COVER STORY TOP 200 – 2004: A Champagne Year

   38 Deloitte/Management magazine Executive of the Year – Ralph Norris, Air New Zealand
40 Deloitte/Management magazine Company of the Year – Fisher & Paykel Appliances
42 NZIM Young Executive of the Year – Anushiya Ayingaran
45 Deloitte Viewpoint
49 AUT Business Ethics Award – New Zealand Aluminium Smelters
52 * Designworks Enterprise IG Visionary Leader – Sir Edmund Hillary
    * Marsh Most Improved Performance Award – SKY Network Television
53 * Deloitte Emerging Enterprise – Snowy Peak
    * Colliers International Best Growth Strategy – Pumpkin Patch
54 QBE Insurance Chairperson of the Year – Dr Roderick Deane
56 Judges57 Criteria
59 A-Z Index62 Top 200 Companies
78 Top 30 Financial Companies80 Year-on-Year Comparisons
82 Top 200 Analysis84 Performance By Sector
86 Missed, Merged, Miscellaneous

With the domestic economy still bubbling along and improved commodity prices putting new zing into the export sector, 2004 provided good growing conditions and, with just few notable exceptions, the corporate sector delivered.
This year, the combined earnings of companies on Deloitte/Management magazine’s Top 200 (excluding finance) listings exceeded the 2003 tally by more than five percent with total approaching the $110 billion mark. The finance sector was fair fizzing. Its collective revenue climbed more than 18 percent on assets worth almost $230 billion.
One outcome of the revenue increase was dramatic lift in the baseline for entry into the Top 200 Club. Last year’s cutoff of $53 million is now over $70 million. At least 17 companies that made it into the list last year dropped below the new qualifying mark.
Others have been excluded because current figures are un-available or because the company’s name or circumstances have changed. Like Toll NZ’s acquisition of Tranz Rail (in last year’s top 50) which resulted in neither company appearing on this year’s list.
But some impressive newcomers have rushed in to fill the gaps. The rash of new listings on the New Zealand Stock Exchange (NZX), for example, is breathing new life and interest to list. Companies like the recently floated kids’ clothing company Pumpkin Patch which entered the list in 101st placing after notching up revenue growth of 15 percent and profit improvement of 307.5 percent. Pumpkin Patch also found itself the recipient of the Colliers International Best Growth Strategy Award at this year’s Deloitte/Management magazine Top 200 Awards last month.
Others that raced up the table include Alcatel which boasted revenue growth of 127 percent with earnings of around $88.5 million and Navman whose 101 percent revenue improvement reflects the opening up of new distribution channels through US-based Brunswick, Navman’s new 100 percent owner.
This year’s list includes nearly 30 newcomers and that, plus the record year for new public floats, suggests healthy economic and regulatory environment for growing business.
But was it champagne year for the Kiwi corporate sector?
“Yes,” says Roger Kerr, director of Asia-Pacific Risk Management and Top 200 Awards judge. “Some of the profit increases were spectacular and lot were significant in terms of percentage increase on the previous year. Earnings wise, it’s been very good year for New Zealand corporates.”

Top of the table
Many of last year’s impressive performers have continued their outstanding run. Fletcher Building shifted couple of notches up to number four in the Top 200 rankings after announcing record results. The company’s revenue rose nearly 23 percent to $3.9 billion. Its net profit after tax for the year ended June 2004, was $240 million – an improvement of nearly 43 percent on what was an award-winning performance last year.
As its CEO Ralph Waters notes, the return for shareholders since the company listed in March 2001 exceeds 135 percent, reality that helps explain why Fletcher Building is consistently flavour of the month with investors.
Telecom too continued to improve its performance. It earned top spot as the nation’s biggest profit maker for the second year in row with net after tax income of $754 million, 6.3 percent improvement on its 2003 effort. Its revenue also rose 3.6 percent to $5.4 billion on the back of growth in internet and JetStream services plus sale of its 12 percent stake in SKY Network to INL in October last year for $221 million.
Chasing Telecom in the profitability rankings (at number four) is telecommunications rival Vodafone which boosted its revenue by 27 percent to $1.07 billion and its profits by more than 70 percent to $154 million by ringing up healthy growth in the cellphone market.
Foodland (NZ) Holdings, which includes Progressive Enterprises plus Woolworths, moved into third place with revenues of close to $5 billion, 49 percent gain on its previous annual performance. Australia-based FAL (Foodland Associated) notes in its 2004 annual report that the contribution from its New Zealand supermarket division lifted by more than 10 percent. It put the strong sales growth and increased market share down to the “combined benefits from store re-branding and refurbishment together with the increased focus on value across all store brands”.
Dunedin-based meat processor PPCS also had good year in addition to finally winning approval for its hostile takeover of Richmond meat company, by racking up revenue increase of 25.6 percent and lifting its profits 96.9 percent to $16.4 million.
Despite the high flying Kiwi dollar, meat companies generally enjoyed strong turnaround years. They were beneficiaries of rising world commodity prices that helped the rural sector to offset exchange rate disadvantage.
Apart from small movements up or down, there’s an air of stability in the top 20 percent of our list. These 40 companies deliver around two thirds of the overall Top 200 revenue.

Profit and losses
Surprisingly, this group and the list in general show collective profitability decrease on last year’s figures. This revelation is counter-intuitive to general market sentiment and is only partially explained by identifying companies that have bucked the general upward trend.
Fonterra, for instance, which is by far the country’s largest revenue earner weighing in at shade under $12 billion, registered five percent drop in revenue and 97 percent drop in profitability. Its sheer scale tends to skew the list figures but its results aren’t directly comparable to those of other companies because of its cooperative structure.
Just 17 of this year’s Top 200 companies recorded loss and in several significant cases this represents an accounting treatment rather than an operating loss.
Carter Holt Harvey earned the dubious distinction of topping this year’s list of biggest loss makers. Its loss of $656 million delivered massive 578 percent profit drop against last year’s profit of $137 million. While some of the result drop can be attributed to the impact higher Kiwi dollar had on the value of its exports, the figures include major one-time writedown in the value of the company’s forests.
Other losses in the top company bracket can also be attributed to exceptional circumstances. Methanex is coming to the end of its gas reserves and its figures include one-off plant writedown.
Market investor and commentator Brian Gaynor describes the apparent reduction in overall Top 200 profitability as “odd”. He also offers an explanation for why some of the figures from overseas-owned companies should be taken with grain of salt – transfer pricing. “It’s becoming real problem,” he adds. “It is development that has to do with the way dividends are now paid.”
Because governments allow tax credits to be passed on (instead of double dipping by taking tax both from company profits and shareholder dividends), most companies try to pay the bulk of their tax liabilities in their home countries, thereby giving maximum benefit to the maximum number of shareholders.

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