Christchurch agribusiness company Scales Corporation now owns all of Esro Petfood, the European petfood ingredient business it set up with a Dutch meat processor three years ago, after buying the other half of the company for what it calls nominal consideration.
In a statement to the NZX released at 8.30am today, Scales said it had acquired the shares of its joint venture partner in Esro Petfood BV. “The acquisition reinforces Scales commitment to medium-term growth opportunities in the region,” the company said. It plans to rebrand the business, and said senior group executives remain in Europe and are “focused on improving operating performance while providing stability for customers, suppliers and employees.”
Scales will fully consolidate Esro Petfood’s results from this month. It said the full-year earnings guidance it gave on 26 August is unchanged. The statement does not give a new name for the business or say whether Scales will put more money into it.
The nominal price follows a difficult few months for the business, and Scales’ own accounts show why the stake was worth so little on paper.
When Scales announced the joint venture in August 2023, it described Esro Food Group as a key player in Europe’s animal by-product processing, with factories in the Netherlands, Belgium and Spain. Scales took a 50 percent shareholding and provided lending facilities of a combined EUR15 million to fund two petfood ingredient plants in Europe. The first was an existing Esro site in Belgium being converted to petfood ingredients, due to open in the last quarter of 2023. Managing director Andy Borland said at the time, “We are very pleased to be partnering with Esro to expand our Global Proteins division into the European market.”
Chair Mike Petersen said in the same August 2023 announcement that the board did not expect a positive impact on earnings “until part way through the 2024 financial year.” By 2025 the business was still losing money. Esro Petfood made an underlying loss of $5.9 million in the 2025 year, according to Scales’ interim financial statements, and Scales’ 2025 results presentation on 25 February said Esro Petfood continued to progress through its start-up phase while moving to a new processing facility.
Then the Dutch partner ran into trouble of its own. On 20 April Scales told the NZX that the Netherlands Food and Consumer Product Safety Authority had begun investigating the operations of Esro Food Group on 16 April. Dutch broadcaster NOS reported on 24 April that the authority had ordered a Brabant meat processor to recall all its products immediately and had withdrawn the company’s approval, and that regional broadcaster Omroep Brabant had identified the company as Esro Food Group.
Scales stressed in April that the petfood business did not sell into the human food market, was a separate legal entity with its own premises, licences and permits, and was not subject to the investigation. “Esro Pet Food continues all normal business operations without interruption,” it said.
That did not last. In a trading update on 27 May, Borland said “our European joint venture partner’s subsidiary, Esro Vlees BV, was placed into receivership following an investigation by the Netherlands Food and Consumer Product Safety Authority. This has created challenges and disrupted operations for our joint venture, Esro Petfood BV.”
A month later the partner company itself failed. Scales’ interim accounts record that Esro Food Group BV filed for bankruptcy on 23 June, which suspended its shareholder rights in Esro Petfood and gave Scales control of the business under the shareholders’ agreement. Scales paid nothing for that control. At 30 June the other half of the shares was held by the trustee of Esro Food Group.
The same accounts show what Scales took on. When it gained control, Esro Petfood owed Scales almost $30 million in loans and interest. Its fixed assets were valued at $14.6 million, and once its bills, tax, lease debts and the Scales loan were counted, it had net liabilities of $20.3 million on its books. Scales wrote its loan down to $9.8 million, which is what the business’s assets were worth after its other debts, and valued its existing half of the shares at nil.
Trading got worse too. Esro Petfood lost $5.8 million at the underlying level in the six months to June, more than three times its $1.8 million loss a year earlier. Scales’ interim results presentation said supply and demand problems had increased the losses since April. The presentation also shows Scales recorded a $19.7 million impairment provision on its loan to Esro Petfood, which it left out of its underlying result.
That write-down was one of the items that pulled Scales’ reported first-half profit well below its underlying figure. Reported net profit after tax fell to $40.4 million from $57.4 million a year earlier, while underlying net profit rose 10 percent to $62.4 million, which Petersen called another record first-half result. Directors lifted full-year guidance for underlying net profit attributable to shareholders to between $55 million and $60 million, up from the $50 million to $55 million range they had repeated in May.
In the interim results announcement on 26 August, Borland said, “The recent disruption at Esro Petfoods in Europe has been challenging, however our immediate focus is to stabilise operations and assess the long-term strategic plan within the region.” Today’s statement indicates Scales has chosen to stay, describing the buyout as a commitment to medium-term growth in the region.
Esro Petfood is small next to the rest of the group. Had it been consolidated for the whole first half, it would have added revenue of $19.7 million and a net loss of $5.8 million, the accounts say, against group revenue of $762.1 million. Scales, founded in 1897 as a shipping business by George Scales, also owns Mr Apple’s orchards and apple exports, runs a logistics division, and has petfood ingredient businesses in the United States, Australia and New Zealand.
Should New Zealand companies keep buying into Europe, or stick closer to markets they know? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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