Meat processor's profits take big cut

Keith Cooper

A high dollar, cost increases and poor international prices have continued to take a sharp knife to meat company profits with the country's largest processor reporting a half-year trading loss of $26.7 million.

However, Otago farmer co-op PPCS suggested annual profits would still be around last year's level of $21 million.

The consolidated $26.7 million trading loss is a swing of more than $30 million from a pre-tax trading profit of about $4.2 million for the same period last year. Trading revenue slid more than $50 million to $852.8 million.

PPCS said a $19.4 million profit from the sale of surplus South Island property took its net pre-tax loss to $7.3 million for the six months to March 5, while the after-tax loss was $3.1 million.

That compared with a net pre-tax surplus of $16 million last year, which was boosted by $11.8 million worth of asset sales, and an after-tax profit of $13.8 million.

Yesterday's poor result - signalled last month - came a week after Hamilton rival Affco reported a 75 per cent dip in pre-tax profits to $3.8 million for the half-year to March 31.

PPCS and Affco complained that the effects of a higher dollar during the period, high costs and weaker prices had carved big slices off their earnings.

PPCS chief operating officer Keith Cooper noted that March was traditionally a profitable month and if his company had the same March 31 balance date as Affco rather than March 5 "our result would have been plus $13 million".

The company was considering changing its balance date to help to make comparisons with others in the industry more meaningful.

PPCS said the first half was traditionally the least profitable part of the year, with September to December last year "more difficult than most".

Lamb was experiencing a "difficult period".

However, the second half was expected to be better after the resumption of traditional stock flows and factors such as prices paid to farmers better reflecting costs.

"Trading results for March and April to date reflect these changes and are above budget,"the company said.

Cooper said PPCS could now expect a "reasonably traditional" profit performance. While he would not give a prediction, he said last year's $21 million result was in the "traditional" range.

The company said more sales of surplus land were expected.

PPCS noted that its strategy was to try to get higher margins by dealing with end users directly as much as possible. This imposed extra stock holding costs while product was "managed into the marketplace", but PPCS said the costs involved were accommodated within the group's funding lines.