Alliance rewards to suppliers hits bottom line result
Meat processor Alliance says its operating profit dropped 60% because of higher payment to farmer shareholders.
Chief executive David Surveyor reports good progress on transforming the co-op: financial performance has improved and $11.4 million has gone to farmer shareholders.
But lot of hard work remains to be done.
“Profit is not at the level we want for a company of this size and we need to capture gains more quickly. Alliance Group needs to run faster,” Surveyor says.
“It’s important we maximise the value we create for New Zealand’s best farmers, and ensure our changes and progress are sustainable by further investment, growing value-add, capturing market value and building organisational capability.”
Net profit before tax and pool distributions was $28m, including extraordinary items relating to a land sale at Makarewa, Southland.
Revenue was up to a record $1.53 billion, and core debt halved to $19m. Shareholders’ equity ratio is 71%, versus 70.6% last year.
Chairman Murray Taggart says Alliance is now a much fitter co-op because of higher efficiency, lower costs and more value-capture from global markets.
“The numbers tell a positive story: new shareholders, a stronger balance sheet, improved profitability and better livestock pricing for our farmers.”
Suppliers are benefiting from firmer international prices for beef, lamb, venison and co-products. “Lamb prices are particularly strong and venison is seen more as a premium product.”
Taggart says the balance sheet now allows the co-op some “exciting initiatives and innovative practices”.
“Alliance has a wide range of short, medium and long-term programmes to gain deeper market penetration and capture more value from existing markets.”
Surveyor says the co-op strives to maximise the price it pays farmers for livestock, and to offer other incentives.
“We have improved our pricing structures… offering more minimum price contracts, which provides greater certainty for farmers who then can have greater confidence when budgeting.”
$15m in loyalty payments went to farmers during the season.
World best practice is key – lifting processing efficiency and improving the operating performance of plants. At least $10m has gone this year into robotic/primal cutting technology and reconfiguring the boning room at Dannevirke; a big upgrade is finished at Lorneville and a big capital spend at Pukeuri.
Product range and market reach are growing in domestic and global markets to lift sales, Surveyor says.
“We are growing our markets and evolving into a more sophisticated player and capturing more value for our farmer shareholders.” The product range is more varied and it includes premium brands.
“A dedicated food service team in the UK targets high-end restaurants and hotels. And we were the first NZ company to dispatch chilled lamb to China as part of a six-month trial.”
Surveyor says the co-op’s safety record has improved.
“Our total recordable injury frequency rate has improved by about 40% year on year.”
