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SFF chairman Rob Hewett says if suppliers want priority in killing space and contracts, dividends and financial rewards, they must ‘share up’.
Hewett told the recent NZ Co-ops business leaders forum that “a large chunk” of animals come from non-shared suppliers.
He says the co-op wants “deep, longstanding relationships built on trust and linked to market” with its suppliers.
SFF shareholders get priority for killing space, contracts, advice, events and market tours. However, Hewett points out that non-shared supply adds value to the company too.
“But we want to prioritise shareholder farmer suppliers ahead of others.
“If you are shareholder supplier and you’ve got animals and there’s a non-shared supplier with the same number of animals, we will give priority to the shareholder.
“If you want dividends, access to financial rewards, access to priority programmes in space and contracts, you need to share up. You don’t have to share up, but remember you won’t be given priority treatment, all things being equal.”
Meanwhile, Hewett has defended the co-op’s decision to take on a 50% investor. He says SFF is now in a better position to pay a dividend to shareholders, after its deal with Chinese company Shanghai Maling, which poured $261million into the co-op in exchange for a 50% stake.
“With our new capital structure we will be able to pay dividends now,” he adds.
Hewett says SFF went looking for outside capital after its shareholders failed to cough up. He says in 2012 the co-op went to shareholders to raise capital, getting only $22 million of the $100m required.
“We needed more capital for the business, and believe me we tried to raise capital from the shareholders.”
According to Beef + Lamb NZ, the annual return on total farm capital is 1%. Hewett says this hindered capital raising among farmer shareholders; poor returns are also discouraging new entrants to the industry.
“Every time I go into a room to talk to my shareholders [I see] they are getting greyer and greyer and greyer; the average age of sheep farmers is 58 and getting older.”
So the SFF board and management embarked on a three-year global search and Shanghai Maling “came to the top of the pile”.
Hewett says he is still asked if SFF remains a co-op after the Shanghai Maling deal.
“We are constitutionally enshrined to remain a co-op; our co-op owns 50% of the operating company.”
Farmers own 100% of SFF Co-op Ltd, which in turn owns 50% of SFF Limited, the processing arm with Shanghai Maling owning the other 50% stake.
