Meat co-op dilemma
Meat processor Alliance Group's cash-strapped farmer shareholders face a dilemma - either pour more money into the co-operative or risk losing 100% ownership and control.
The meat co-op’s farmer shareholders have elected Ross Bowmar and Richard Greer to the board.
McEvedy, who farms in Canterbury, was elected as a supplier representative in 2020 and retired by rotation this year. He sought re-election and finished fourth in the five-candidate race for two board seats. Dawn Sangster, who also retired by rotation, did not seek re-election.
An Alliance statement says 45.6% of eligible votes were exercised in the directors’ election: 25.16% of shareholders voted at the meat co-op’s annual meeting in Alexandra yesterday.
Alliance reported a $98 million loss for the year following a record result the previous year.
Shareholders were told that the co-op has made the necessary changes to ensure it can better navigate the volatility in global red meat markets and return to profitability.
“We are all very disappointed with this year’s $97.9 million loss, which coincided with our 75th anniversary and followed a record result for the co-operative the previous year,” says Murray Taggart, Alliance chair.
“However, the improvements we have made to the business over recent months mean the co-operative is now fitter, more resilient and able to more efficiently deliver for our people, our farmers and our customers.”
All red meat processors/exporters were impacted by the deteriorating global market, although Alliance was particularly affected by the sharp decline in sheepmeat pricing and demand.
“Soon after last year’s Annual Meeting in December, the extent of the market collapse became apparent, especially for sheepmeat. Following a brief recovery, the Chinese market crashed and the downturn spread to other markets around the world. Margins remained compressed for the remainder of the year as all New Zealand exporters struggled to re-position product into other markets, which resulted in lower prices than justified by farm gate schedules,” Taggart explains.
Alliance Group also incurred additional costs bringing on extra processing capacity for farmers in anticipation of a 2023 summer drought, which never eventuated.
The combined impact of these market and weather factors saw profitability slump and reduced revenue of just over $2 billion. Operating cashflow was positive, but unacceptably low at a $2 million surplus, noted Taggart.
Increasing red meat prices in offshore markets in recent years had masked areas within Alliance’s business that were not operating effectively, however the company has addressed these weaknesses, he says.
“Normally these areas for improvement would have been more transparent, but the implementation of our Enterprise Resource Planning technology project has not been plain sailing with some aspects of the implementation delivering outcomes below expectations.
“While most of those challenges are now behind us, further refinement of the new system over the next 24 months will build more resilience into our new business processes.”
