Rough time cuts Affco profit

By PAULA OLIVER

Turbulent times at meat company Affco were highlighted yesterday when the company reported a poor half-year result - down 90 per cent on the previous period.

Affco chiefs had warned of a profit downgrade, but the after tax profit figure of $752,000 yesterday revealed the extent of the difficulties the company faced.

Affco had a $7.4 million profit in the previous corresponding period.

Executive chairman Sam Lewis described the half year, which included the departure of a large chunk of the company's management team, the MAF vets strike, a wet summer and the US beef quota battle, as disruptive and disappointing.

But it was also a catalyst for change, he said. Although the result showed that the company's recovery towards good returns for its shareholders had slowed, it had also forced a review of the company's activities.

As part of that review, operations at Affco's Chinese joint venture plant have been suspended until livestock supply issues are resolved.

All other international initiatives were also under close scrutiny, Mr Lewis said.

Affco's revenue for the half year increased 23 per cent to $558 million, but the MAF vets' strike had shaved as much as $3.5 million off the bottom line, the company said.

A wet summer had produced lower-than-expected stock numbers, and the beef quota issue cost the company $500,000.

Affco hit the headlines shortly after its February annual meeting, when chief executive Ross Townshend suddenly departed. Mr Townshend had gained a high profile, particularly for his "internationalisation" programme. But he and other management were seen by some as scapegoats for the company's present woes.

Mr Lewis is earning some credit for his handling of what has been a difficult situation, but he is also earning criticism for expressing the desire for Affco to be more like publicity-shy southern companies Alliance and PPCS.

He says the board is facing the future realistically.

"Already the effects of the strong internal focus on structures and costs have become apparent. A significantly revamped management team provides extensive meat industry experience, and a tighter reporting structure," Mr Lewis said.

Market observers are watching closely. Affco's share price has fallen to 31c from 42c in February, prompting some analysts to say the company was ripe for a takeover - but its share price has held steady over the past month. The company has said cuts to staff and salaries are coming.