Alliance seeking outside capital
Reeling from two consecutive years of heavy losses, Alliance says it has appointed Craigs Investment Partners to explore external capital-raising options.
Alliance chair Mark Wynne says a final decision on the closure will be made later this month but "the economics are pretty compelling". Federated Farmers is backing Alliance's decision to mothball the Smithfield plant but says it feels for the employees and other supporting businesses that will be impacted.
The 139-year-old Smithfield plant is the company's oldest site and requires significant investment in repairs and maintenance to keep it operational. Sited on potentially valuable land beside Caroline Bay just north of the city, it is also facing encroachment from retail development.
Wynne told Rural News that Smithfield is the area where the declining stock has had a significant impact.
"If you go back 20-30 years, New Zealand was famous for 60 million sheep. Now, we have roughly 23 million so it's a structural change and land use change has been a key part of that," Wynne told Rural News.
"In the early 2000s you saw significant sheep and beef conversion into dairy farms and more recently, we've seen reasonable volume of whole of farm - not just a few hectares out the back kind of thing - but the whole farm being sold off into carbon farming."
Although sheep are 'a dual purpose' animal, wool had been in the doldrums for a very long time, and the red meat commodity cycle, particularly lamb, had been on a downward swing for the last couple of years.
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Wynne says the board reviews Alliance's processing networks on a regular basis.
"When the economics finally don't work anymore, then you must decide.
"Unfortunately, Smithfield is the area where the declining stock has had a significant impact."
Asked if the closure was not already a "done deal" despite the consultation, Wynne says they will listen to the feedback from staff during the consultation period.
"The economics are compelling for the closure. But you know we go through these processes in good faith, and we will listen to their feedback.
"That feedback will close on Friday the 11th of October. And we will make our final decision by Friday the 18th, a week later."
Wynne said the site would "undoubtedly" be sold eventually but nothing has yet been done towards that.
"We haven't even had official valuation of the site, etc.
"Our priority has been really working through the process, working with our employees and trying to get the best outcome."
About 600 staff would be affected and significant redundancies are expected, although staff would be offered the opportunity to apply for re-deployment at the company's other processing plants where possible.
Federated Farmers South Canterbury president Greg Anderson called the announcement a tragedy for Timaru and the region.
"I just feel for the families and all the tradesmen that work out there. That's the worst part about it."
It's not just fathers, but sons and brothers and daughters who work at the plant and may now all be redundant, he said.
However, he highlighted dairy rather than forestry as the key factor in South Canterbury.
"The unfortunate thing is that sheep farming is just not profitable enough and there's too much land use change. In my area, probably a couple hundred thousand sheep have disappeared to dairy farming."
Forestry conversion had taken place in areas such as the Hakataramea and North Otago, but it didn't have the same impact in the province as it did in the North Island.
Anderson himself farms sheep and beef on hill country in the Fairlie Basin but says the flat land of the basin used to have 35,000 sheep and now has none at all.
"The biggest land use change down here has been dairy farming."
An Alliance shareholder for 35 years, Anderson says he hopes the company is now on the right track and has picked the right workds to mothball.
