Silver Fern Farms posts losses

New Zealand
Published:  18 November, 2013

Meat processor and exporter Silver Fern Farms (SFF) has made a loss of $28.6 million (US$23.9 million) after tax for the year ending September 2013 from total revenue of $2 billion (US$1.7 billion).

The loss follows the $31.1m (US$26 million) loss last year after a volatile trading phase when buyers baulked at high-priced lamb and sheep meat, leaving meat companies with large stocks and lower demand.

Silver Fern Farms announced in October that it is selling its Shannon fellmongery, meaning 86 jobs from the plant will go.

Chief executive Keith Cooper said at the time that the company has entered into an unconditional agreement to sell the plant, which processes lambskins for conversion into leather, to Lowe Corporation.

The Shannon plant processing of North Island pelts will be done through the Lowe Corporation's Hastings plant.

The consolidation of the pelt processing is in response to forecasted lower lamb numbers in New Zealand.

SFF has completed a two-year programme to work through the after-effects of the sheep meat market spike then collapse from January last year.

The farmer-owned co-operative has extended its banking facilities, but says the business remained in good heart.

Chairman Eoin Garden said the company's equity position of 39% remained healthy and the business platform was sound and competitive.

"We have negotiated increased funding lines as part of a new two-year banking facility - SFF will continue to manage the seasonal crop to market over the 12 months to come, in a manner which ensures continuity and security of supply to the market."

He said market consumption and pricing continued to decrease in the first half of the 2012-13 year after the sheep meat market collapse resulting in further a write-down of stocks.

"In reality, the market collapse dramatically impacted upon two financial years due to large stock positions over the September 2012 balance date", said Garden

Profitability was also affected by sheep meat held up at the Chinese border by a paperwork wrangle, and the Russian flow-on materially affected SFF shipments.

On a positive note, beef, venison and co-products performed well over the period.

Garden said the investments were designed to secure greater market returns for suppliers into the future.

"The Silver Fern Farms board believes for the industry to be competitive in the sector, a serious commitment to on-going investment is required," he said.

"Our future depends upon shareholders understanding and supporting that commitment."

Major changes made to the business included a new regional livestock-buying approach to align it with local plant needs, a new geographic sales structure, and the reshaping of processing plants to meet demand and requirements for the growing Chinese market.

SFF said the outlook for the year was favourable for the business. This was being driven by growing demand from China, lower global availability of sheepmeat supply, and an awareness by key European and US markets of the need to secure stock to avoid being unable to meet consumer demand.

However, it remained wary of prices rising beyond consumers' reach.

The co-operative said it was a strong supporter of industry reform and was working with PricewaterhouseCoopers to carry out a strategic review of the business, focusing on future options on the back of stalled industry reform talks.

"It is clear something needs to change, and as a farmer-owned co-operative it was incumbent on us to not only ascertain the appropriate path for our Silver Fern Farms' shareholders, but also how we can make a difference within the overall industry model," Garden said.

PricewaterhouseCoopers would report to the board mid-way through the season.

Source: NZfarmer.co.nz

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