Silver Fern Reports Operating Surplus

NEW ZEALAND - New Zealand beef and lamb processor Silver Fern Farms has reported an operating surplus of NZ$40.6 million for the year ending 30 September 2011 from a turnover of NZ$2.1 billion compared to a loss of NZ$12 million in 2010 from a turnover of NZ$1.8 billion.
calendar icon 21 November 2011
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The company has also declared a dividend of 10 cents per ordinary share in addition to the quarterly Performance Premium payments made during the year, bringing total distributions to suppliers/shareholders of NZ$14.5 million.

Silver Fern Farms Chairman Eoin Garden said the satisfying result comes at the end of a challenging year and a three year restructuring programme.

“We are also mindful of the need for industry aggregation. Our recent acquisition of two processing plants, the Wallace Waitoa plant and Frasertown Meats in Northern Hawkes Bay, is evidence of our commitment to consolidation and is part of our wider strategic plan for the future of Silver Fern Farms," he said.

"We are now seeing the benefits of the creation of a modern consumer-facing, farmer partner focused co-operative, with a clear progressive strategy that focuses on operating within today’s challenges but also invests in the future.

"We are investing in product development, innovative marketing to meet the future expectations of our consumers and we are committed to FarmIQ Systems Limited to deliver optimal farming systems to enable our farmer partners to meet consumer expectations.

"In addition we are demonstrating our commitment to making a difference, not only to the red meat sector but also to the New Zealand economy, by the establishment of our joint venture with Fonterra Co-op Limited forming Kotahi Limited. Kotahi will optimise the supply chain to market and deliver new efficiencies. The future of the red meat sector will depend upon continued execution of such market focused strategies,” said Mr Garden.

Chief Executive Keith Cooper added: “The 2010/11 financial year was full of extraordinary events – some positive, others less so. We experienced never before seen volatility in the New Zealand dollar, a spring storm that left the industry with a record low lamb crop, the Christchurch earthquakes which affected so many of our Christchurch people and the devastating fire at our Te Aroha plant just prior to Christmas. But, on the upside, in-market prices for red meat and by-products lifted and, thanks to many factors aligning, our farmer partners received record returns.”

The company’s balance sheet is strong with an equity ratio now sitting at 59 per cent, positively influenced by a reduction in total debt over the past three years. This included the repayment of NZ$75 million of bonds during the first quarter and in October 2011 the repayment of the redeemable preference shares. The balance sheet restructuring is now complete.

“As a result, net bank debt at balance date was NZ$119.5 million against stock and debtors of NZ$267 million and we are benefiting from lower interest rates.”

Keith Cooper said the year-end result was achieved by the focus on marketing, operational efficiencies and managing foreign exchange prudently. It included $13m expenditure on research and development, innovation and marketing.

“While this is classified as ‘expenditure’, it is clearly an investment in our future.”

Further to the 10 cents per share dividend, Silver Fern Farms’ board also announced an exchange offer for transacting shareholders who hold rebate or supplier investment shares. The offer gives transacting shareholders the opportunity to exchange their existing shares (on a one-for-one basis) to ordinary shares and receive the 10 cents per share dividend.

Mr Garden said the board recently received a vote of confidence, with no candidates standing against the incumbent directors whose positions were due for election by rotation.

“Herstall Ulrich and Rob Hewett were re-appointed unopposed, which we view as an endorsement of the company’s direction and performance.”

Silver Fern Farms’ annual meeting will be held on 5 December at The Poplars, Timaru.

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