BUSINESS & INVESTING WRAP:
* Treasury more upbeat on economic outlook than six months ago
* Summerset to repay wage subsidy
* Mercury set to boosts its electric vehicle fleet following growing demand
* Proposed new Southland data centre secures electricity supply contract with Meridian
* US philanthropist delivers US$4.2 billion early Christmas present
While Covid-19 caused restaurant sales of its seafood products in the northern hemisphere to slump, Sanford chair Sir Robert McLeod says the pandemic has emphasised the importance of identifying opportunities for more effective diversification.
Addressing shareholders at the company’s AGM yesterday, he said the need to develop and expand the company’s domestic online sales would further diversify its customer base and channels to market.
“The group has had to carefully navigate through all aspects of its business this year in terms of which projects to implement or defer, which wild catch species to pursue, the extent of inventory build, and the timing of harvesting mussels.”
McLeod said these choices provided Sanford with an opportunity to diversify across the supply and demand conditions of our buyer markets.
“There is no doubt that long-term customer demand for Sanford products is assured; Covid-19 drove a wedge into a number of those markets that is temporary rather than permanent” he said.
Acting CEO Andre Gargiulo said the company’s financial results had been affected by the poor performance of its wildcatch division, the largest part of Sanford’s business. While it was down 3 percent in tonnage of sales volumes from 2019, it resulted in a 45-percent slide in in terms of its profit contribution.
The performance of its Greenshell mussel had been more positive with a strong production year and revenue was up 12-percent. However, Gargiulo said maintaining mussel revenues in 2021 would be a challenge because of a heavy reliance on the foodservice market, in particular banqueting, which continues to be hit hard worldwide in the wake of Covid-19.
Salmon sales volumes and revenue were up 3 and 4 percent respectively. But its profit contribution was down 9-percent due to salmon sales also being vulnerable to foodservice downturns.
Gargiulo said the company would focus on keeping its costs contained but it would proceed with the replacement of its scampi vessels which would significantly upgrade its fleet.
Sanford shares closed down 1 percent at $4.95, just 14c above their low for the year.
Treasury more upbeat on economic outlook than six months ago
With fewer people losing their jobs, the economy will bounce back sooner than expected from the ravages of Covid-19, according to the latest forecasts from Treasury.
Treasury secretary Caralee McLiesh said indicators of economic activity had “continued to surprise on the upside” since the economic forecasts in the half-year fiscal update were finalised.
Pointing to strong retail sales, traffic movements and electricity demand as well as an improvement in business confidence, McLiesh said the economy was ending the year in better shape than had previously been forecast.
On the employment front, Treasury said significant fiscal support – primarily through the wage subsidy scheme – had been responsible for saving a great many jobs.
Unemployment is now expected to peak at 6.9 percent by the end of 2021, below the 7.8 percent tipped in the pre-election fiscal update.
Once border restrictions are eased and economic activity continues to recover, the unemployment rate is forecast to fall gradually to around 4 percent.
While Treasury is basing its forecasts on an easing of border restrictions from June 2021 and for the border to be fully open from the start of 2022, it noted that planned vaccination programs globally may present “upside risk to these assumptions.”
On the economic front, Treasury is now tipping the economy to bounce back faster than expected, with sharply higher-than-expected near-term growth but this would be followed by lower-than-expected growth over the medium term.
Treasury is expecting the economy grew 10.5 percent in the September quarter, which is lower than the RBNZ forecast of 13.4 percent. The official figure will be released by Statistics NZ later today.
Treasury is now tipping the economy to expand 1.5 percent in the year to June 2021 versus a prior forecast of a 0.5 percent contraction.
Summerset to repay wage subsidy
Despite warning that it expects its annual net profit to fall by between 7 percent and 10 percent as a result of repaying the government’s wage subsidy, Summerset shares yesterday gained a further 3 percent to close at a new record high of $11.20.
The updated guidance that underlying net profit for calendar 2020 would come in between $96 million and $98 million, down from $106.2 million last year, excludes the $8.6 million wage subsidy.
Summerset also announced chair Rob Campbell would step down next April after leading the company’s board for 10 years.
During that time the company’s assets have increased from $540 million to $3.4 billion with resident numbers rising from 1,700 to 6,000.
The board will appoint a new chair once the search for a new director is complete.
Campbell’s retirement follows the announcement last month that chief executive Julian Cook will step down in March and will be replaced by chief financial officer Scott Scoullar.
Mercury set to boosts its electric vehicle fleet following growing demand
Mercury NZ plans to invest $6 million to boost its electric vehicle subscription fleet to around 450 cars.
To date, the company has offered 60 EVs for $399 a month in Auckland for the past two years with demand regularly outstripping supply. It now plans to add another 50 vehicles a month to benefit from a growing trend in favour of EVs and away from car ownership more generally.
Mercury’s chief marketing officer Julia Jack said the move reflects a growing trend away from car ownership.
“Both here and globally we’re seeing more people seriously consider subscription services in the wake of economic uncertainty caused by Covid-19. There’s much less appetite for ‘dead assets’ sitting in the driveway, depreciating by the minute.”
Mercury, the country’s third-largest power retailer, was an early and strong advocate for electrification of transport. Its purchases will be a major boost for EV uptake which has plateaued in the past year.
NZ had almost 23,600 EVs on the road at the end of November, having added 565 to the fleet last month.
Mercury said its initial shipments will be of late-model Nissan Leafs, which have proven affordable and practical for subscribers to date. A wider range of models may be added as they become available.
Proposed new Southland data centre secures electricity supply contract with Meridian
A new hyperscale data centre being proposed north of Invercargill has secured the backing of Meridian Energy which has agreed to supply up to 100 megawatts of electricity to the new venture.
The $700 million Datagrid project, being developed by the founders of Hawaiki Cable and Callplus, would start as a 25,000 square-metre, 60 MW facility and scale to 40,000 sqm over several years.
However, the project is contingent on securing an anchor tenant to underwrite the laying of new undersea cables linking the site to Sydney and Melbourne and the current Hawaiki cable, which lands at Mangawhai heads north of Auckland. Another cable would link Invercargill and cities on NZ’s east coast.
Hawaiki founder Remi Galasso said that level of connectivity would allow the centre to serve a potential market of 20 million people across NZ, Victoria, New South Wales and parts of Queensland.
Electricity is a major operating cost of data centres and Southland’s low ambient temperature means the Datagrid facility would be 15 percent cheaper to power than a similar-sized operation in Australia.
The company believes Meridian’s hydro and wind resources in the region would also be attractive to businesses such as Google, Apple and Facebook which are seeking renewable energy supplies for their centres.
Globally, the demand for data centres is growing so fast that by 2030 they are expected to consume around 8 percent of the world’s electricity.
Meridian, the country’s biggest electricity generator, has been investigating data centres alongside other potential energy-intensive developments that could use power that will be made surplus by the eventual closure of the aluminium smelter at Tiwai Point.
US philanthropist delivers US$4.2 billion early Christmas present
MacKenzie Scott, the former wife of Amazon founder Jeff Bezos, announced yesterday that she would give away more than US$4.2 billion to 384 organisations as part of a plan to donate a majority of her US$60 billion fortune to charity.
The announcement comes just four months after Scott donated US$1.7 billion to 116 organizations, including four historically Black colleges and universities in July. The latest round of philanthropic gifts total more than US$4.16 billion donated by Scott to organisations nationwide in the past four months.
“The pandemic has been a wrecking ball in the lives of Americans already struggling,” Scott wrote in a social media post. “Economic losses and health outcomes alike have been worse for women, for people of colour, and for people living in poverty. Meanwhile, it has substantially increased the wealth of billionaires.”
Scott’s post included a list of the hundreds of organisations that received funds, including financial service providers for under-resourced communities, education for historically marginalised and underserved individuals, civil rights advocacy groups and legal defence funds that take on institutional discrimination.
Scott is the world’s 18th-richest person with a net worth of US$60.7 billion, according to the Bloomberg Billionaires Index. Her fortune has soared this year as Amazon’s stock has surged in the pandemic. Scott received a quarter of Bezos’ Amazon shares following their 2019 divorce.
