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The 138 workers at the PPCS meatworks at Burnside in Dunedin have become the latest casualties of the company's "right-sizing" programme, as it struggles with declining supplies and excess capacity.

PPCS chief executive Keith Cooper said the closure of the deer processing plant addressed a critical lack of available livestock and excess expenses involved in keeping the site open.

The Burnside site began operating in 1882. PPCS said the site was dominated by sheep and beef processing facilities which had been closed since the late 1980s but still required maintenance.

"Tightening New Zealand and European food safety regulations make the continued operation of export meat processing facilities at Burnside increasingly problematic as all areas on site, even those not used for food processing, must be maintained to specified standards," Mr Cooper said.

"In addition, the modern blast freezers used for venison processing require a large section of now-obsolete conventional cold storage to be frozen down, which incurs significant ongoing electricity costs."

Mr Cooper said sheep and lamb numbers were expected to drop by two million in the South Island next year and national deer numbers were forecast to drop from 736,000 to around 500,000.

"The forecast seriously impacts on the ongoing viability of the venison and (lamb and deer) skin processing operations at Burnside," he said.

Under the companies closure proposal the venison operation, which is currently shut down for the off-season, would not reopen in October and the hide processing and cold storage operation would be closed in August.

Burnside's operations would be shared across the remaining four South Island plants.

The announcement is another blow to the Dunedin economy, coming just a month after Fisher & Paykel announced it was closing its Mosgiel plant with the loss of 430 jobs. A further 50 jobs were lost when Dunedin knitwear firm Tamahine announced its closure.

PPCS last week announced it was planning to close its Oringi works near Dannevirke, with the loss of 446 jobs.