Value-added focus for Silver Fern

Silver Fern Farms chairman Eoin Garden received director's fees of $86,460 last year, up 53.6 per cent on the previous year. Photo / Simon Baker

The 2009 financial year will be recorded as a watershed year for Silver Fern Farms, chairman Eoin Garden says in the company's annual report.

It was a year in which SFF made substantial progress in its transformation from a traditional meat processor-sales oriented cooperative to a market-led food company.

"The need to invest in longer-term value adding strategies is imperative if we are to position our company for the unprecedented global demand for red meat protein predicted immediately following recovery of the current global economic crisis."

The year had been dominated by the global recession in the majority of New Zealand's key markets and a highly volatile New Zealand dollar exchange rate, he said.

SFF earlier reported an operating profit of $5.1 million for the year ended August 31, well down on the $75.6 million reported in the previous corresponding period. Assisted by a one-off gain from the settlement with PGG Wrightson of $37 million, and other minor one-off items, the company reported a net profit of $43.6 million compared with $37.6 million last year.

Garden said in view of the economic environment and the company's recent focus on recapitalisation of the business, the directors resolved no shareholder distributions would be paid for the year.

"While this will be disappointing, your directors believe it is prudent financial management and distributions should be looked at over the long-term and not at each year in isolation."

In July, SFF shareholders voted in favour of constitutional changes. The approval of a new constitution meant SFF now had the ability to introduce a modern capital structure which protected the company and gave shareholders increased benefits over past structures, he said.

A total of 5787 shareholders, holding 42.9 million shares and representing 75 per cent of the total shares eligible for exchange, participated in the offer which closed on October 9.

Shareholders elected to subscribe for a further 22.2 million shares under the associated rights offer.

The results reflected a high level of positive shareholder engagement with the new structure of the company, said Garden.

The market outlooks offered some good news for farmer shareholders but were dominated by references to the volatile currency.

Garden said the recession had hurt the high-end restaurant trade and tourism industries as consumers reduced their spending. Lamb products were an integral part of those two sectors and sales had been affected.

SFF was confident its "plate to pasture" strategy would continue to develop consumer focused products that would return additional value to farmers.

About 75 per cent of the increased lamb returns for 2009 were from currency gains which had been largely eroded in the last two months of the slaughter season. Continued New Zealand dollar strength would have an "unfortunate and significant impact" on SFF returns and farmer payments in the 2010 season, he said.

There was also concern that South American countries were making great progress in gaining access to beef markets that had traditionally been closed to them.

- OTAGO DAILY TIMES