Alliance Group net profit tumbles by 50pc, but farmers paid more

Murray Taggart , Chairman of Alliance Group Ltd. Photo / Supplied

Red-meat co-operative Alliance Group more than halved its net profit as it paid more for livestock and in tax, interest and administration costs.

Net profit for the year ended September fell to $6.6 million from $14.4m a year earlier, the Invercargill-based co-operative said in its annual report.

Revenue, however, lifted to $1.8 billion from $1.5b in the prior year and it paid more than $1.2b to its farmer-shareholders.

The group also paid $14.6m in loyalty payments and $31.6m in advance payments to support farmers in periods of low cash flow.

"The loyalty payment is only a very small portion of the revenue a farmer gets paid for the animal and the bulk of it gets paid up front on the day and those prices are much higher this year than what they were last year in the case of sheep meat and venison," chairman Murray Taggart said.

"Beef is down a bit."

While there were increases in what it received and paid out to farmers, "the increase we received from the market wasn't as much as the additional money we paid out to farmers".

Overall cost of sales rose 16.6 per cent to $1.71b, administration expenses climbed nearly 11 per cent, interest costs jumped 20 per cent and tax expense soared 60.6 per cent.

Alliance is owned by more than 4000 farmer-shareholders and exports lamb, beef, venison and co-products to more than 65 countries.

It plans to make a non-taxable bonus share issue to shareholders in December, based on livestock supplied during the financial year just ended.

"The co-operative is not making a profit distribution to shareholders and will instead invest in the long-term future of the business. Our farmers overwhelmingly backed this decision at our recent round of shareholder meetings. We will also issue 9.5 million bonus shares to shareholders next month," it said.

Other factors to impact performance included extreme dry conditions. The livestock procurement market had also not been aligned with global supply and demand and it affected performance, Alliance said in its annual report.

Taggart said the company remained focused on new technology, investing $15.9m in a venison plant at Lorneville that began processing in September. It also invested in a new robotic primal/middle cutter and processing room in Dannevirke that came on stream in late June.