Affco sees better days ahead after poor result

By PHILIPPA STEVENSON agricultural editor

In a year of record meat company profits, Affco has taken the booby prize.

The troubled company yesterday described a $574,000 after-tax profit in the year to September - 96 per cent down on last year - as "disappointing".

The result, on turnover of $1.2 billion (up $209 million on last year), was $178,000 below the interim result and down $14.6 million on last year.

It contrasted with the result of North Island counterpart Richmond, which this week reported a 77 per cent rise in after-tax profit to $20.65 million on revenues of $1.42 billion over the same period.

The South Island co-op PPCS, which Affco executive chairman Sam Lewis hopes to emulate in style and result, had a 95 per cent after-tax profit gain in the year to August to $36.78 million, on operating revenue of $1.17 billion.

Affco, which jettisoned most of its senior executives during the year, said it was guardedly optimistic about the future.

Total equity increased by $2 million to $115.9 million, and total tangible assets reduced by $7 million to $248 million.

The company said no dividend would be declared.

Mr Lewis said that, despite a difficult and frustrating period, the inherent strength of the company remained.

"While the board feels the disappointment of this result as keenly as shareholders, we do take comfort in the knowledge that the company has now thoroughly and realistically addressed its position in a highly competitive and challenging industry," he said.

Measures to restructure trading and distribution activities included closing its American office and selling the Mathias Group marketing operation.

"We have made head-office cost reductions of $9 million on an annualised basis, and improved our working capital position by $28 million year on year," Mr Lewis said.

"In addition, a special logistics project has been implemented to reduce Affco's supply-chain operating structure by up to $6 million annually."

The company had refocused on its core business of processing and a number of capital restructuring initiatives at the end of the year would strengthen it, he said.

South Island food company Talley's Group had become a significant shareholder and the confidence of existing major shareholders showed in a fully underwritten rights issue.

Settlement of a seasonal funding facility with a banking syndicate would provide greater flexibility and strength in the procurement area.