SFF turnaround

The co-op has reported a net profit before tax of $1.8 million for 2013, compared to a loss of $36.5m loss the previous year.

The company also paid down $99 million in debt as part of a plan to reduce the cost of debt servicing to the company.

Chairman Rob Hewett says Silver Fern Farms' shareholders will be heartened to see audited confirmation of the turnaround in profitability.

"This is a positive result, and confirms that the changes we've made to the business are setting us on the right track after two challenging years. Whilst the absolute level of profit at $1.8 million is unacceptable, it is a sign post on the path to where we need to get to."

The reported result includes a provision taken of $3.3m, following the Employment Relations Authority decision earlier this month regarding the technical redundancy of staff at its Silverstream plant in October 2013.

Hewett says the decision was unexpected.

"We believe it is prudent at this stage to take the provision while we consider our next steps over the coming month. Adjusting for this provision, we are in line with our profit guidance issued at the end of October."

Debt levels at year end are down $99m from $387.6m to $288.6m, a 25.5% reduction on the previous financial year. The equity ratio has improved to 45.2%.

"We know many of our farmer shareholders see improved profitability and debt reduction as a priority for the company, which is what we have delivered," he says.

"We are committed to creating a sustainable co-operative. To achieve that we need to materially lift our level of profitability and we need to further reduce our debt. We have a range of plans in place right across the business to achieve these goals. Whilst it is early into the new season, it is pleasing to note that, based on unaudited management accounts, for the first two months of the new financial year we are trading ahead of last year and with lower levels of inventory and debt.

"As previously announced, we believe the timing is right to look at options to build an enduring capital base which will help us return sustained profits to our shareholders."

The company is currently working with Goldman Sachs to advise on options to create a more sustainable business and capital structure.

The Annual report will be available in late January ahead of the company's annual meeting which will be held in Dunedin on February 18.