PPCS turns around first half loss

Otago meat cooperative PPCS, which had a half year loss of $7.3 million and negative cash flow of $143m, today reported its net profit rose 25 per cent to $10 million in the year to August 31.

The country's biggest meat company reported a pre-tax trading loss of $26.7 million for the half year and breached its banking covenants.

Chief executive Stewart Barnett said the relatively mild winter meant a good lamb drop was anticipated and overall livestock availability was predicted to be positive for the coming season, starting in October.

"Although the currency has firmed over recent weeks the NZ dollar is at lower levels than at the same time last year and we are looking for a lower trend to continue."

He said markets had stabilised and demand was firm for meat in general, which sets the scene for a positive start to the season. The pre-tax profit was $29m, including a non recurring gain on the sale of properties of $19m.

Earnings before interest and tax rose 35 per cent to $58m.

Chairman Reese Hart said it was a very pleasing turnaround in what was a difficult year for all companies involved in exporting.

"Earlier in the year, currency and climate issues had a large influence on performance, but as the season progressed performance came strongly back into line with director expectations, on the back of strong procurement and a more favourable currency."

Mr Hart said that the company's first six month performance was reflective of a shift in the peak processing season.

"It is important to understand that a meat company's performance must be viewed across the entire financial year, and the reporting of results part way through the season does not necessarily reflect what the outcomes for the full year will be.

"If the peak season is later in a particular year, then the company's six month performance will not be an accurate gauge of the overall year and that is what has happened for PPCS this year."

He said the principal cause of the company's covenant issue earlier this year was, "put simply, that the season came on later this year than is usual.

"As a result we incurred additional costs and did not have the cashflows expected through to the end of February, with those cashflows coming in March.

"The result was that we missed the covenant at the February measurement point, but were quickly back in compliance with it in March. As much as anything, the problem was with the measurement date relative to the timing of the season."

Mr Hart said the company had completed a series of meetings with suppliers to explain the merits of a capital raising programme that would see about $45m of supplier investment shares issued over three years.

It was part of a process of obtaining wider ownership of the business by livestock suppliers, he said.

The reaction from the meetings held to date had been positive, and the supplier investment share programme will begin as planned on November 1.

- NZPA