29 Oct 2014

Fortunes improve for Silver Fern Farms

5:55 pm on 29 October 2014

New Zealand's biggest meat processor and exporter Silver Fern Farms has signalled a return to profitability after two years of heavy losses.

The company is telling farmers at its annual shareholders and suppliers roadshow, which started in the North Island yesterday, that it is expecting a net pre-tax profit of $5 million to $7 million for the year just ended.

It said that would represent a more than $40 million improvement on the previous year, when it announced an after tax operating loss of more than $28. 5 million.

Silver Fern chairman Rob Hewett said while the turnaround is an improvement after two difficult years, it was still not satisfactory and the co-operative would not be resting on its laurels.

"The majority of it is around inventory conversion to cash, so we've had a significant movement of stocks out of the business in the last 12 months, and converting that to cash. We've also sold a few assets deemed to be non-core.

"This is a game of two years. We've played the first half well and set the scene for a good season coming, so we expect significant debt reduction again this year and a further significant enhancement to profitability is forecast."

Mr Hewett said Silver Fern Farms is planning some further structural changes to the business and looking at capital raising options as well.

"We've been on the record for a long time saying that the industry needs to be recapitalised and certainly we do. Primarily, that's around being able to invest in the growth areas of our business.

"As a consequence of that, we are going to operate the business in three streams - sheepmeat, beef and deer. That is around making our teams more accountable and more nimble in the market place.

"We're in the process of appointing an investment bank to help us with our equity raise option gathering. It's going to take six months to come up with a range of options for us to consider."

Chief executives stepping down

In other big changes, Silver Fern Farms chief executive Keith Cooper will be stepping down after eight years, while Alliance Group's Grant Cuff is set to leave in December.

Mr Cooper has been with the co-operative for 24 years, but says with its return to profitability, it is the right time to step down.

"The meat industry is a brutal industry - it's challenging, it's exciting, it's vibrant and it's a lot of fun. However, with all those things in the melting pot, it's hard to keep the energy levels up and doing it for a long period of time.

"The company's back in profit, we've got the debt down and we're embarking on some good projects in terms of how we're structuring the company and looking at the capital model, so it's a nice point in time, between the challenges of the past eight years and the new opportunities that are going to be undertaken, to let someone else pick up the baton and give it another go."

Chairman Rob Hewett said Keith Cooper has made a significant contribution to the co-operative, but indicated some time ago he was planning to step down, and a succession plan was already in place with Dean Hamilton to be appointed.

Mr Hamilton has been the company's strategy officer since April and has experience in the meat industry and banking sectors.

Meanwhile, the other big meat co-operative, the Alliance Group, is also losing its chief executive.

Grant Cuff has been doing the job since 2005 and woulld step down in December, following the company's annual meeting. The Alliance board has started the search for a replacement.

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