Shipping crisis deepens
The shipping crisis caused by Houthi rebel attacks in the Red Sea and problems with a lack of water in the Panama Canal appears to be deepening by the day.
Meat company Silver Fern Farms has turned around its fortunes during the last year from a $30 million loss to a profit of just over $15m.
However, despite the big profit turnaround, its chairman has only given the company a pass-mark.
“It still remains very much a work in progress,” Rob Hewett says. “There’s still more to do.”
He claims the after-tax profit of $15.4m for the year ended December 31 would have been even better if the one-off cost of $10m for closing the Fairton plant, near Ashburton, had not been included in the result.
Despite the better result, only half of the profit will go to farmer shareholders in the Silver Fern Farms Co-op; the other half will benefit its new 50% shareholder Shanghai Maling.
Hewett says there will be a dividend payout for co-op shareholders and a patronage reward payment for qualifying farmer/shareholders.
“Co-op shareholders and Shanghai Maling will receive a 50/50 share of the $12m dividend – about $6m,” he explains. “And a patronage reward will go to farmers who hold shares in SFF and supplied livestock to the business during the year.”
The co-op’s share is taxable but Hewett says the tax paid will come back to co-op shareholders as imputation credits on the dividends they get.
The main dividend, payable on April 27, will amount to a fully imputed 2.8c/share and the patronage dividend to qualifying shareholders will be 2.9c a share.
SFF Ltd’s net profit before abnormal items was $25.6m. The one-off abnormal charges totalled $10.2m, mostly the closure costs of the Fairton plant.
Earnings were $50.9m, versus a loss of $7.5m in the previous full year to September 30, 2016. The change of balance date followed the Shanghai Mailing investment.
Last year annual sales were $2.2 billion, the same as in 2016.
Hewett says the latest result reflects improved market conditions for sheep and venison, lower overhead costs following plant closures and improved efficiencies.
He describes the current market conditions as a bit of a “purple patch” for the red meat.
No inventory build-ups occurred in the lamb and mutton markets, he says. Product moved quickly at high prices and good margins.
“Everyone is short in the supply chain; they haven’t got any inventory,” Hewett explains. “Right now our inventory days are as low as they have ever been; we just don’t have the stock available.
“Farmers are being well paid and processors are making money; everybody is pretty happy.”
Analysis by Dunedin-based Techion New Zealand shows the cost of undetected drench resistance in sheep has exploded to an estimated $98 million a year.
Shipping disruption caused by Houthi rebels in the Red Sea has so far not impacted fertiliser prices or supply on farm.
The opportunity to spend more time on farm while providing a dedicated service for shareholders attracted new environmental manager Ben Howden to work for Waimakariri Irrigation Limited (WIL).
Federated Farmers claims that the Otago Regional Council is charging ahead unnecessarily with piling more regulation on rural communities.
Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.
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