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Silver Fern Farms chairman Rob Hewett says the company is on track to deliver a significantly improved profit for the 2014 year, following a strategic review of the business and a focus on debt reduction.
“We expect the audited pre-tax earnings for the company will be $5 and $7 million for the year ended 30 September 2014,” Hewett says.
This will represent a greater than $40 million net profit improvement on 2013. Over the same period, the company has also paid down $100 million in debt.
After a challenging couple of years, profitability is something that many farmer shareholders will see as a priority for the company this season.
Hewett points to the organisational changes made this year as a contributing factor in the company’s improved performance, with further changes still to come.
“Our sales and procurement operations have both been reorganised and performed strongly,” he said.
“We are planning on internally reorganising the business into three species units - beef, sheepmeats and venison. The new business structure will continue to be centrally led and will make the co-operative more responsive to future developments and opportunities in the current overall industry model.”
Sliver Fern Farms hope that the improved structure will increase the visibility of performance and strategy across species and establish a broader range of opportunities for any future capital structure initiatives.
“We believe the timing is right to look at capital structure options in view of our improved profitability, a positive backdrop of rising global demand for protein, an improved outlook for farm profitability, and ongoing interest from customers to gain security of supply.
The company will appoint an investment bank to assist it and any new capital would allow the company to accelerate the reduction of bank debt and cost of debt servicing, which currently costs the company $35 million a year.
“The market outlook is positive which should give farmers good confidence going into the coming season,” Hewitt said.
A full audited result will be announced in November.
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