Better, but not flash

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.”