Silver Fern Farms Ltd reports $2.4b in annual sales

Silver Fern Farms' Finegand plant. Photo / Richard Davison

The Silver Fern Farms Co-op board says it is determined to support moves to improve Silver Fern Farms Ltd's performance, as strong farm-gate sheep-meat prices affected earnings last year.

Both Silver Fern Farms Ltd - which is jointly owned by Silver Fern Farms Co-operative and Shanghai Maling - and Silver Fern Farms Co-operative have released their financial results for the year to December 31.

Silver Fern Farms Ltd achieved sales of $2.4 billion; earnings before interest, tax, depreciation and amortisation (ebitda), including a share of associate earnings, of $32.4
million; and after-tax net profit of $5.8 million.

That compared with $2.2 billion of sales the previous year, and after-tax net profit of $15.4 million, which was after non-recurring items of $10.2 million primarily related to the closure of meat processing operations at the Fairton plant in May 2017.

The company increased capital expenditure, up $8 million at $29 million, across health and safety, compliance, asset replacement and operational improvement.

Chief executive Silver Fern Farms Ltd. Simon Limmer. Photo / George Novak

Chief executive Simon Limmer said the after-tax result, while representing a back-to-back profit, was not at the level the company was aiming to achieve.

"It is acknowledged we must lift the profitability of the business in order to sustain our aggressive capital reinvestment programme, and to more actively progress our in-market investment in sales and marketing to grow value in the market,'' he said in a statement.

Prices for beef and venison products held up throughout 2018 and returns to both farmers and processors equitably reflected the market realities, he said.

While sheep meat was a notable performer for the company in 2017, returns last year could not sustain satisfactory levels of profitability.

That was due in large part to strong farm-gate prices for sheep meat not adequately reflecting in-market returns at crucial points of the season when processing volumes were low and eroded operational efficiency.

Last December's result was the worst December result for the company in the past 10 years.

Silver Fern Farms Co-operative chairman Rob Hewett said Silver Fern Farms Ltd was undergoing a process of consolidation.

It was in a period of intensive capital investment across infrastructure and systems to ensure it could sustain a high level of performance.

Silver Fern Farms Co-operative chairman Rob Hewett. Photo / Supplied

"While the level of profitability is lower than desirable as it goes through this process, we have an expectation that we will be in a position to derive future value from our equal share in the company,'' he said.

Silver Ferns Farms Co-operative reported after-tax net profit of $900,000 for the 2018 financial year, reversing a loss of $5.6 million in 2017, although that result was over a 15-month period which included losses from discontinued operations.

The co-operative would receive a $874,000 dividend from its 50 per cent shareholding in Silver Fern Farms Ltd.

While significantly down on last year's $4.1million dividend, it was pleasing that Silver Fern Farms Ltd was able to pay a dividend to its two shareholders, Hewett said.

The co-operative - which remained in a strong position with no debt - had decided to distribute the $874,000 as a patronage reward only payable to qualifying supplying shareholders, Hewett said.

The annual report would be available on April 12, ahead of the co-operative's annual meeting in Dunedin on May 1.

• New Zealand's four main meat processors and the Meat Industry Association are launching a charitable trust to support those affected by the Christchurch mosque attacks.

Farmers sending stock to Silver Fern Farms, Alliance Group, AFFCO New Zealand and ANZCO Foods could nominate either a number of animals or a sum of money from the sale and proceeds would be paid directly to the Meat Industry Association Halal Community Response Trust, MIA chief executive Tim Ritchie said.

The Muslim community played a vital and significant role in the New Zealand meat processing industry, allowing exports to be certified as halal.

"A number of our people working in our sector lost friends and family in the attack and this is one way we can show our support,'' Ritchie said.