The country’s largest meat exporter, Silver Fern Farms, has announced a record pre-tax profit of $89.6 million and $70.6 million after tax for the 2019 year, a huge improvement on the previous year’s $6.3 million and $5.8 million respectively. Turnover of $2.6 billion was 8% up on 2018 and only $100k less than the 15 month turnover in 2017 which produced a pre-tax loss of $6.5 million. Borrowings and working capital funding amount to $130.1 million.
The latest result is a $100 million turnaround from the recent low point in 2016 before the injection of capital by Shanghai Maling which saw a $30 million loss on turnover of $2.15 billion. It is now hard to understand why there was so much resistance to the sale to the well heeled Chinese investor which has clearly brought about a comprehensive recapitalisation of the company while allowing the cooperative to retain 50% of a solvent and performing business. This has resulted in a profit of $34.9 million for the cooperative and farmer shareholders which is sensibly being retained as a buffer in the uncertain trading environment.
The annual report acknowledges upfront that the 2019 result predates the enormously uncertain environment in the post Covid-19 world, as well as benefiting from the China led price recovery which saw red meat prices, especially sheepmeat, reach unprecedented highs. Noting the dreadful end to 2018 which saw the previous year’s income and profit fall away sharply, CEO Simon Limmer said 2019 was a China story, but in a different way this would also be the case in the current year.
Limmer makes the point the current year has already seen a sudden decline of the food service side of the business, but retail has compensated for this. Demand in a post-Covid recovering China is strong, while American demand for hamburger beef remains solid, but the outlook is less certain in other markets. The UK and EU are likely to remain sluggish for the rest of the year.
The main advantages for Silver Fern Farms are the strength of its balance sheet with no long term debt and the successful implementation of its business strategy. It is in a position to invest in its people and its operational facilities, as well as pursuing its vision of becoming the “world’s most successful and sustainable grass-fed red meat company.” The 2019 result demonstrates the importance of stable ownership which SFF clearly now has with committed shareholders that are determined to ensure successful performance at both ends of the business – livestock supply and international marketplace – while investing in its plants and people.
SFF is confident it is robust enough to cope with the challenges 2020 will continue to throw at it. In Limmer’s words “our financial stability provides a platform to execute our strategy, develop our people, support our farmers, feed New Zealanders and the world with sustainable, naturally delicious red meat.”
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