prior years(143)
369
Deferred tax expense relating to the origination and reversal of temporary differences
(1,774)855
Total income tax expense recognised in profit or loss
7,407 11,577
The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the
financial statements as follows:
Profit before tax45,63848,527
Income tax expense calculated at applicable corporate tax rates11,83013,065
Non-assessable income(5,404)(3,092)
Non-deductible expenses1,1241,235
(Over) under provision of income tax in previous year - current tax(143)369
Under provision of income tax in previous year - deferred tax--
7,407 11,577
18
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
B5. TAXATION (CONTINUED)
The tax rates used in the above reconciliation are the corporate tax rate of 28% payable by New Zealand companies
under New Zealand tax law, 30% payable by Australian companies under Australian tax law and 25.5% payable by
US entities under US tax law (being federal tax 21% and weighted average state tax 4.5%).
Opening
balance
Charged to
profit or loss
Charged to
other
comprehen-
sive income
Foreign
exchange
movements
Closing
Balance
$000's$000's$000's$000's$000's
Deferred tax liability
Taxable and deductible temporary differences
arise from the following:
31 December 2022
Deferred tax liabilities (assets):
Trade and other receivables11
71--
82
Unharvested agricultural produce6,877
165--
7,042
Property, plant and equipment and computer software15,985
(1,409)(753)137
13,960
Trade and other payables(850)
142--
(708)
Lease liability and right-of-use asset (NZ IFRS 16)(939)
(743)-(4)
(1,686)
Other financial assets and liabilities, joint ventures and pension plan1,860
-(2,724)(5)
(869)
Net deferred tax liability22,944(1,774)(3,477)12817,821
31 December 2021
Deferred tax liabilities (assets):
Trade and other receivables(164)175--11
Unharvested agricultural produce6,719158--6,877
Property, plant and equipment and computer software12,5148872,5018315,985
Trade and other payables(748)(102)--(850)
Lease liability and right-of-use asset (NZ IFRS 16)(676)(263)--(939)
Other financial assets and liabilities, joint ventures and pension plan7,951-(6,088)(3)1,860
Net deferred tax liability25,596855(3,587)8022,944
Current tax is the taxation expected to be paid to taxation authorities in respect of the current year. Deferred taxation
is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying
amounts in the Financial Statements. Current and deferred tax is calculated on the basis of the laws enacted or
substantively enacted at balance date.
Income tax
Current and deferred tax are recognised in profit or loss, except when the tax relates to items charged or credited
to other comprehensive income, in which case the tax is also recognised in other comprehensive income.
19
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
B6. FOREIGN CURRENCY TRANSACTIONS
In preparing the financial statements of the individual entities, the transactions in currencies other than New
Zealand dollars are recorded at the rates of exchange prevailing at the dates of the transaction. At the end of each
reporting period financial assets and liabilities denominated in foreign currencies are retranslated into New
Zealand dollars at the rates prevailing at the end of the reporting period.
Exchange differences from these transactions are recognised in profit or loss in the period in which they arise.
Income and expenses for each subsidiary whose functional currency is not New Zealand dollars are translated at
exchange rates that approximate the rates at the actual dates of the transactions. Assets and liabilities of each
subsidiary are translated at exchange rates at balance date.
All resulting exchange differences are recognised in the foreign exchange translation reserve, which is a separate
component of equity.
The effective portion of exchange differences on foreign currency borrowings designated as hedges of net
investments in foreign operations is also recognised in the foreign exchange translation reserve.
20
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C. KEY ASSETS
IN THIS SECTION
This section shows the key assets Scales uses to generate operating revenues. There is information about:
• property, plant and equipment;
• unharvested agricultural produce;
• investments accounted for using the equity method;
• goodwill; and
• inventories.
C1. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings at
fair value
Apple trees at
fair value
Plant and
equipment
at cost
Office
equipment and
motor vehicles
at cost
Capital work
in progress
at costTotal
$000's$000's$000's$000's$000's$000's
Gross carrying amount
Balance at 1 January 2021
107,89932,804 63,98213,009 17,738
235,432
Additions
14,8252,5687,428684 (9,683)
15,822
Disposals
--(304)(1,293)-
(1,597)
Revaluation
20,61822---
20,640
Effect of foreign currency translation
109-202110
322
Balance at 31 December 2021143,45135,39471,30812,4018,065270,619
Additions
7212,437 11,0551,793 (1,414)
14,592
Disposals
--(100)(534)(21)
(655)
Revaluation
8,257(6,030)---
2,227
Effect of foreign currency translation
158-301229
490
Balance at 31 December 2022152,58731,80182,56413,6626,659287,273
Accumulated depreciation, and impairment
Balance at 1 January 2021
1,8731,840 40,6219,787
-54,121
Depreciation expense
1,7453,0264,5121,160
-10,443
Disposals
--(259)(1,247)
-(1,506)
Revaluation
(1,744)(3,026)--
-(4,770)
Reversal of impairment on revaluation
(610)(1,040)--
-(1,650)
Effect of foreign currency translation
--112-
-112
Balance at 31 December 20211,26480044,9869,700-56,750
Depreciation expense
2,0982,1574,9091,056
-10,220
Disposals
--(39)(519)
-(558)
Revaluation
(2,098)(2,157)--
-(4,255)
Impairment on revaluation
673,661--
-3,728
Effect of foreign currency translation
--1831
-184
Balance at 31 December 20221,3314,46150,03910,238-66,069
Net book value
As at 31 December 2021142,18734,59426,3222,7018,065213,869
As at 31 December 2022151,25627,34032,5253,4246,659221,204
21
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C1. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Accounting policy
Land, buildings and apple trees are included in the statement of financial position at their fair value at the date of
revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Valuations are performed with sufficient regularity such that the carrying amounts do not differ materially from
those that would be determined using fair values at the end of the reporting period.
Any valuation increase arising on the revaluation of such land, buildings and apple trees is recognised in other
comprehensive income and accumulated as a separate component of equity in the revaluation reserve, except to
the extent that it reverses a valuation decrease for the same asset previously recognised in profit or loss, in which
case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in
carrying amount arising on the revaluation of such land, buildings and apple trees is charged to profit or loss to
the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of
that asset.
Depreciation on revalued buildings and apple trees is charged to profit or loss. On the subsequent sale or
retirement of revalued property or apple trees, the attributable revaluation surplus remaining in the revaluation
reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained
earnings except when an asset is derecognised.
Office equipment, motor vehicles, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the
item.
Depreciation is provided on property, plant and equipment, including buildings and apple trees but excluding land
and capital work in progress. Depreciation is charged so as to write off the cost or valuation of assets, other than
land and capital work in progress, over their estimated useful lives, using the straight-line method. The estimated
useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes
in estimate accounted for on a prospective basis. The following estimated useful lives are used in the calculation of
depreciation:
Apple trees30 years
Buildings10 to 50 years
Office Equipment and Motor Vehicles2 to 20 years
Plant and Equipment2 to 25 years
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or
loss.
Land and buildings carried at fair value
Land and buildings shown at valuation were valued at fair value as at 31 December 2022 by independent registered
valuers Added Valuation Limited and Logan Stone Limited. The valuations were arrived at by reference to market
evidence of transaction prices for similar properties.
22
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C1. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land and buildings carried at fair value (continued)
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available.
Where Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation.
Group finance team led by the Chief Financial Officer works closely with the qualified external valuers to establish the
appropriate valuation techniques and inputs to the model. The Chief Financial Officer reports the Group finance team’s
findings to the Audit & Risk Management Committee to explain the methods used and causes of fluctuations in the fair
value of assets and liabilities.
The fair value of land and buildings is calculated on the basis of market value. Market value is determined by applying
income capitalisation and comparative sales calculations which are benchmarked against depreciated replacement
cost calculations. The valuations include adjustments to observable data for similar properties to take into
account property-specific attributes.
The significant unobservable inputs, based on regional averages, for the land and buildings (mainly coolstores and
packhouses) are potential market comparative rentals $5 - $250 per square metre (2021: $5 - $250) and the capitalisation
rates of 5.6% - 10% (2021: 5.3% - 10%).
The higher the rental rates the higher the fair value. The higher the capitalisation rates the lower the fair value.
Significant changes in either of these inputs would result in significant changes to the fair value measurement.
Orchard land is valued within the range of $39,500 to $180,000 per hectare (2021: $31,600 to $176,800).
The Group’s land and buildings are classified as Level 3 in the fair value hierarchy.
The carrying amount of land and buildings had it been recognised under the cost model is $62,365,000
(31 December 2021: $64,114,000).
Apple trees carried at fair value
The Group’s apple orchards, being the apple trees other than the existing crop on the trees, were valued at fair value by
Boyd Gross B.Agr (Rural Val), Dip Bus Std, FNZIV, FPINZ of Logan Stone Limited as at 31 December 2022.
The market valuations completed by Boyd Gross were based on a discounted cash flows analysis of forecast
income streams and costs. They were benchmarked against a comparison of sales of other orchards adjusted to reflect
the location, plantings, age and varieties of trees and productive capabilities of the orchards. The fair value of
orchard land and buildings are deducted from the overall orchard valuation to give rise to the apple trees valuation.
The significant unobservable inputs, based on district averages, for the apple trees are:
20222021
Production levels (gross tray carton equivalent (tce)) per hectare2,485 - 5,2493,262 - 7,599
Orchard gate returns per tce$20.00 - $62.00$25.00 - $40.00
Orchard costs per tce$20.21 to $37.16$13.63 to $31.14
Discount rate15.6% - 17.1%15.5% - 16.5%
The higher the production levels and orchard gate return the higher the fair value. The higher the orchard costs
and discount rate the lower the fair value. Significant changes in any of these inputs would result in significant
changes to the fair value measurement. The Group’s apple trees are classified as level 3 in the fair value hierarchy.
The carrying amount of apple trees had it been recognised under the cost model is $13,873,000
(31 December 2021: $15,421,216).
23
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C1. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The apple trees, on owned and leased orchards, have the following planting profile:
Total hectares planted
20222021
Premium varieties:
NZ Queen
205207
Pink Lady
117118
Red sports (Fuji and Royal Gala)
268264
Other premium
174173
Traditional varieties:
Braeburn
8689
Royal Gala
152160
Other traditional
147150
1,1491,161
Risk management strategy:
The Group is exposed to financial risks arising from changes in climatic conditions, market prices and the value of
the New Zealand dollar. The Group mitigates these risks by geographical spread of orchards, installing hail and frost
protection on orchards which have shown to be more susceptible to these risks, utilising foreign currency derivative
instruments and building close working relationships with key customers.
C2. UNHARVESTED AGRICULTURAL PRODUCE
20222021
$000's$000's
Balance at beginning of the year
24,561 24,022
Decrease due to harvest
(24,561)(24,022)
Development expenditure
26,388 25,931
Fair value adjustment
(1,239)(1,370)
Balance at end of the year
25,149 24,561
The assessment of the value of unharvested agricultural produce was undertaken by management, using a discounted
cash flow model, and is calculated as the fair value less estimated harvest and post-harvest costs (including
costs to sell) of the unharvested crop on the trees at the reporting date. The risk adjusting discount rate represents an
allowance for adverse events that may affect crop, harvest and/or market conditions. This calculation is also benchmarked
against orchard costs incurred during the current growing cycle.
The Group’s unharvested agricultural produce is classified as Level 3 in the fair value hierarchy.
The significant unobservable inputs included in the model are the:
20222021
Production levels (tonnes per hectare per annum)60 - 11127 - 131
Orchard gate returns per tce$23 to $65$24 to $57
Risk adjusting discount rates46% to 64%46% to 64%
The higher the yield per hectare and the higher the orchard gate returns per tce, the higher the fair value. The
higher the risk adjusting discount rate, the lower the fair value.
24
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Details of each of the Group’s material joint ventures at the end of the reporting period are as follows:
Joint venturesPrincipal activityCountry of
Holding
Balance date
incorporation
20222021
ANZ Exports Pty LtdTrading companyAustralia42.50%0% 30 June
FI Group Holding Pty LtdTrading companyAustralia50%0% 30 June
Meateor Australia Pty LtdTrading companyAustralia33.33%0% 30 June
Meateor Pet Foods Limited Partnership Trading companyNew Zealand50%50% 31 December
Profruit (2006) LimitedTrading companyNew Zealand50%50% 31 December
Summarised financial information in respect of the Group’s joint ventures is set out below. The aggregate summarised
financial information below represents amounts in joint ventures financial statements prepared in accordance
with NZ IFRS Standards.
The Australia incorporated entities have a balance date of 30 June which aligns with the income tax year in Australia.
On 31 October 2022, Scales Group acquired the shareholdings of FI Group Holding Pty Limited, ANZ Exports Pty Limited
and Meateor Australia Pty Limited. On the same date, Scales Group provided a put option to the other shareholders of
each entity for the remaining shares and the shareholders provided Scales Group with a call option for the remaining
shares. The exercise price is set at a value based on a multiple of the respective entities EBITDA. The options have a nil fair
value at 31 December 2022.
Summarised financial information for Profruit (2006) Limited for the year ended 31 December
20222021
$000's$000's
Current assets
14,558 11,832
Non-current assets
6,0156,058
Current liabilities
(4,717)(2,098)
Non-current liabilities
(2,142)(2,466)
Net assets
13,714 13,326
Group's share in the net assets
6,8576,663
Carrying amount of investment in equity accounted entities
6,8576,663
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
16434
Current financial liabilities (excluding trade and other payables and provisions)
(326)(325)
Non-current financial liabilities (excluding trade and other payables and provisions)
(2,142)(2,466)
Revenue
26,504 22,396
Profit for the year after tax
2,1283,430
Other comprehensive income attributable to the owners of the company
--
Total comprehensive income
2,1283,430
The above profit for the year includes the following:
Depreciation and amortisation
646604
Interest expense
469210
Income tax expense
8381,352
25
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
20222021
$000's$000's
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint
venture recognised in the consolidated financial statements:
Share of profit before taxation
1,4842,382
Share of income tax
(415)(667)
Share of other comprehensive income (net of tax)
--
Share of net profit for the year and total comprehensive income1,0691,715
Carrying value at beginning of the year
6,6636,198
Dividends and distributions paid
(875)(1,250)
Investment in equity accounted entities6,8576,663
Summarised financial information for Meateor Pet Foods Limited Partnership for the year ended 31 December
Current assets
25,679 19,824
Non-current assets
29,328 29,403
Current liabilities
(10,526)(7,461)
Non-current liabilities
(2,847)(2,991)
Net assets
41,634 38,775
Group's share in the net assets of equity accounted entities
20,817 19,388
Carrying amount of investment in equity accounted entities
20,817 19,388
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
320511
Current financial liabilities (excluding trade and other payables and provisions)
(3,600)(1,100)
Non-current financial liabilities (excluding trade and other payables and provisions)
--
Capital commitments
2,000-
Revenue
52,665 48,826
Profit for the year after tax
3,2242,894
Other comprehensive income attributable to the owners of the company
1,634(2,030)
Total comprehensive income
4,858864
The above profit for the year includes the following:
Depreciation and amortisation
1,2531,189
Interest expense
245190
Income tax expense
--
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint
venture recognised in the consolidated financial statements:
Share of profit before taxation
1,6121,447
Share of income tax
--
Share of other comprehensive income (net of tax)
817(1,015)
Share of net profit for the year and total comprehensive income2,429432
Carrying value at beginning of the year
19,388 19,956
Dividends and distributions paid by equity accounted entities
(1,000)(1,000)
Investment in equity accounted entities20,81719,388
26
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
Summarised financial information for the Fayman equity accounted entities for the year ended 31 December
The initial accounting for the acquisitions of FI Group Holdings Pty Limited, ANZ Exports Pty Limited and Meateor
Australia Pty Limited is provisional and will be finalised within 12 months of the acquisition.
2022
$000's
Current assets
35,931
Non-current assets
4,581
Current liabilities
(21,613)
Non-current liabilities
(13,678)
Net assets
5,221
Group's share in the net assets of equity accounted entities
2,611
Goodwill
25,301
Effect of foreign exchange translation
(841)
Carrying amount of investment in equity accounted entities
27,071
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
1,533
Current financial liabilities (excluding trade and other payables and provisions)
(14,742)
Non-current financial liabilities (excluding trade and other payables and provisions)
(13,607)
Revenue
48,546
Profit for the year after tax
4,112
Other comprehensive income attributable to the owners of the company
-
Total comprehensive income
4,112
The above profit for the year includes the following:
Depreciation and amortisation
7
Interest expense
268
Income tax expense
1,706
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint
venture recognised in the consolidated financial statements:
Share of profit before taxation
2,783
Share of income tax
(839)
Share of other comprehensive income (net of tax)
-
Share of net profit for the year and total comprehensive income1,944
Investment acquired
25,968
Dividends and distributions paid by equity accounted entities
-
Effect of foreign exchange translation
(841)
Investment in equity accounted entities27,071
The Group previously guaranteed a share of the Profruit (2006) Limited bank loan facilities, this was released in 2021
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
27
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
The results and assets and liabilities of joint ventures are incorporated in these consolidated financial statements
using the equity method of accounting. Under the equity method, an investment in a joint venture is initially
recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the
Group’s share of the profit or loss and other comprehensive income of the joint venture. Dividends or
distributions received from a joint venture reduce the carrying amount of the investment in that joint venture in
the Group financial statements. When the Group’s share of losses of a joint venture exceeds the Group’s interest
in that joint venture, the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on
behalf of the joint venture.
An investment in a joint venture is accounted for using the equity method from the date on which the investee
becomes a joint venture until the date it ceases to be a joint venture. On acquisition of the investment in a joint
venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable
assets and liabilities of the investee is recognised as goodwill, which is included within the carrying value of the
investment. The requirements of NZ IAS 36Impairment of Assetsare applied to determine whether it is
necessary to recognise any impairment loss.
28
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C4. GOODWILL
20222021
$000's$000's
Gross carrying amount
Balance at beginning of the year43,39241,905
Effect of foreign currency exchange differences2,1351,487
Balance at end of the year
45,527 43,392
Goodwill arising on the acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any. Goodwill is tested for impairment annually, or more
frequently if there are indications that goodwill might be impaired. For the purpose of impairment testing,
goodwill has been allocated to the cash-generating units (CGUs) listed below which represent the lowest level at
which the Directors monitor goodwill.
20222021
$000's$000's
Horticulture - Fern Ridge5,7025,702
Horticulture - Mr Apple8,5318,531
Food Ingredients - Shelby29,33927,204
Logistics1,9551,955
45,527 43,392
As at 31 December 2022, the Directors have determined, based on discounted cash flow and value in use
calculations, that there is no impairment of goodwill associated with Fern Ridge, Shelby and Logistics.
The discounted cash flow and value in use calculation uses future cash flows covering a five year period based on
a Board approved budget. The model was based on the following key assumptions:
29
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C4. GOODWILL (CONTINUED)
20222021
Pre-tax discount rates12-16%10-13%
Annual growth rates3%3%
The Directors consider that any reasonably possible changes in the key assumptions would not cause the carrying
amount of any of the CGUs to exceed their recoverable amount.
The directors determined the recoverable amount of Mr Apple CGU based on the value in use of the business
which uses future cash flows covering a 5 year period based on the director approved forecast.
The directors concluded that there is no impairment of the Mr Apple CGU as the recoverable amount exceeded the
carrying value of the Mr Apple CGU.
$000's
Recoverable amount of the Mr Apple CGU
286,967
Carrying value
244,014
Headroom
42,953
Key assumptions:
Post-tax discount rate8.67%
Terminal growth rate beyond year 52.00%
The post-tax discount rate was determined based on the weighted average cost of capital which utilises past
experience and external sources.
The sensitivity of the recoverable amount of the Mr Apple CGU to the reasonably possible changes
is set out below:
$000's$000's
+0.5%-0.5%
Post-tax discount rate
(20,270)23,471
Terminal growth rate
17,183 (14,785)
+5%-5%
Forecast earnings
20,558 (20,558)
Changes in each key assumptions that would result in the recoverable amount equalling the carrying amount, assuming
all other inputs remain unchanged, are set out below:
Post-tax discount rateIncrease by 1.15%
Terminal growth rateReduction by 1.69%
Forecast earningsReduction by 10.45%
30
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
C5. INVENTORIES
20222021
$000's$000's
Finished goods
37,810 25,041
Other
4,8374,600
42,647 29,641
Inventories are stated at the lower of cost and net realisable value. Cost means the actual cost of the inventory
and in determining cost the first in first out basis of stock movement is followed, with due allowance having been
made for obsolescence. Net realisable value represents the estimated selling price for inventories less all
estimated costs of completion and costs necessary to make the sale.
C6. IMPAIRMENT OF ASSETS
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the CGU to which the asset belongs.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to
the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss
for goodwill is recognised directly in profit or loss and is not reversed in subsequent periods.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future pre-tax cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying
amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
C7. SOFTWARE
Software is stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the item. Amortisation is calculated on a straight line basis.
The estimated useful live of 3 years is used in the calculation of amortisation.
20222021
$000's$000's
Gross carrying amount
Opening balance7,239
6,537
Additions994
702
Closing balance
8,2337,239
Accumulated amortisation
Opening balance(6,522)
(6,180)
Amortisation expense(379)
(342)
Closing balance
(6,901)(6,522)
Net book value1,332717
31
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
D. CAPITAL FUNDING
IN THIS SECTION
This section explains how Scales manages its capital structure and how dividends are returned to shareholders.
In this section there is information about:
• equity;
• dividends paid; and
• earnings per share.
Capital management
The Group’s capital includes share capital, reserves and retained earnings. The Group’s policy is to maintain a
strong capital base so as to maintain investor, creditor and customer confidence and to sustain the future
development of the business. The impact of the level of capital on shareholders’ return is also recognised and the
Group recognises the need to maintain a balance between the higher returns that might be possible with greater
gearing and the advantages and security afforded by a sound capital position.
D1. SHARE CAPITAL
Issued and paid up capital consists of 142,721,868 fully paid ordinary shares (2021: 142,394,837) less treasury stock of
1,088,295 shares (2021: 1,230,166 shares) (refer to note D2). All shares rank equally in all respects.
Shares issued or purchased on market under the Senior Executive Share Scheme ("Share Scheme") (note D2) are
treated as treasury stock until vesting to the employee.
Number of shares
Fully paid ordinary shares:
20222021
Opening balance142,394,837142,090,521
Share Scheme - shares issued327,031304,316
Closing balance142,721,868142,394,837
Treasury stock:
Opening balance1,230,1661,580,229
Share Scheme - shares issued327,031304,316
Share Scheme - shares forfeited and sold(27,657)(61,074)
Share Scheme - shares fully vested(441,245)(593,305)
Closing balance1,088,2951,230,166
The available subscribed capital of $49,101,810 (2021: $47,456,844) represents the amount of the shareholders’ equity
that is available to be returned to shareholders on a tax-free basis.
In accordance with the Companies Act 1993 the Company does not have a limited amount of authorised capital
and issued shares do not have a par value.
20222021
Movement in share capital related to share-based payments:$000's$000's
Equity-settled employee benefit share scheme vested
Interest-free loan became full recourse1,2331,324
Accumulated share option value reclassified from reserve into share capital8041,251
Accumulated dividends reclassified from retained earnings into share capital234295
2,2712,870
32
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
D2. RESERVES
Revaluation
Cash flow
hedge
Share of
joint
ventures
Equity-settled
employee
benefits
Foreign
exchange
translation
Pension plan
reserve
Total
reserves
$000's$000's$000's$000's$000's$000's$000's
Balance at 1 January 2021
65,62519,9476611,802(860)(401)
86,774
Other comprehensive income (loss)22,909(14,926)(731)-692
191
8,135
Transfer to retained earnings
(2,224)-----
(2,224)
Recognition of share-based payments
---726--
726
Shares fully vested
---(1,251)--
(1,251)
Balance at 31 December 202186,3105,021(70)1,277(168)(210)92,160
Other comprehensive income (loss)7,235(7,707)588-330
179
625
Transfer to retained earnings
------
-
Recognition of share-based payments
---609--
609
Shares fully vested
---(804)--
(804)
Balance at 31 December 202293,545(2,686)5181,082162(31)92,590
Revaluation reserve
The revaluation reserve arises on the revaluation of land, buildings and apple trees, net of the related deferred tax.
Cash flow hedge reserve
The cash flow hedge reserve represents the unrealised gains and losses on interest rate and foreign currency
contracts taken out to manage the Group interest rate and foreign currency risks, net of the related deferred tax.
Equity-settled employee benefits reserve
The Share Scheme involves the Company making available interest-free loans to selected senior executives to
acquire shares in the Company. The senior executives will not gain any benefit with respect to the shares purchased
under the Share Scheme unless they remain in employment with the Group for a period of three years from the
date of acquisition of those shares.
The shares are held by a custodian during the restricted period and are then transferred to the senior executive.
All net dividends or distributions received in respect of the shares must be applied to repayment of the
interest-free loan.
Grant dateVesting dateExercise price, $
Number of shares
Opening
balanceGrantedForfeited
Vested and
exercised
Closing
balance
30 April 2019 - FY1830 April 20222.71249,179-(8,672)(240,507)-
28 June 2019 - FY18R28 June 20224.06200,738--(200,738)-
30 April 2020 - FY1930 April 20233.20291,344-(9,219)-282,125
28 June 2020 - FY19R28 June 20234.19194,511---194,511
30 April 2021 - FY2030 April 20243.20294,394-(9,766)-284,628
30 April 2022 - FY2130 April 20254.06-327,031--327,031
Total1,230,166327,031 (27,657)(441,245)1,088,295
33
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
D2. RESERVES (CONTINUED)
The weighted average share price for shares that vested during 2022 was $4.69.
The shares issued vest over three years. The estimated value of the share options is determined using the
Black-Scholes pricing calculator and is amortised over the restricted period. This cost is expensed with the
corresponding credit included in the equity-settled employee benefits reserve. Expected share price volatility was
based on historical volatility of the Company's ordinary shares.
20222021
FY21FY20
The inputs into the "option pricing calculator" are:
Issue date share price, $5.034.55
Expected share price volatility, %2523
Option life, years33
Risk-free interest rate, %3.270.41
Exercise price, $3.203.20
Fair value, at the grant date, $2.211.54
Foreign exchange translation reserve
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as
part of the net investment, are accounted for in two ways. Gains or losses relating to the effective portion of the
hedge are recognised in other comprehensive income. Any gains or losses relating to the ineffective portion of the
hedge are recognised in profit or loss.
Gains or losses arising on translation of foreign subsidiaries results (Note B6) are also recognised in this reserve.
D3. DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
20222021
$000's$000's
Final dividend paid - 9.50 (2021: 9.50) cents per share13,44413,413
Interim dividend declared - 6.00 (2021: 9.50) cents per share8,50313,419
21,94726,832
All above dividends were fully imputed.
The 2022 interim dividend was declared on 9 December 2022 and paid on 16 January 2023.
D4. IMPUTATION CREDIT ACCOUNT
20222021
$000's$000's
Balance at end of the year18,05720,895
The imputation credit account balance represents the net amount available at the reporting date that can be
attached to future dividends declared.
The Scales Corporation Limited consolidated tax group for income tax includes Scales Corporation Limited and all
New Zealand registered subsidiary companies other than Scales Employees Limited.
34
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
D5. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to shareholders of the company by the
weighted average number of ordinary shares on issue during the year, excluding shares held as treasury stock.
Diluted earnings per share assumes conversion of all dilutive potential ordinary shares in determining the
denominator.
20222021
Profit attributable to equity holders of the Company ($000's):19,41226,925
Weighted average number of shares:
Ordinary shares141,413,787 140,900,047
Effect of dilutive ordinary shares (non-vested Senior Executive Share Scheme)302,534351,554
Weighted average number of Ordinary Shares for diluted earnings per share141,716,321 141,251,601
Earnings per share (cents):
Basic - continuing13.719.1
Diluted - continuing13.719.1
35
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E. FINANCIAL ASSETS AND LIABILITIES
IN THIS SECTION
This section explains the financial assets and liabilities of Scales, the related risks and how Scales manages these
risks. In this section of the notes there is information on:
• the accounting policies, judgements and estimates relating to financial assets and liabilities; and
• the financial instruments used to manage risk.
ACCOUNTING POLICIES
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or
loss’ (FVTPL) and ‘measured at amortised cost’.
The classification depends on the business model for managing the financial asset and the cash flow
characteristics of the financial asset and is determined at the time of initial recognition or when a change in the
business model occurs.
Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are not measured at cost or
amortised cost. Gains and losses on a financial asset designated in this category and not part of a hedging
relationship are recognised in profit or loss.
Financial assets measured at amortised cost
The Group’s financial assets held in order to collect contractual cash flows that are solely payments of principal
and interest on the principal outstanding are measured at amortised cost. Cash and cash equivalents, trade
receivables and employee loans are classified in this category.
Impairment of financial assets
The Group recognises aloss allowance for expected credit losses (ECL) on investments in debt instruments that
are measured at amortised cost, trade and other receivables. Theamount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL for trade receivables. Theexpected credit losses on these financial assets
is estimated using aprovision matrix based on the Group’s historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been asignificant increase in
credit risk since initial recognition. However,if the credit risk on the financial instrument has not increased
significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an
amount equal to twelve-monthECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected
life of afinancial instrument. Incontrast, twelve-month ECL represents the portion of lifetime ECL that is expected to
result from default events on afinancial instrument that are possible within twelve months after the reportingdate.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that
are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the original effective interest rate.
36
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E. FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Financial liabilities measured at amortised cost
The Group’s financial liabilities include trade and other payables and borrowings. These financial liabilities are
initially recognised at fair value net of any directly attributable costs. Subsequent to initial recognition, they are
measured at amortised cost using the effective interest method.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value with reference to observable market data at the end of each reporting
period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated as
an effective hedging instrument, in which event the timing of the recognition in profit or loss depends on the
nature of the hedge relationship. The Group designates certain derivatives as cash flow hedges. A derivative is
presented as a non-current asset or a non-current liability where the cash flow will occur after twelve months and it is
not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or
current liabilities.
Hedge accounting
At the inception of a hedge relationship, the Group documents the relationship between the hedging instrument
and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether
the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in cash flows
of the hedged item, attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in other comprehensive income and accumulated as a separate component of equity in the hedging
reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is
included in ‘other income’ or ‘other losses’.
Amounts recognised in the hedging reserve are reclassified from equity to profit or loss in the periods when the
hedged item is recognised in profit or loss, in the same line as the recognised hedged item. Hedge accounting is
discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in the
hedging reserve at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss
that was deferred in the hedging reserve is recognised immediately in profit or loss.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss
on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive
income and accumulated under the heading of foreign exchange translation reserve. The gain or loss relating to
the ineffective portion is recognised immediately in profit or loss. Gains and losses on the hedging instrument
relating to the effective portion of the hedge accumulated in the foreign exchange translation reserve are
reclassified to profit or loss on the disposal of the foreign operation.
37
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E1. TRADE AND OTHER RECEIVABLES
20222021
$000's$000's
Trade receivables
36,170 23,945
Interest receivable
-372
Other receivables
1,9641,224
Owing by entity accounted for using the equity method
924-
Goods and services tax
3,0443,117
42,10228,658
Credit risk management
The Group activities expose it to credit risk which refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. Financial instruments which potentially subject the
Group to credit risk principally consist of cash and cash equivalents, trade and other receivables and advances.
The Group performs credit evaluations on trade customers, obtains trade credit insurance as appropriate but
generally does not require collateral. The Group continuously monitors the credit quality of its major receivables
and does not anticipate non-performance of those customers. Cash and cash equivalents are placed with high
credit quality financial institutions.
There is a significant concentration of credit risk with 5 customers who represent 44.42% (2021: 5 customers
who represented 36.87%) of trade and other receivables.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum
exposure to credit risk.
Included in trade receivables are debtors which are past due at balance date, as payment was not received within
one month, and for which provision for expected credit losses was not material as there has not been a significant
change in credit quality and the amounts are still considered recoverable. No collateral is held over these balances
although trade credit insurance cover is obtained in respect of some specific receivables. Interest is not charged on
overdue debtors. The ageing of these past due trade receivables is:
1 month4,9985,740
2 months1,2881,508
More than 2 months13,9812,260
20,2679,508
There was no material ECL based on Group assessment as at 31 December 2022 (2021: nil).
E2. OTHER FINANCIAL ASSETS
Current:
At fair value:
Foreign currency derivative instruments
4,4355,923
Interest rate swap contracts and forward rate agreements
503-
4,9385,923
38
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E2. OTHER FINANCIAL ASSETS (CONTINUED)
20222021
$000's$000's
Non-current:
At fair value:
Foreign currency derivative instruments
9,853 10,185
Interest rate swap contracts and forward rate agreements
1,004198
Shares in unlisted companies
184184
At amortised cost:
Employee loans
1,628507
Related party loans
2,842-
15,51111,074
E3. TRADE AND OTHER PAYABLES
Trade payables16,12711,551
Accruals15,5656,858
Employee entitlements5,5345,057
37,22623,466
E4. BORROWINGS
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition,
borrowings are measured at amortised cost with any difference between the initial recognised amount and the
redemption value being recognised in profit or loss over the period of the borrowing using the effective interest
method. The fair value of current and non-current borrowings is approximately equal to their carrying amount.
The Group replaced existing Multi-Option Facility Agreements with Coöperatieve Rabobank U.A., New Zealand
Branch ("Rabobank") and Westpac New Zealand Limited ("Westpac") with new agreements on 11 November 2021.
The existing facility agreement with ANZ bank New Zealand Limited ("ANZ") was also replaced with a new agreement
on 11 November 2021. The USD denominated loans are designated as a hedge of net investment in foreign operations.
Facility limit
Undrawn facility
2022202120222021
Facility
$000's$000's$000's$000's
Rabobank term facility, NZD1,0001,000--
Rabobank term facility, USD11,63511,635--
Rabobank seasonal facility, NZD1,0001,0001,0001,000
Westpac term facility, NZD1,0001,000--
Westpac term facility, USD11,63511,635--
Westpac seasonal facility, NZD1,0001,0001,0001,000
ANZ overdraft, NZD1,0001,0001,0001,000
The floating interest rate is 1.91% to 5.85% (2021: 1.22% to 2.17%) and the term borrowing facility expiry date is
1 July 2024. Seasonal facility presented as current borrowings is due for repayment within one year. The bank facilities
are secured by a first ranking security interest granted by each of the Charging Group Companies over all its present
and after-acquired property (including proceeds) and a first ranking security interest over any of the Charging Group
Companies' present and future assets and undertakings which are not personal property. The bank facilities are also
secured by first and exclusive registered mortgages over property comprising coolstores, orchards and industrial and
commercial property owned by members of the Charging Group. Charging Group Companies as at 31 December 2022
are Scales Corporation Limited, Scales Holdings Limited, Mr Apple New Zealand Limited, New Zealand Apple Limited,
Geo.H.Scales Limited, Meateor Foods Limited, Scales, Logistics Limited and Meateor Group Limited.
39
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E4. BORROWINGS (CONTINUED)
Other current
borrowings
Term borrowings
2022202120222021
$000's$000's$000's$000's
Seasonal (current) and term (non-current) borrowings:
Opening balance-86036,06052,199
Drawdowns----
Repayments---(18,000)
Loans forgiven-(860)--
Effect of foreign currency translation--2,6721,861
--38,73236,060
E5. OTHER FINANCIAL LIABILITIES
20222021
$000's$000's
Current financial liabilities at fair value:
Foreign currency derivative instruments
7,2091,822
Interest rate swap contracts and forward rate agreements
-173
Put option
8,2365,415
15,4457,410
Non-current financial liabilities at fair value:
Foreign currency derivative instruments
11,8026,387
Interest rate swap contracts and forward rate agreements
--
Put option
1,5861,951
13,3888,338
In 2016 the Group increased its shareholding in Fern Ridge Produce Limited ("Fern Ridge") to 75%. As
part of the transaction, 2.12% of the shares were then sold to an employee of Fern Ridge, and Scales entered into
agreements with the remaining shareholders of Fern Ridge whereby those shareholders have an option to put
their shares to Scales at a value based on a multiple of Fern Ridge profits, but with a minimum value equivalent
to that paid to the selling shareholders.
The option was exercised by the remaining shareholders in 2022 resulting in Scales acquiring the remaining shares
in Fern Ridge Produce Limited.
In 2018 the Group acquired 60% of Shelby JV LLC and its subsidiaries Shelby Foods LLC, Shelby
Exports Inc, Shelby Cold Storage LLC, Shelby Trucking LLC and Shelby Properties LLC (collectively, "Shelby Group").
As part of the transaction, the Company entered into an agreement with the vendor whereby the vendor has an
option to put a further 5% of total units in Shelby Group to Scales at a value based on a multiple of Shelby Group
EBITDA. The obligation to acquire the ownership interest under the put option is included in other financial liabilities.
E6. INTEREST RATE RISK
Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. Management monitors the
level of interest rates on an ongoing basis and may use interest rate swaps and forward rate agreements to
manage interest rate risk.
40
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E6. INTEREST RATE RISK (CONTINUED)
Interest rate swap contracts and forward rate agreements
Under interest rate swap contracts and forward rate agreements, the Group agrees to exchange the difference
between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts,
some of which can commence in future reporting years, enable the Group to mitigate the risk of changing interest
rates on the cash flow exposures on the issued floating rate debt. The fair value of these contracts at the reporting
date is determined by discounting the future cash flows using the forward interest rate curves at reporting date
and the credit risk inherent in the contracts. The average contracted fixed interest rate is based on the notional
principal amount at balance date.
The Group’s interest rate swap contracts and forward rate agreements are classified as Level 2 in the fair value
hierarchy.
Details of interest rate swap contracts for the Group are:
Fixed Interest Rate
Notional principal
amountFair value
202220212022202120222021
%%$000's$000's$000's$000's
Maturity Date
Within 1 year------
2-5 years1.201.2017,36416,1011,50725
After 5 years------
17,36416,1011,50725
These interest rate swap contracts and forward rate agreements, exchanging floating rate interest amounts for
fixed rate interest amounts, are designated as cash flow hedges in order to reduce the Group’s cash flow exposure
resulting from floating interest rates on borrowings. The interest rate swap and forward rate agreement
payments, and the interest payments on the loans occur simultaneously, and the amount deferred in equity is
recognised in profit or loss over the period that the floating rate interest payments on debt impact profit or loss.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the
Group performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate
swap contracts and the value of the corresponding hedged items will systematically change in opposite directions
in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these
hedge relationships (which is not material) is the effect of the counterparty and the Group's own credit risk on
the fair value of the interest rate swap contract, which is not reflected in the fair value of the hedged item
attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging
relationships.
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives
and non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared
assuming the amount of liability outstanding at reporting date was outstanding for the whole year. A 1%
increase or decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in interest rates. Impact on net profit
after tax assumes that none of floating interest rate borrowings were hedged.
20222021
+1%-1%+1%-1%
$000's$000's$000's$000's
Impact on net profit after tax(131)131(14)14
Impact on cash flow hedge reserve net of tax337(352)460(485)
41
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E7. FOREIGN CURRENCY RISK
Foreign currency risk management
Foreign currency risk is the risk that the value of the Group’s assets and liabilities or revenues and expenses will
fluctuate due to changes in foreign exchange rates. The Group is exposed to currency risk as a result of normal
trading transactions denominated in foreign currencies. The currencies in which the Group primarily trades are the
Australian dollar, Euro, Canadian dollar, Great Britain pound and United States dollar, with the largest exposure
being to the United States dollar.
Currency risk is managed by the natural hedge of foreign currency receivables and payables and the use of foreign
currency derivative financial instruments. The fair value of foreign currency derivative financial instruments at the
reporting date is determined on a discounted cash flow basis whereby future cash flows are estimated based on
forward exchange rates and contract forward rates, discounted at a rate that reflects the credit risk of various
counterparties.
The Group’s forward foreign exchange contracts and foreign exchange options are classified as Level 2 in the fair
value hierarchy.
Details of foreign currency instruments at balance date for the Group are:
20222021
Contract
ValueFair Value
Contract
ValueFair Value
$000's$000's$000's$000's
Sale commitments forward foreign exchange contracts422,810(3,795)315,2841,754
Sale commitments foreign exchange options158,067(928)171,6806,145
These foreign currency instruments are designated as cash flow hedges in order to reduce the Group’s cash flow
exposure resulting from movements in foreign currency exchange rates on anticipated future transactions. It is
anticipated that the sales will take place during the 2023 to 2027 financial years at which stage the amount
deferred in equity will be released into profit or loss.
For hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life
and underlying) of the foreign exchange forward contracts and their corresponding hedged items are the same,
the Group performs a qualitative assessment of effectiveness and it is expected that the value of the forward
contracts and the value of the corresponding hedged items will systematically change in opposite directions in
response to movements in the underlying exchange rates. The Group uses the hypothetical derivative method
for the hedge effectiveness assessment and measurement of hedge ineffectiveness. As for the hedge of the net
investment in Meateor US LLC sub-group, the Group assesses effectiveness by comparing the nominal amount
of the net assets designated in the hedge relationship with the nominal amount of the hedging instrument.
This is a simplified approach because the currency of the exposure and hedging instruments perfectly match
and the Group excludes from the designation the foreign currency basis spread.
The following table demonstrates the sensitivity to a reasonably possible change of 5% in the value of New
Zealand dollar against other foreign currencies, with all other variables held constant. The impact on the Group’s
profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on the Group’s
equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.
42
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E7. FOREIGN CURRENCY RISK (CONTINUED)
20222021
+5%-5%+5%-5%
$000's$000's$000's$000's
USD
Impact on net profit after tax(783)865(489)540
Impact on cash flow hedge reserve net of tax(15,976)14,479(12,977)12,024
AUD
Impact on net profit after tax644(1,082)(3)4
Impact on cash flow hedge reserve net of tax176176--
EUR
Impact on net profit after tax(2)2--
Impact on cash flow hedge reserve net of tax(2,143)1,940(2,376)2,197
GBP
Impact on net profit after tax(7)7(1)2
Impact on cash flow hedge reserve net of tax(991)898(1,150)1,052
CAD
Impact on net profit after tax----
Impact on cash flow hedge reserve net of tax(383)347(309)279
E8. CATEGORIES OF FINANCIAL INSTRUMENTS
20222021
$000's$000's
Financial assets:
Amortised cost111,67261,446
Derivative instruments in designated hedge accounting relationships15,79516,108
Fair value through profit or loss184184
127,65177,738
Financial liabilities:
Amortised cost86,82975,141
Derivative instruments in designated hedge accounting relationships19,0118,382
Fair value through profit or loss9,8227,366
115,66290,889
The carrying amount of financial instruments at amortised cost approximates their fair value.
43
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
E9. MATURITY PROFILE OF FINANCIAL LIABILITIES
Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay. The table includes both interest and principal cash flows.
Within 3
months
4 months
to 1 year1-5 yearsTotal
$000's$000's$000's$000's
2022
Trade and other payables37,226--37,226
Dividend declared8,503--8,503
Put options8,236-1,5869,822
Borrowings570239,88540,457
Interest rate swaps and forward rate agreements----
54,535241,47196,008
2021
Trade and other payables23,466--23,466
Dividend declared13,419--13,419
Put options5,415-1,9517,366
Borrowings16550037,05537,720
Interest rate swaps and forward rate agreements962921,2931,681
42,56179240,29983,652
44
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
F. GROUP STRUCTURE
IN THIS SECTION
This section provides information to help readers understand the Scales Group structure and how it affects the
financial position and performance of the Group. In this section there is information about subsidiaries and
non-controlling interests.
F1. SUBSIDIARY COMPANIES
Subsidiary companies:Principal activityCountry of
Holding
Balance date
incorporation
20222021
Fern Ridge Produce LimitedTrading companyNew Zealand100%72.88% 31 December
Geo. H. Scales LimitedNon trading companyNew Zealand100%100% 31 December
Longview Group Holdings LimitedNon trading companyNew Zealand100%100% 31 December
Meateor Foods Australia Pty LimitedTrading companyAustralia100%100% 31 December
Meateor Foods LimitedTrading companyNew Zealand100%100% 31 December
Meateor Group LimitedHolding companyNew Zealand100%100% 31 December
Meateor US LLCHolding companyUnited States100%100% 31 December
Mr Apple New Zealand LimitedTrading companyNew Zealand100%100% 31 December
New Zealand Apple LimitedTrading companyNew Zealand100%100% 31 December
Scales Employees LimitedCustodial companyNew Zealand100%100% 31 December
Scales FI Group Holding Pty LtdHolding companyAustralia100%0% 31 December
Scales Holdings LimitedHolding companyNew Zealand100%100% 31 December
Scales Logistics LimitedFreight consolidatorNew Zealand100%100% 31 December
Scales Logistics Australia Pty LtdFreight consolidatorAustralia100%100% 31 December
Selacs Insurance LimitedInsurance companyNew Zealand100%100% 31 December
Shelby Cold Storage, LLCColdstore operatorUnited States60%60% 31 December
Shelby Exports, IncNon trading companyUnited States60%60% 31 December
Shelby Foods, LLCTrading companyUnited States60%60% 31 December
Shelby JV LLCHolding companyUnited States60%60% 31 December
Shelby Properties LLCNon trading companyUnited States60%60% 31 December
Shelby Trucking LLCTrading companyUnited States60%60% 31 December
Subsidiary companies are controlled by the Company. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
company loses control of the subsidiary.
45
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
F2. NON-CONTROLLING INTERESTS
The following non-wholly owned subsidiaries of the Group have material non-controlling interests.
Proportion of equity interest held by non-controlling interests:
Subsidiary companies:Country of incorporation
Non-controlling holding
and operation
20222021
Shelby JV LLC and its subsidiariesUnited States40%40%
The summarised financial information in respect of the Group’s subsidiary that have material non-controlling
interests as at 31 December 2022, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below:
20222021
$000's$000's
Statement of financial position
Current assets29,82723,428
Non-current assets6,1633,288
Current liabilities(11,697)(7,630)
Non-current liabilities(435)(730)
Net assets23,85818,357
Attributable to:
Equity holders of the Company14,31511,014
Non-controlling interests9,5437,343
Note that a put option on 5% of the non-controlling interest shareholding is recognised as a financial liability,
separate from non-controlling interest. Refer to note E5 for disclosures regarding the put option.
Total dividends paid to non-controlling interests17,3138,484
Statement of comprehensive income
Total revenue220,425142,037
Net profit for the year47,15524,448
Attributable to:
Equity holders of the Company28,29314,669
Non-controlling interests18,8629,779
Statement of cash flows
Net cash provided by operating activities48,06425,352
Net cash used in investing activities(4,238)(530)
Net cash used in financing activities(43,344)(21,264)
Net increase in net cash4823,558
46
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
G. OTHER
IN THIS SECTION
This section includes the remaining information relating to Scales’ financial statements which is required to
comply with NZ IFRS.
G1. CAPITAL COMMITMENTS
20222021
$000's$000's
Commitments entered into in respect of apple trees purchases as at balance date2,5301,264
Commitments entered into in respect of property, plant and equipment purchases as at balance date3712,912
G2. LEASES
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognised a
right-of-use asset and a corresponding liability with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of twelve months or less) and leases of low value
assets. For these leases, the Group applies the practical expedient and recognises the lease payments as an
operating expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the lease assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined,
the Group uses its incremental borrowing rate (IBR).
Lease payments included in the measurement of the lease liability comprise:
- fixed lease payments (including in-substance fixed payments), less any lease incentives;
- variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
- the amount expected to be payable by the lessee under residual value guarantees;
- the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
- payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate
the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments
made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
- the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case
the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
- the lease payments change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease
payments using the initial discount rate;
- a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case
the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
47
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
G2. LEASES (CONTINUED)
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments
made at or before the commencement date and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on
which it is located or restore the underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under NZ IAS 37Provisions, Contingent Liabilities and Contingent Assets.
Right-of-use assets are depreciated over the shorter period of either the lease term or the useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects
that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful
life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies NZ IAS 36Impairment of Assetsto determine whether a right-of-use asset is impaired and
accounts for any identified impairment loss under this standard.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and
the right-of-use asset. The related payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included in the line "Administration and operating expenses"
in the statement of comprehensive income.
As a practical expedient, NZ IFRS 16 permits a lessee not to separate non-lease components, and instead account for
any lease and associated non-lease components as a single arrangement.
The lease modification in the current year relates to the reassessment of renewal terms for leases extending longer than 10
years. The impact reduced the lease liability and right of use asset proportionately based on the reduction in the overall
lease term assumed. The difference has been recorded as a loss on lease modification in the statement of comprehensive income.
Right-of-use assets
Land and
buildings
Plant and
equipment
Office
equipment
motor and
vehiclesTotal
$000's$000's$000's$000's
Carrying Amount
Balance at 1 January 202172,827295,02177,877
Additions5,2124511,6517,314
Depreciation expense(6,372)(180)(2,208)(8,760)
Balance at 31 December 202171,6673004,46476,431
Additions2,3267963,5676,689
Lease modification(24,989)--(24,989)
Depreciation expense(6,332)(390)(2,365)(9,087)
Balance at 31 December 202242,6737065,66649,044
48
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
G2. LEASES (CONTINUED)
20222021
$000's$000's
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets9,0878,760
Loss on lease modification1,854-
Interest expense on lease liabilities2,9532,964
Expense relating to short-term leases and low-value assets2,2182,319
Lease liabilities
Current10,92510,237
Non-current44,06669,481
Maturity analysis (undiscounted cash flows)
Year 110,93210,244
Year 29,9309,205
Year 39,0658,613
Year 48,4668,083
Year 57,5787,451
Onwards26,48359,860
72,454103,456
Cash outflows for leases
Interest on lease liabilities2,9532,964
Repayments of lease liabilities8,2817,839
Short-term leases and low-value asset leases2,2182,319
13,45213,122
G3. RELATED PARTY DISCLOSURES
Transactions with related parties
Certain Directors or senior management have relevant interests in companies with which Scales has transactions
in the normal course of business. A number of Scales directors are also non-executive directors of other
companies. Any transactions undertaken with these entities have been entered in the ordinary course of business.
Key management personnel remuneration
The compensation of the directors and executives, being the key management personnel
of the Group, is as follows:
Short-term employee benefits3,4452,986
Share-based payments574416
Post-employment benefits11399
4,1323,501
During 2022, 975,164 (2021: 1,201,923) shares were on issue to key management personnel in accordance with the
Share Scheme described in note D2.
49
Scales Corporation Limited
Notes to the financial statements for the year ended 31 December 2022
G3. RELATED PARTY DISCLOSURES (CONTINUED)
20222021
$000's$000's
Transactions with equity accounted entities
Revenue from sale of goods2,4281,623
Revenue from services6,1794,547
Dividends and distributions received1,8752,250
Interest received24-
Materials and Services received(998)(1,034)
Trade receivables at balance date924479
Purchase of property, plant and equipment15-
Related party loans2,842-
On 31 October 2022, Meateor Group Limited along with the other joint venture partners, agreed a financing arrangement
with Meateor Australia Pty Limited for a term of 5 years. The total facility provided to Meateor Australia Pty Limited
is AUD 4 million with the interest rate on the drawdown balances charged at 5% per annum.
G4. CONTINGENT LIABILITY
There is no contingent liaibilities as at 31 December 2022 (2021: Nil).
G5. EVENTS OCCURRING AFTER BALANCE DATE
After balance date, Scales Corporation Limited signed an amendment to the lending facility agreements with Rabobank
and Westpac. The facility of AUD 25 million was drawn down of 7 February 2023.
Cyclone Gabrielle resulted in flooding of some the Group's Hawke’s Bay orchards. The initial assessment is that 4 of 15
orchards were impacted. Of the four damaged orchards, three had extensive damage and one moderate. Further limited
crop damage is also anticipated to the remaining orchards from the effects of the cyclone. Crop/fruit damage from the
event is not covered by insurance. The 2023 harvest started prior to the cyclone and, with 3% picked, there is still a
substantial proportion of the crop available and remaining to be harvested for export. Picking has recommenced, with
cool-storage and packing activities back underway. Group packhouses and coolstores remain fully operational.
Other than disclosed above, the impact on unharvested agricultural produce, land and buildings, apple trees, or goodwill
carrying values is not able to be quantified as at the financial statement authorisation date.
Group does not expect material operating impact on its other business units, which accounted for the majority of
Group's operating profits for previous years.
There were no other events occurring subsequent to balance date which require adjustment to or disclosure in the
financial statements.
50
---
Distribution Notice
Section 1: Issuer information
Name of issuer SCALES CORPORATION LIMITED
Financial product name/description ORDINARY SHARES
NZX ticker code SCL
ISIN (If unknown, check on NZX
website)
NZSCLE0002S8
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year X Special
DRP applies
Record date 23/03/2023
Ex-Date (one business day before the
Record Date)
22/03/2023
Payment date 31/03/2023
Total monies associated with the
distribution
$4,995,265.38
Source of distribution (for example,
retained earnings)
RETAINED EARNINGS
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution $0.04861111
Gross taxable amount $0.04861111
Total cash distribution $0.03500000
Excluded amount (applicable to listed
PIEs)
$0.00000000
Supplementary distribution amount $0.00617647
Section 3: Imputation credits and Resident Withholding Tax
Is the distribution imputed Fully imputed
If fully or partially imputed, please state
imputation rate as % applied
100%
Imputation tax credits per financial
product
$0.01361111
Resident Withholding Tax per financial
product
$0.00243056
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
STEVE KENNELLY
Contact person for this announcement STEVE KENNELLY
Contact phone number 03 371-2263
Contact email address steve.kennelly@scalescorporation.co.nz
Date of release through MAP 23/02/2023
---
SCALES CORPORATION LIMITED
Bringing Nutrition to the World
23 February 2023
Annual Results Presentation
For the Year Ended 31 December 2022
2
Scales Corporation Limited –2022 Full Year Results
1.FY22 Results and Overview
I.Summary
II.Sustainability
III.Group Performance
IV.Divisional Performance
V.Capital Management
2.Global Proteins
3.Impact of Cyclone Gabrielle and FY23 Outlook
Appendices:
A.NZ IFRS Reconciliation
B.Disclaimer
1. FY22Results and Overview
I. Summary
5
Scales Corporation Limited –2022 Full Year Results
✓Financial results towards the top end of the FY22Guidance range:
✓Underlying* NPATAttributable to Shareholders of $27.6m(2021: $29.8m), down 7%
✓Reported NPAT Attributable to Shareholders of $19.4m(2021: $26.9m), down 28%
✓Further outperformance from Global Proteins complemented by strategic investments made in Australia
✓Lockdowns in China resulted in material reductions in market prices during critical sales windows, especially during the latter parts of the
season, adversely impacted Horticulture results
* Underlying Results exclude some New Zealand International Financial Report Standards (NZ IFRS) non-cash and other adjustments.Management and the Board believe that Underlying Results more accurately demonstrate the change in operational performance of
the Group. Underlying NPAT and Underlying EBITDA are shown before the deduction of share of Non-Controlling Interests (Fern Ridge, Shelby and FaymanInternational / ANZExports (Fayman)). Note that our definition of “Underlying” includes the effects of NZ
IFRS 16 Leases in line with current market practice. All Underlying result numbers, including comparatives, are now inclusiveofNZ IFRS 16 effects. A reconciliation of Underlying to Reported Measures is provided in Appendix A
✓Logistics continued its growth trajectory and continued to provide vital support to both internal and external customers
✓StrongGroupperformancedrivenbyrecordGlobalProteinsandLogisticsresults
✓WebelieveourglobalinvestmentstrategywillcontinuetoensurethatScalesmeetsitsfuturebusinessearningsambitions
6
Scales Corporation Limited –2022 Full Year Results
158,595 MT
Petfood ingredients sold
1
(2021: 149,207)
4,580,000
TCEs of apples exported
4
(2021: 4,983,000)
$27.0m
Net cash
(2021: $82.1mnet cash)
27,580
TEU
2
equivalents
managed
(2021: 30,313)
15.5 cents
Dividends declared
per share
3,324,000
TCEs of own-grown apples
exported
(2021: 3,651,000)
$619.2m
Record revenue
(2021: $514.6m)
14.3%
ROCE
3
(2021: 13.8%)
1.Includes 100% of volumes from Meateor NZ; i.e. total volumes controlled directly and indirectly by the Meateor Group. Excludes volumes sold by Fayman.
2.TEU is aTwenty-foot Equivalent Unit is a unit of cargo capacity to describe container volumes.
3.Return on Capital Employed, calculated as EBIT divided by Capital Employed, where Capital Employed is calculated as non-current assets plus working capital (excluding cash, overdrafts and borrowings, NZ IFRS 16 right of use asset and lease liability, dividends declared, derivative
assets / liabilities and employee loans).
4.Tray carton equivalent, a measure of apple and pear weight, defined as 18.6kgpacked weight which equates to 18.0kgsale weight. Includes own grown and external grower volumes including those volumes exported by Fern Ridge Fresh.
II. Sustainability
8
Scales Corporation Limited –2022 Full Year Results
Update on our Sustainability strategy
Business delivery
StrategyCurrent assessmentFocus areas
Future operating
environment
Horizon scans
Refine materiality
and risks areas
Baseline
measurement
Pathway analysis
Review goals
Business objective
and project setting
•Horizon scan
workshops
completed, including
climate scenarios for
Mr Apple
•Global Proteins and
Logistics workshops
to follow in 2023
•Reviewed materiality to
focus on key areas of
impact, reducing the
number of materiality
domains from 24 to 12
•Updated Mr Apple’s
sustainability risk and
opportunities register
following the workshops
•Completed Scales’ first
water, carbon and soil
baselines for our
regenerative trials
•6 point action plan
developed for Mr Apple
following the horizon
scan workshops, which
will form the basis of its
sustainability strategy in
2023
•Expect to complete
action plans for Global
Proteins and Logistics
following horizon scan
workshops
•Goals and metrics to
be reviewed once
previous steps
completed
9
Scales Corporation Limited –2022 Full Year Results
Excellent progress made on our Sustainability initiatives
PEOPLE
•Built and communicated our Employee Value Proposition (EVP) to key stakeholders
•Custom built two leadership programmes that are currently being rolled out: Leading through Others (Senior Managers)and Emerging Leaders (Assistant
Managers/Team Leaders/Site Managers)
•Re-engaged the ‘Ethical Voice’ worker wellbeing online survey platform targeted at our RSEworkers. Mr Apple consistently scored ‘excellent’
*
and improved
our scores across all themes surveyed
ENVIRONMENT
•Completed Scales’ first Group-wide water footprint, which will form the baseline for our water strategy
•Completing Scales’ first Group-wide carbon footprint
•Delivered a group wide decarbonisation road-map, outlining key initiatives, capex and reduction targets
MARKETPLACE
•Supported the establishment of New Zealand Apple & Pears’ Smart and Sustainable programme, a 7 year programme to investigate theminimisation of
sprays whilst continuing to ensure world leading market access for our apples
•Aligned with the above, Mr Apple completed a baseline assessment for its regenerative program. We note that this orchard has been impacted by Cyclone
Gabrielle
CORPORATE
•Reviewed our materiality domains to focus on key areas of impact
•Set Group-wide climate scenarios
•Established sustainability committees across our divisions, and are working through our climate scenarios as part of our strategy refresh
* Scores over 75% are rated as excellent
III. Group Performance
11
Scales Corporation Limited –2022 Full Year Results
Income Statement
Revenue
$m20222021
% chg.
1
20222021
% chg.
1
20222021
% chg.
1
20222021
% chg.
1
Underlying (excluding NZ IFRS 16)28.130.4-8%46.940.416%66.563.06%619.2514.620%
NZ IFRS 16 Leases(1.9)(0.7)(1.9)(0.7)9.410.8 - -
NZ IFRS 16 Leases - renewal reassessment
2
1.4 - 1.4 - 2.0 - - -
Underlying (including NZ IFRS 16)27.629.8-7%46.439.817%77.973.86%619.2514.620%
NZ IFRS & other adjustments:
Impairment of non-current assets(2.7)1.2(2.7)1.2(3.7)1.6 - -
Other NZ IFRS adjustments
3
(5.5)(4.0)(5.5)(4.0)(5.6)(3.8) - -
Reported
4
19.426.9-28%38.236.93%68.571.6-4%619.2514.620%
Notes:
1. %'s are calculated based on non-rounded figures, figures may not sum due to rounding
2. Reflects a reset to the NZ IFRS 16 Leases calculation for Mr Apple
3. Includes a change in the gross liability on put options of $4.2m
4. A full reconciliation between Underlying and Reported earnings is provided in Appendix A
5. Earnings are shown before the deduction of share of NPAT for Non-Controlling Interests (Fern Ridge and Shelby)
NPAT Attributable to
ShareholdersNPATEBITDA
Excellent results, particularly from Global Proteins and Logistics
•Reported NPATAttributable to Shareholders of $19.4m, down 28% (2021: $26.9m)
•Underlying NPATAttributable to Shareholders of $27.6m, down 7% (2021: $29.8m)
•Underlying NPATof $46.4m, up 17% (2021: $39.8m)
•Underlying EBITDA of $77.9m, up 6% (2021: $73.8m)
•Revenue of $619.2m, up 20% (2021: $514.6m)
12
Scales Corporation Limited –2022 Full Year Results
•Historic results are unadjusted for businesses that have been sold or acquired
•2018 results have not been restated for the effects of NZ IFRS 16
Underlying EBITDA
Underlying NPAT
Attributable to Shareholders
Revenue
13
Scales Corporation Limited –2022 Full Year Results
Divisional Performance
% chg.
$m1H222H222022Margin1H212H212021Margin2022 v 2021
Global Proteins29.930.360.218.8%15.318.133.415.3%80%
Horticulture24.5(7.5)17.07.4%38.82.040.816.8%-58%
Logistics3.63.06.65.3%2.72.24.96.0%33%
Corporate(2.7)(3.1)(5.8)N/A(2.0)(3.3)(5.3)N/A10%
Underlying EBITDA55.322.677.912.6%54.819.073.814.3%6%
Underlying NPAT34.711.746.47.5%33.36.539.87.7%17%
Underlying NPAT
Attributable to Shareholders25.62.027.64.5%29.00.729.85.8%-7%
Notes:
1. Prepared on an Underlying basis. A reconciliation to Reported earnings is provided in Appendix A.
2. %'s are calculated based on non-rounded figures, figures may not sum due to rounding.
3. NZ IAS 41 Agriculture requires unsold agricultural produce to be measured at fair value less costs to sell meaning the expected profit on unsold fruit is recognised
in the interim result, giving rise to seasonality in profitability as shown above.
4. Due to the change in strategic focus of Global Proteins, Profruit earnings have been reclassified to Horticulture for both FY22 and FY21.
A further change in divisional earnings mix
•Global Proteins –growth due to:
•Strong market conditions and new product development, leading to improved volumes, mix and margin
•Contribution from Faymanfollowing investment
•Horticulture –lockdowns in China resulted in material reductions in market prices during critical sales windows, especially during the latter parts of
the season, adversely impacted Horticulture results together with lower volumes, higher shipping costs and labour availability
•Logistics –healthy increase in earnings despite a testing market environment
14
Scales Corporation Limited –2022 Full Year Results
•Trends in Underlying EBITDA by division are shown in the graphs below
•2018 results have not been restated for the effects of NZ IFRS 16
Global ProteinsLogisticsHorticulture
15
Scales Corporation Limited –2022 Full Year Results
Balance Sheet
$m20222021
Current assets excl cash
Trade and other receivables42.128.7
Inventories42.629.6
Unharvested agricultural produce25.124.6
Other15.110.0
Current assets125.092.8
Trade and other payables(37.2)(23.5)
Lease liability(10.9)(10.2)
Other(15.4)(7.9)
Current liabilities (63.6)(41.6)
Net Working Capital61.451.2
Non-current assets
Land and buildings at fair value151.3142.2
Apple trees at fair value27.334.6
Other property, plant and equipment42.637.1
Investments, intangibles and goodwill101.670.2
Right of use asset49.076.4
Other15.511.1
Non-current assets387.4371.5
Capital employed448.7422.8
Non-current & other liabilities
Deferred tax liabilities(17.8)(22.9)
Lease liability(44.1)(69.5)
Other financial liabilities(13.6)(8.8)
Dividends declared(8.5)(13.4)
Non-current & other liabilities(83.9)(114.6)
Net Cash
Cash less overdraft65.833.2
Term deposits - 85.0
Borrowings(38.7)(36.1)
Net Cash27.082.1
Total Equity391.8390.3
Current liabilities excl overdraft, borrowings & dividends declared
Strong financial position
•Movement in working capital primarily reflects:
◦Unseasonal increase in trade and other receivables due to late market turbulence in China and Europe
◦Growth in inventory balances within Global Proteins consistent with revenue growth
•Movement in non-current assets reflects:
◦Capex and revaluation of land, buildings and apple trees
◦A reset to the NZ IFRS 16 Leases calculation for Mr Apple
◦Investment in Fayman
•Movement in Net Cash primarily relates to:
◦Dividend payments (note this includes
payments to minority shareholders)
◦Investment in Fayman
Net Cash Reconciliation ($m)
IV. Divisional Performance
17
Scales Corporation Limited –2022 Full Year Results
$m20222021% change
Revenue319.9 218.9 46%
Underlying EBITDA60.2 33.4 80%
Underlying EBIT59.3 32.6 82%
KPI - Global Proteins
20222021% change
Petfood Ingredients Volume Sold (MT)158,595149,2076%
Financial Performance - Global Proteins
•6% increase in petfood ingredients volumes sold:
◦Excludes volumes sold by Fayman
•46% increase in revenue and 80% increase in Underlying EBITDA reflects:
◦Material improvements in operational efficiencies at processing sites following recent development and investment
◦Impacts of new product development returning higher margins
◦Leadership team with long term customer relationships, enabling expansion of geographic reach and product range
◦Changes in mix, including product, customer and market
◦Contribution from Faymansince completion (equity-accounted)
Global Proteins -Underlying EBITDA ($m)
Significant growth as a result of strategic investments and ongoing petfood market demand
Petfood Ingredients -Volumes Sold (MT 000s)
18
Scales Corporation Limited –2022 Full Year Results
$m20222021% change
Revenue228.9 243.4 -6%
Underlying EBITDA17.0 40.8 -58%
Underlying EBIT(1.1)22.9 -105%
Financial Performance - Horticulture
The Horticulture division and industry was affected by severe market disruption
•Revenue of $228.9m(2021: $243.4m)
•Underlying EBITDA $17.0m(2021: $40.8m)
•9% decrease in Mr Apple total own-grown export volumes
•Earnings and volumes impacted by the previously mentioned lockdowns together with lower volumes, higher shipping costs and labour availability
•Somemarket impacts affecting the FY22 result are either not expected to repeat, or to diminish in significance, in FY23
Horticulture -Underlying EBITDA ($m)
Mr Apple Own Export Volumes (TCE 000s)Movement in Premium Volumes (TCE 000s)
19
Scales Corporation Limited –2022 Full Year Results
Apple Prices by Variety (NZD / TCE, FOB)
20222021% change
Premium Varieties40.639.82%
Traditional Varieties27.333.3-18%
Weighted Average all Apples36.137.5-4%
20222021% change
NZD:USD0.660.683%
NZD:EUR0.560.55-1%
NZD:GBP0.500.501%
NZD:CAD0.860.871%
20222021% change
Mr Apple own-grown volumes3,3243,651-9%
External grower volumes*1,2561,332-6%
Total volume exported4,5804,983-8%
Juice Concentrate Sold5,7486,497-12%
FX Rates
Volumes (TCE 000s)
Profruit Volume (000 L)
Slight Premium price growth offset by a difficult year for volumes and Traditional prices
•Pricing and total volumes impacted by slow sales rates:
◦Many Premium prices were in line with or slightly above the prior year, confirming our strategy of
investing in Premium varieties
◦Traditional prices were impacted by lockdown policies, higher domestic crops, oversupply of fruit
due to the Ukraine war and challenged domestic economies
•Profruitcontinues to be a valuable outlet to extract value from non-export grade fruit:
◦Movement in volumes reflects changes in industry production
•Focus for 2023 is to continue to build demand of Premium varieties, such as Posy
TM
and
Dazzle
TM
* External grower volumes comprise external grower volumes handled by Mr Apple and
Fern Ridge Fresh
20
Scales Corporation Limited –2022 Full Year Results
Financial Performance - Logistics
$m20222021% change
Revenue123.3 81.9 51%
Underlying EBITDA6.6 4.9 33%
Underlying EBIT5.8 4.1 41%
KPIs - Logistics
20222021% change
Ocean Freight Volume (TEUs)27,58030,313-9%
Airfreight Volume (tonnes)5,5533,64552%
Strategic value of division accompanied by strong growth
•Excellent full year results:
◦51% increase in revenue to $123.3m(2021: $81.9m), principally as a result of changes in
market freight costs
◦33% increase in Underlying EBITDA to $6.6m(2021: $4.9m)
•Large growth in airfreight volumes (up by more than 50%) offsets a minor decline in
ocean freight volumes (in part due to lower horticultural production)
•Scales Logistics’ ability to navigate complex supply-chain disruptions and ensure timely
delivery of perishable products to customers remains a key advantage for Scales’
Horticulture and Global Proteins divisions as well as its external freight customers
Logistics -Underlying EBITDA ($m)
V. Capital Management
22
Scales Corporation Limited –2022 Full Year Results
Maintenance
$m20222021
Global Proteins1.60.5
Horticulture2.63.7
Logistics0.20.1
Other0.00.0
4.44.4
Margin Sustainability
$m20222021
Horticulture6.66.0
6.66.0
Growth
$m20222021
Global Proteins1.9 -
Horticulture2.76.1
4.66.1
Total Capital Expenditure15.616.5
Return on Capital Employed
20222021
Global Proteins68.7%48.0%
Horticulture-0.4%7.8%
Logistics64.1%37.3%
Group14.3%13.8%
Target12.5%12.5%
Investing to future-proof the business
•Horticulture ROCE impacted by lower current year earnings
•FY22capital expenditure included:
◦Mr Apple orchard redevelopment
◦Whakatupackhouse automation programme
◦Investment in plant & machinery to accommodate increased volumes in Global Proteins
•Future investment will be prioritised towards Global Proteins given its strong growth
prospects and return on investment:
◦Mindful of our responsibility to maintain appropriate cash levels and retain strength in our
balance sheet
2. Global Proteins
24
Scales Corporation Limited –2022 Full Year Results
15.3%
19.4%
Scales’ Global Proteins division is being developed to benefit from the following attractive attributes
•Resiliency to market cycles –we believe that petfood and edible proteins are well insulated against changes in the macroeconomic environment
•Above average returns on invested capital
•Ability to leverage our existing strong networks in Australasia, Asia and North America and the opportunity to do so within Europe
•Alignment to long-term themes:
◦Growing protein consumption driven principally by economic and socio-economic trends
◦Forecast protein supply ‘gap’ with demand growth outpacing supply
•Opportunities for premiumisationin the sector through the marketing of, e.g., ‘New Zealand and Australian lamb’, ‘Australian grass-fed beef’
Value of Global Petfood Market (US$b)
Asia forecast meat consumption (mill T)
$-
$20
$40
$60
$80
$100
$120
$140
20202021202220232024202520262027202820292030
US$b
4.6% CAGR
25
Scales Corporation Limited –2022 Full Year Results
•The USA is the world’s largest petfood market (sales of US$42.3bin 2022
1
)
•It has also become the largest exporter of petfood products to China:
◦Exports totalled over US$304mJan–Nov 2022, up ~200% year-on-year, accounting for nearly 50% of all China’s
imports over the 11-month period
2
•In 2H22, USA petfood manufacturers announced over US$2.4bin facility expansions and
investments
3
:
◦Industry commentators count approximately 40 facility expansions or new builds that were either announced
or completed in 2022
•Supply chain and sourcing of raw materials have been identified as the biggest future production
challenges for petfood manufacturers
4
. As such, they are developing strategic supply relationships
with key protein suppliers such as Meateor and Shelby
•This lays a foundation for growth for Scales’ Global Proteins division as recent investments come
into production. The majority of this growth is likely to be realised from 2024 onwards
1. https://www.imarcgroup.com/us-pet-food-market#:~:text=The%20US%20pet%20food%20market,3.9%25%20during%202023%2D2028
2. https://www.petfoodprocessing.net/articles/16657-us-pet-food-exports-to-china-up-nearly-200
3. https://www.petfoodprocessing.net/articles/16526-pet-nutrition-demand-fuels-more-than-2-billion-in-facility-investments
4. https://digital.petfoodprocessing.net/sosland/pfp/pet-food-processing-december-2022/index.php#/p/12
Continued expansion of the petfood industry
26
Scales Corporation Limited –2022 Full Year Results
Our value proposition is our wide range of quality ingredients and end-to-end supply chain excellence
•‘One stop shop’ for customers and suppliers
•Global, long-standing and strong relationships
with both suppliers and customers built on
service quality, trust, innovation, and value
contribution
•Solving a problem for our suppliers and adding
value to our customers:
•Providing solutions to our supplier partners,
taking waste streams or by-products from them
to allow them to focus on their core business
•Repurposing these products at specialised
facilities into a value-added edible protein or
petfood ingredient
•End-to-end logistics provider
We source and
supply premium
protein ingredients
and deliver on
time, in the desired
form, for our
global customers
By-product raw
material supply from
abattoirs is
fragmented. To
access desired
volumes requires
many relationships
across multiple
countries
Over 500 ingredients
involved in pet food
manufacturing –
procurement and
inbound supply
chains are complex
Fragmented supply
chains are more
exposed to
disruptions as
highlighted by the
recent global events
Current and growing
mismatch between
protein supply and
demand in western
and developing
countries
27
Scales Corporation Limited –2022 Full Year Results
North America
Name Shelby
Ownership60%
ActivitiesPetfood ingredients
Processing sites4
Key Species Beef, pork
HighlightsSupply relationships cultivated over multi-decade, intergenerational networks.
Our network of processing sites, which are located in close proximity to key
suppliers, or inside abattoirs, together with the supply of collection equipment
optimises returns for key suppliers to entrench relationships
Global
Proteins:
Operations
by region
•The European petfood market is the world’s second
largest petfood market with sales of €21.2b in 2022
•With many of our existing core customers operating
in the European market, we have strong aspirations
to extend our petfood operations into the European
market
•We are in active discussions to establish a presence
in the European market
We have global aspirations for our Global Proteins division
Name MeateorNZ
Ownership50%
ActivitiesPetfood ingredients
Processing sites2
Key Species Lamb, beef, mutton, venison
HighlightsSupply certainty through investment
partnership with the world’s largest
lamb processor
Name FaymanInternational / Meateor
Australia
Ownership50% / 33%
ActivitiesEdible proteins and petfood
ingredients
Processing sites1 (est. 2Q 2023)
Key Species Lamb, beef, pork, salmon
HighlightsPartnering with multi-generational
established business with extensive
relationships across the market
New ZealandAustralia
Europe
28
Scales Corporation Limited –2022 Full Year Results
We apply years of knowledge,
to produce consistent, high
quality ingredients
We use partnership models
across a variety of countries
to secure and aggregate
raw material supply
Our excellence in supply chain management
results in full, on-time delivery even under the
most challenging environments
We consistently invest in
innovation and technology
to improve our product
pipeline, and operations
Our deep market knowledge and key
relationships with shipping companies ensures
we secure the best prices and capacity
We integrate our business planning
processes with our customers, to
provide supply chain resilience and
new product development
We have strong market relationships and
sales channels for all animal by products
including petfood, edible and pharmaceutical
We have strong partnerships with
customers in high growth Asian markets
29
Scales Corporation Limited –2022 Full Year Results
Gameplan
•When entering a new market, we use partnership models with existing industry players who have
strong relationships to secure raw material supply and who have networks with end-buyers:
◦Our investments will include an ability to increase our stake over time
•We will seek to achieve synergies across:
◦Sales & marketing including optimisation of customer networks
◦Use of our processing and market experience to develop new products, source new species and improve
production efficiencies
◦Leveraging supply chain experience to reduce costs and improve performance across the group
◦Supplementing existing teams with new capability and talent, supported by our governance and oversight
•Investment targets and objectives will include:
◦Reported earnings should equate to cashflow, of which a significant portion should flow up to the parent
Local partnerships –
access to supply, new
sales channels
Scales’ market
knowledge, processing
and supply chain
expertise and core
customer base
Expansion
model
30
Scales Corporation Limited –2022 Full Year Results
Strengthened sales and
executive team with the
addition of a long-term
industry buyer, with
extensive and deep
industry relationships
Commissioned new
toll processing
facility in Dodge
City, adjacent to
very large abattoir
Previous investments in
processing capability and
capacity plus increased
demand through the
pandemic enabled
increases in volume
Installation of new
processing equipment
allowing new product
development resulting
in increased yields
and higher quality
products
Hired highly-experienced
Operations Director to
oversee efficiency
improvements and
implement new product
development
Integrate planning with
customers to develop new
in-house processing site
–volumes expected to
come online in 2024
Currently installing
processing & cooling
equipment
60% of Shelby
purchased by Scales
Future growth initiatives
Change in species
and product mix
3. Impact of Cyclone Gabrielle
and FY23 Outlook
32
Scales Corporation Limited –2022 Full Year Results
We are pleased to report that all team members are safe and well. However, many people
have experienced significant loss or disruption as a result of this event. The Hawke’s Bay
community, its people and its culture, are an integral part of Scales. Accordingly, Scales
is making a donation of $250,000 to the recovery. We will also be providing tailored
assistance to those staff members who have been particularly affected.
•At the time of writing, we are still assessing and understanding the operational impact
of Cyclone Gabrielle.
•As previously noted, 3 orchards have extensive damage, whilst 1 orchard has been
moderately affected
•We note the following with respect to those 4 affected orchards:
◦The Brookfields, Kinross and Pakowhaiorchards (a combined planted area of 239 ha), are
extensively damaged, whilst the Pilosorchard (planted area of 79 ha) is moderately damaged
◦The remaining 832 planted ha suffered no significant damage
◦Key varieties planted at the 4 mentioned orchards include Royal Gala (106 ha), Pink Lady
(43 ha), NZ Queen (43 ha), Fuji (30 ha), Dazzle
TM
(25 ha), and Posy
TM
(17 ha)
◦The 4 affected orchards have a higher relative share of Royal Gala (37% of total plantings),
Pink Lady (36% of total plantings), and Posy
TM
(48% of total plantings –however a majority of
Posy
TM
had been picked prior to the cyclone)
Extensively damaged
Moderately damaged
No significant damage
33
Scales Corporation Limited –2022 Full Year Results
Groupupdate
•As previously advised, due to the wide ranging impacts of Cyclone Gabrielle on Hawke’s Bay, we have withdrawn our FY23profit Guidance:
◦We expect to provide updated Guidance as soon as practicable, once the financial impacts of the cyclone are fully understood
•FY22 dividend payments will be made in 3 instalments in 2023:
◦The first instalment, of 6.0 cps, was paid on 16 January 2023
◦It is our intention to pay the second instalment, of 3.5 cps, on 31 March 2023
◦We will review, and advise on, the third instalment in early May 2023
•Our dividend policy will revert to 50% -75% of Underlying Net Profit After Tax Attributable to Shareholders from FY23
•We will continue to maintain prudent capital management
Appendices
35
Scales Corporation Limited –2022 Full Year Results
Reconciliation of Divisional Underlying Profitability to Reported Profitability
GroupGlobal ProteinsHorticultureLogisticsCorporate and eliminations
$m2022202120222021202220212022202120222021
Underlying / Reported Revenue
EBITDA Reconciliation
Underlying EBITDA (excluding NZ IFRS 16)66.563.060.133.36.530.95.84.2(5.9)(5.4)
NZ IFRS 16 Leases9.410.80.10.18.59.90.80.80.10.1
NZ IFRS 16 Leases - renewal reassessment2.0 - - - 2.0 - - - - -
Underlying EBITDA (including NZ IFRS 16)77.973.860.233.417.040.86.64.9(5.8)(5.3)
Other adjustments:
(Impairment)/reversal of impariment of non-current assets(3.7)1.6 - - (3.7)1.6 - - - -
Gain on sale of property, plant and equipment - 1.1 - - - 1.1 - - - -
Equity settled employee benefits(0.6)(0.7) - - - - - - (0.6)(0.7)
NZ IFRS 16 Leases - renewal reassessment(2.0) - - - (2.0) - - - - -
Fayman acquisition entries1.6 - 1.6 - - - - - - -
Intercompany FX(0.6) - 1.1 - - - - - (1.7) -
Change in fair value gain on apple inventory0.1(0.9) - - 0.1(0.9) - - - -
Change in gross liability for non-controlling interests(4.2)(1.9)(4.2)(2.2)(0.0)0.3 - - - -
Transaction costs(0.0)(1.4) - - - - - - (0.0)(1.4)
Reported EBITDA68.571.658.731.211.443.06.64.9(8.2)(7.5)
EBIT Reconciliation
Underlying EBIT (excluding NZ IFRS 16)56.052.259.332.6(3.1)21.15.64.0(5.9)(5.4)
NZ IFRS 16 Leases0.32.00.00.00.11.80.20.20.00.0
NZ IFRS 16 Leases - renewal reassessment2.0 - - - 2.0 - - - - -
Underlying EBIT (including NZ IFRS 16)58.254.259.332.6(1.1)22.95.84.1(5.9)(5.4)
Other adjustments: - -
(Impairment)/reversal of impariment of non-current assets(3.7)1.6 - - (3.7)1.6 - - - -
Gain on sale of property, plant and equipment - 1.1 - - - 1.1 - - - -
Equity settled employee benefits(0.6)(0.7) - - - - - - (0.6)(0.7)
NZ IFRS 16 Leases - renewal reassessment(2.0) - - - (2.0) - - - - -
Fayman acquisition entries1.6 - 1.6 - - - - - - -
Intercompany FX(0.6) - 1.1 - - - - - (1.7) -
Change in fair value gain on apple inventory0.1(0.9) - - 0.1(0.9) - - - -
Change in gross liability for non-controlling interests(4.2)(1.9)(4.2)(2.2)(0.0)0.3 - - - -
Transaction costs(0.0)(1.4) - - - - - - (0.0)(1.4)
Reported EBIT48.852.157.930.4(6.6)25.15.84.1(8.2)(7.6)
36
Scales Corporation Limited –2022 Full Year Results
Reconciliation of Divisional Underlying Profitability to Reported Profitability
Group
Global Proteins
Horticulture
Logistics
Corporate and eliminations
$m
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
NPAT Reconciliation
Underlying NPAT (excluding NZ IFRS 16)
46.9
40.4
49.1
26.5
(2.0)
15.6
4.0
2.8
(4.3)
(4.5)
NZ IFRS 16
Leases
, net of tax
(1.9)
(0.7)
(0.0)
(0.0)
(1.8)
(0.6)
(0.1)
(0.1)
(0.0)
(0.0)
NZ IFRS 16 Leases - renewal reassessment
1.4
-
-
-
1.4
-
-
-
-
-
Underlying NPAT (including NZ IFRS 16)
46.4
39.8
49.1
26.5
(2.4)
15.0
4.0
2.7
(4.3)
(4.5)
Other adjustments:
(Impairment)/reversal of impariment of non-current assets
(3.7)
1.6
-
-
(3.7)
1.6
-
-
-
-
Gain on sale of property, plant and equipment
-
1.1
-
-
-
1.1
-
-
-
-
Equity settled employee benefits
(0.6)
(0.7)
-
-
-
-
-
-
(0.6)
(0.7)
NZ IFRS 16 Leases - renewal reassessment
(2.0)
-
-
-
(2.0)
-
-
-
-
-
Fayman acquisition entries
1.6
-
1.6
-
-
-
-
-
-
-
Intercompany FX
(0.6)
-
1.1
-
-
-
-
-
(1.7)
-
Change in fair value gain on apple inventory
0.1
(0.9)
-
-
0.1
(0.9)
-
-
-
-
Change in gross liability for non-controlling interests
(4.2)
(1.9)
(4.2)
(2.2)
(0.0)
0.3
-
-
-
-
Transaction costs
(0.0)
(1.4)
-
-
-
-
-
-
(0.0)
(1.4)
Tax effect of other NZ IFRS adjustments
1.2
(0.7)
(0.8)
(0.5)
1.6
(0.2)
-
-
0.5
-
Reported NPAT
38.2
36.9
46.9
23.9
(6.5)
16.9
4.0
2.7
(6.1)
(6.6)
NPAT Attributable to Shareholders Reconciliation
Underlying NPATAS (excluding NZ IFRS 16)
28.1
30.4
30.3
16.7
(2.0)
15.4
4.0
2.8
(4.3)
(4.5)
NZ IFRS 16
Leases
, net of tax
(1.9)
(0.7)
(0.0)
(0.0)
(1.8)
(0.6)
(0.1)
(0.1)
(0.0)
-
NZ IFRS 16 Leases - renewal reassessment
1.4
-
-
-
1.4
-
-
-
-
-
Underlying NPATAS (including NZ IFRS 16)
27.6
29.8
30.3
16.7
(2.4)
14.8
4.0
2.7
(4.3)
(4.5)
Other adjustments:
(Impairment)/reversal of impariment of non-current assets
(3.7)
1.6
-
-
(3.7)
1.6
-
-
-
-
Gain on sale of property, plant and equipment
-
1.1
-
-
-
1.1
-
-
-
-
Equity settled employee benefits
(0.6)
(0.7)
-
-
-
-
-
-
(0.6)
(0.7)
NZ IFRS 16 Leases - renewal reassessment
(2.0)
-
-
-
(2.0)
-
-
-
-
-
Fayman acquisition entries
1.6
-
1.6
-
-
-
-
-
-
-
Intercompany FX
(0.6)
-
1.1
-
-
-
-
-
(1.7)
Change in fair value gain on apple inventory
0.1
(0.9)
-
-
0.1
(0.9)
-
-
-
-
Change in gross liability for non-controlling interests
(4.2)
(1.9)
(4.2)
(2.2)
(0.0)
0.3
-
-
-
-
Transaction costs
(0.0)
(1.4)
-
-
-
-
-
-
(0.0)
(1.4)
Tax effect of other NZ IFRS adjustments
1.2
(0.7)
(0.8)
(0.5)
1.6
(0.2)
-
-
0.5
-
Reported NPAT Attributable to Shareholders
19.4
26.9
28.0
14.1
(6.5)
16.7
4.0
2.7
(6.1)
(6.6)
37
Scales Corporation Limited –2022 Full Year Results
Theinformation in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees,
shareholders nor any other person shall have any liability whatsoever to any person for any loss (including, without limitation,arising from any fault or negligence) arising from this presentation or
any information supplied in connection with it.
This presentation supplements our full year results announcement. It should be read subject to and in conjunction with the additional information in that release, and other material which we have
released to the NZX.
This presentation may contain projections or forward-looking statements regarding a variety of items. Such projections or forward-looking statements are based on current expectations, estimates
and assumptions and are subject to a number of risks, uncertainties and assumptions. There is no assurance that results contemplated in any projections and forward-looking statements in this
presentation will be realised. Actual results may differ materially from those projected in this presentation. No person is under any obligation to update this presentation at any time after its release
to you or to provide you with further information about Scales Corporation Limited.
Our results are reported under NZ IFRS. This presentation includes non-GAAP financial measures which are not prepared in accordance with NZ IFRS. The non-GAAP financial measures used in this
presentation include:
•EBITDA. We calculate EBITDA by adding back (or deducting) depreciation, amortisation, finance charges / (revenue), and taxation expense to net earnings / (loss) from continuing operations
•EBIT. We calculate EBIT by adding back (or deducting) finance charges / (revenue), and taxation expense to net earnings / (loss)from continuing operations
•Underlying EBITDA and EBIT are calculated by adding back (or deducting) certain non cash NZ IFRS and other adjustments
•Underlying Net Profit is calculated by adding back or (or deducting) the after-tax effect of certain non cash NZ IFRS and other adjustments
A full reconciliation of Underlying to reported measures is provided in our Annual Report.
We believe that these non-GAAP financial measures provide useful information to readers to assist in the understanding of our financial performance, financial position or returns, but that they
should not be viewed in isolation, nor considered as a substitute for measures reported in accordance with NZ IFRS. Non-GAAP financial measures may not be comparable to similarly titled
amounts reported by other companies.
Forward-looking statements are subject to any material adverse events, significant one-off expenses or other unforeseeable circumstances.
The information in this presentation is of a general nature and does not constitute financial product advice, investment advice or any recommendation. Nothing in this presentation constitutes
legal, financial, tax or other advice.
---
Results announcement
Results for announcement to the market
Name of issuer Scales Corporation Limited
Reporting Period 12 months to 31 December 2022
Previous Reporting Period 12 months to 31 December 2021
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$619,173 20%
Total Revenue $619,173 20%
Net profit/(loss) from
continuing operations
$19,412 -28%
Total net profit/(loss) $19,412 -28%
Interim/Final Dividend
Amount per Quoted Equity
Security
0.03500000
Imputed amount per Quoted
Equity Security
0.01361111
Record Date 23/03/2023
Dividend Payment Date 31/03/2023
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$2.37 $2.39
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to the attached reports for commentary and audited
consolidated financial statements.
Authority for this announcement
Name of person
authorised
to make this announcement
Steve Kennelly
Contact person for this
announcement
Steve Kennelly
Contact phone number +64 3 3712263
Contact email address steve.kennelly@scalescorporation.co.nz
Date of release through MAP
23/02/2023
Audited financial statements accompany this announcement.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.